Economics
Foundations of alternative economics
Hasan Gürak
There are numerous 'toothless sorcerers, masquerading as economics experts'.
K. Velupillai
Foreword
Orthodox economic textbooks suggest a kind of economic world which can only exist in fictitious markets where producers and consumers interact like robots, relations are mechanical and assumptions utopian. Accordingly, all expositions related to output, price and demand are, in substance, nothing but sophistry.
Basic concepts like “equilibrium”, or “given prices for producers” or “perfect competition” might seem logical and consistent for orthodox academicians who do not much care for the relevance of assumptions and/or transactions. Yet, many economists are becoming more and more discontent with the sophistries of orthodox, mainly neoclassical, doctrines. There is a globally growing interest and demand for more alternative economic ideas and analyses which should help to better comprehend the actual problems, help to make realistic analyses and offer implementable remedies or forecasts.
It is a fact that orthodox economists were not even aware of the presence and significance of “technological developments” until the “rediscovery” by Solow in 1950s. Who knows when they will “rediscover”, among other things, the fact that prices are not and have never been “a given” for the producers in competitive markets? It will continue to be a great waste of the efforts of capable minds, if orthodox economists continue to defend this fictitious economic world and its relationships.
The purpose of this book is to present some realistic alternative approaches to the conventional unrealistic doctrines of orthodox economists. It is not claiming to present totally realistic alternatives to orthodox doctrines. Shortcomings and mistakes are inevitable and many ideas or models presented need deeper and more refined analysis. Therefore, I hope that the alternative approaches presented here shall not be rejected out of hand on purely ideological grounds.
Acknowledgement
This book contains many original approaches and analyses differing, from the perspectives, and dominant “mainstream” theories regarding the well-known and common subjects of economics. I have presented many non-traditional, non-mainstream works before, which my Turkish colleagues, with the exception of two, or three of them, have to say the least, preferred to overlook and denied these works even a modicum of understanding which they generously provided for the fallacies of the more mainstream economic theories. As a result, or rather in response to them, I have decided to end my academic carrier with a last book entitled “Economics” which you are now reading.
A full downloadable copy of the book “Economics” has been available for about a year with the hope of provoking some response. Many academicians I know have been informed about its presence and content. Many of the approaches and analyses are so different from mainstream ideologies, that I was hoping, at least, that the proponents of these mainstream economic ideologies would rush to the defense of these, their ideologies, in the face of my challenging critique. However, my expectations were in vain; there was no response at all. I was disappointed to see that the prevailing attitude was one of total disregard.
While enduring and working in this unproductive and sterile atmosphere, there was one notable exception the well known academician, Prof. Dr. Cihan Dura, who not only cared enough to read the entire text with patience but also in order to improve my work shared his valuable criticism with me . I have benefitted to large extent from his views and proposals for which I am deeply grateful.
And a final word for the colleagues who/instead of making some small contribution which I expected out of academic courtesy/ preferred to ignore my work
: Thank you all…
Hasan Gürak
November - 2011
Contents
Foreword
Teşekkür
Part-1
INTRODUCTION
On scientific (!) economics
In pursue of new searches
Subject of economics
Micro-economics vs. macro-economics
Economics: Science or Ideology?
Social science vs. Natural science
On qualified labor(-er) and technological progress
Basic principle and the plan of study
Part-2
SOME KEY CONCEPTS, DEFINITIONS AND ASSUMPTIONS
Some Key Concepts and Assumptions
Enterprise (firm)
Entrepreneur (the capital owner)
Science and technology
Knowledge
Science or scientific knowledge
Productive Knowledge (Technology)
Accumulation of knowledge
Importance of knowledge (technology) for enterprises
Products (goods and services)
Commodities - Goods
Service
Inputs of production
“Productive” factor(s)
Nature: a “productive” factor
Labor(-er): “a productive” production factor
Capital: a “productive” factor?
Other “factors of production”
Human capital: labor(er) or capital?
Human capital and labor(er) without mental faculties
Competition
Increasing returns to capacity
On institutions
In summary
Part-3
PRODUCTION (Supply)
Technology – (production knowledge)
Technology, labor-inputs and profit
Profit rate – cost relation with given production capacity
Technological progress and output
Technological productivity growth
Final wors
Part-4
PRICE
Short-run price analysis: technology “given”
Production Price (PP) - Market Price (MP)
Impact of technological changes on price
Given product, “new” production process and price
“New” production process in service sector and price
New products and long-run price
Concluding remarks
Part-5
DEMAND
Consumer/End-user
Demand (needs and desires)
Utility
Short-run demand function
Basic factors determining individual demand
Basic factors determining enterprise demand
Basic factors determining institutional demand
Short-run individual demand, production capacity & profits: technology “given”
Long-run individual demand and technological innovations
Cost-reducing technological progress & individual demand-(given product)
Cost-reducing technology and individual demand: “given product”
“New” products and individual demand
Income and individual demand
Equilibrium: a utopian or scientific concept?
Final words
Part-6
FUNCTIONAL INCOME DISTRIBUTION
An ideal income distribution
Pareto optimum
Optimum functional income distribution
1- Functional income distribution: “given” technology
2- “Efficiency (micro-productivity) growth” & income distribution
3- “Technological (macro-) productivity growth” & income distribution
Case-1 Labor(-er)-saving technological progress
Case-2 Input-saving technological progress
Case-3 Output increasing technological progress
4- Technological imperfections and global income distribution
Final remarks
Part-7
GROWTH (INCREASED PRODUCTIVITY)
Productivity (V)
Quantitative analysis of “productivity”:
Valueanalysis of “productivity”
Optimum productivity
“Productivity growth” (economic growth)
Growth-1: Efficiency (micro-productivity) increase
Growth-2: Technological (macro) productivity growth-Long-run
Growth-3: Horizontal investments & growth
Cross-country productivity comparison
Concluding remarks
Part-8
GLOBAL - INTERNATIONAL TRADE
Concept confusion
Global (international) trade and theories
On trade theories
Major determinants of global trade
1- Price and trade
2- Preferences for diverse qualities-designs
3- Impact of income/wealth level on global trade
Types of global trade
1- Trade between developed countries
2- Global trade between developed & developing countries
3- Global trade between developing countries
4- Intra-firm global trade
Some critiques of “liberal” trade policies
Global competition
Global competition and FDIs
Global trade, and convergence of wages and prices
Concluding remarks
Part-9
GLOBAL TECHNOLOGY (KNOWLEDGE) TRANSFER
Economic Growth and Development
Technology and technological progress
Transfer of Technology
Channels of the Transfer of Technology
What should be the price?
Hidden costs of technology transfer
“Package Deals” with Restrictive Clauses
Summary of the Findings
Some Policy Proposals
Part-10
INSTITUTIONS & ECONOMICS
Institutional economics & institutional structure
Markets as institutions
Different countries, different institutions
Role of institutions in retrospect
What should be the long-run targets of institutions?
Some concluding remarks
Part-11
WHERE IS THE GLOBAL ECONOMY HEADING?
Global production
Do FDIs help to increase global competition?
Global income distribution
Some proposals for future
Local (intra-country) measure
Some global propositions
Appendix-A
Appendix-B
BIBLIOGRAPHY
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