Power has no place in introductory economic theory where inequality is a natural and
equitable outcome of competitive market forces. According to this view,
which is based upon textbook models of competitive markets, individuals
are rewarded according to their contributions to the economic well being
of society. Those who contribute the most to the production of the
goods and services we all enjoy receive the highest rewards and climb to
the top of the income distribution.... this school argues that instead of interfering with the efficiency and
fundamental equity the market system brings us, what is needed is to
elevate the skills of the have-nots through education to improve their
human capital, and to ensure that everyone has equal opportunity to reap
the rewards the market system has to offer.
The other school of thought argues that market imperfections and the exploitation of power relationships cause income inequality.
Adherents to this school of thought believe that market systems have an
inherent tendency toward large monopolies, and this tendency has been
furthered by technological change, globalization, and economic
strategies by incumbent firms that make it hard for new competitors to
enter the market. instead of interfering with the efficiency and
fundamental equity the market system brings us, what is needed is to
elevate the skills of the have-nots through education to improve their
human capital, and to ensure that everyone has equal opportunity to reap
the rewards the market system has to offer.
From Economic Models Must Account for ‘Who Has the Power’ | The Fiscal Times
"As monopoly power becomes established, those with economic and political power can capture the political process and prevent the enforcement of antitrust law and regulatory change that could threaten their market dominance."
ReplyDeleteInequality is not natural because according to capitalism, competition will bring about the demise of monopolies. Inequality is the result of applying laissez-faire ideology on a market that is not truly free to justify abusing the economy.
I feel like the economics models we have today are the equivalent of Newtonian physics models. They work under very specific assumptions and they don't quite take everything into account. I hope the science progresses into the Einstein level soon and maybe even into the more complicated levels we're at today for physics.
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