Polecon 101 Main essays

What is Distinctive about the New Institutional Economics? How is North Representative?

Intro: Neoclassical Economics views markets as arenas if exchange but NIE embeds institutions at the center claiming markets only function when rules, rights, and enforcement exists.

Thesis: NIE is distinctive because it focuses on transaction costs, property rights, and the role of the state as determinants of market evolution while keeping neoclassical assumptions of rational actors and incentives. North represents this thought by successfully marrying rational choice with institutional analysis to explain historical economic development.

Paragraph #1: NIE distinctive has insittutions as foundations of markets.

Evidence: Transaction costs.

• Cite: North, structure change and coase on firms and property rights

• Explain: Exchange is not costless — bargaining, enforcing contracts, and uncertainty make markets expensive. Historically, high costs meant societies often relied on reciprocity or redistribution instead of markets.

• Connect: NIE is distinctive in showing institutions evolve to lower transaction costs, making markets safer, more secure, and more feasible.

Evidence 2: Property Rights

• Cite: North, Structure and Change.

• Explain: Secure property rights incentivize investment and innovation. Example: English enclosures privatized land, giving farmers incentives to invest and raise productivity.

• Connect: Institutions don’t just protect rights — they shape incentives, and in doing so, drive economic growth.

Evidence 3: The State’s Role

• Cite: North, Structure and Change.

• Explain: The state defines and enforces property rights. These can be efficient (promoting growth) or inefficient (rent-seeking, elite capture).

• Connect: NIE is distinctive in stressing that the state is not an external “interferer” but a central player in structuring markets.

Reason Why: Together, these features show NIE departs from neoclassical economics by making institutions key determinants of performance, not background conditions.

Paragraph #2: North represents NIE by combining neoclassical assumptions with institutional analysis.

• Evidence 1: Individual Rationality

  • Cite: North, Structure and Change.

  • Explain: North assumes individuals are utility-maximizing. Institutions channel this rationality, structuring incentives and reducing uncertainty.

  • Connect: Shows North retains neoclassical foundations while embedding them in institutional frameworks.

• Evidence 2: Security → Innovation

  • Cite: North, Structure and Change.

  • Explain: Secure property rights guarantee returns, incentivizing technological progress and long-term investment.

  • Connect: North exemplifies NIE’s blend of neoclassical innovation logic with institutional design.

• Evidence 3: Ideology & Collective Action

  • Cite: North, Structure and Change.

  • Explain: North acknowledges people sometimes obey rules or act collectively even against short-term self-interest (e.g., ideology, norms).

  • Connect: This broadens neoclassical rationality by recognizing social norms and ideology as part of institutional structures.

• Reason Why: North embodies NIE by combining rational-choice logic with institutions, ideology, and state power to explain long-term development.

Counter-Argument (Polanyi)

• Claim: Polanyi would reject NIE’s story that property rights emerge naturally to reduce costs and create efficiency.

• Evidence 1: The Great Transformation — “laissez-faire was planned; planning was not.”

• Explain: Property rights and markets were not neutral institutional innovations — they were constructed through deliberate state intervention (e.g., enclosures, commodification of labor).

• Connect: Polanyi critiques NIE’s assumption of natural institutional evolution, insisting markets are political projects, not spontaneous outcomes of rational efficiency.

How do Hayek and Friedman’s Views resemble one another, and how do they differ?

Intro / Thesis

• Intro: Hayek and Friedman are two central neoliberal theorists who defend markets as foundations of freedom and reject central planning.

• Thesis: Both argue that economic freedom underpins political freedom and that property rights are central to liberty, but they diverge in the scope they assign to the state and in how far deregulation should go.

Paragraph 1 Claim: Both ground their arguments in the link between free markets and political liberty, opposing central planning and defending property rights.

• Evidence 1: Market and Political Liberty

  • Cite: Hayek — competition produces spontaneous order; Friedman — markets are the most efficient organizers of activity.

  • Explain: Free markets are political safeguards: central planning concentrates power, while competition disperses it.

  • Connect: Both tie economic freedom directly to political freedom — a core neoliberal similarity.

• Evidence 2: Rejection of Central Planning

  • Cite: Hayek — central planning is a slippery slope to authoritarianism; Friedman — it distorts incentives and productivity.

  • Explain: Hayek stresses the political danger of planning, Friedman the economic inefficiency.

  • Connect: Despite different emphases, both converge in a neoliberal rejection of socialism and state control.

• Evidence 3: Property Rights

  • Cite: Hayek — property rights enable creativity; Friedman — property rights incentivize investment.

  • Explain: Secure ownership provides individuals the confidence to innovate and take risks.

  • Connect: For both, capitalism is not just efficient but liberty-preserving through secure rights.

• Reason Why: These points show Hayek and Friedman’s shared neoliberal foundation: political freedom depends on economic freedom, and both are preserved by property rights and markets.

---

Paragraph 2 Claim: They differ in how they view regulation, competition, and the state’s scope.

• Evidence 1: Competition and Monopoly

  • Cite: Hayek — supports antitrust and legal rules to preserve competition; Friedman — resists antitrust, fearing regulator capture.

  • Explain: Hayek accepts neutral guardrails to sustain markets; Friedman sees intervention as a bigger risk than monopoly itself.

  • Connect: Shows Hayek more open to regulation for competition, Friedman more committed to deregulation.

• Evidence 2: Intentions vs. Outcomes

  • Cite: Hayek — evaluates policy by intent (e.g., patents justified if they foster creativity); Friedman — warns well-intentioned laws get hijacked for private gain.

  • Explain: Hayek trusts legal design can strengthen liberty; Friedman distrusts regulation as fertile ground for rent-seeking.

  • Connect: Highlights Hayek’s principle-based approach vs. Friedman’s pragmatic skepticism of state action.

• Evidence 3: Role of the State

  • Cite: Hayek — state sets rules, enforces contracts, ensures competition, and limits welfare; Friedman — state’s role should be minimal, confined to monetary stability and property rights.

  • Explain: Hayek accepts broader functions if they preserve order; Friedman warns most interventions distort markets.

  • Connect: Contrast reveals Hayek’s willingness to endorse constructive state functions, while Friedman demands minimal government.

• Reason Why: Their divergence shows Hayek allows a constructive role for law and policy, whereas Friedman sees even limited regulation as dangerous expansion of state power.

---

Counter-Argument / Qualification

• Claim: Some argue the differences are overstated — Hayek’s support for antitrust is minor compared to their overwhelming opposition to central planning.

• Explain: Both stress the slippery slope of state expansion and defend the primacy of markets.

• Connect: Yet their differences matter: Hayek frames markets in political-philosophical terms (power and liberty), while Friedman frames them in economic-technical terms (incentives and efficiency). This divergence broadens the neoliberal tradition by offering distinct defenses of market freedom.

What is Distinctive about Econ & Soci? How is Fligstein representative of this school of thought?

Intro / Thesis

• Intro: Economic sociology casts a wider net than economics or NIE. Markets are not only about efficiency or incentives but are embedded in social relationships, history, and political contexts.

• Thesis: Economic sociology redefines rationality as institutionally and socially situated, emphasizing stability, embeddedness, and collective understandings. Fligstein exemplifies this by showing how markets function as fields of power where incumbents and challengers struggle to establish rules, norms, and property rights.

---

Paragraph 1 Claim: Distinctive features of economic sociology = rationality embedded in a broader societal context.

• Evidence 1: Stability and Order

  • Cite: Fligstein, Architecture of Markets.

  • Explain: Firms often pursue stability and survival, not just profit maximization. Political analysis of rules, laws, and power struggles is central to how markets stabilize.

  • Connect: Unlike neoclassical models, economic sociology shows organizations seek stability to reduce uncertainty, embedding markets in politics and institutions.

• Evidence 2: Wide Net of Influences

  • Cite: Fligstein, Architecture of Markets.

  • Explain: Markets are shaped by culture, history, networks, and norms. Property rights are not just economic tools but social decisions about who gets what and why.

  • Connect: Economic sociology goes beyond incentives or contracts, framing markets as collective understandings of rules and order.

• Evidence 3: Embedded Rationality

  • Cite: Fligstein (drawing on Granovetter’s “embeddedness”).

  • Explain: Rationality is embedded in institutions and relationships. Firms act rationally within networks and social contexts, not abstract models of efficiency.

  • Connect: Distinctive feature: economic sociology qualifies rationality, showing it is historically and socially situated.

• Reason Why: These three points make economic sociology distinct by embedding markets in broader institutional, cultural, and political contexts.

---

Paragraph 2 Claim: Fligstein represents economic sociology through his theories of fields, power relations, and conceptions of control.

• Evidence 1: Markets as Fields

  • Cite: Fligstein, Architecture of Markets.

  • Explain: Fields are meso-level social orders where firms observe one another, define competitors, and set norms. Example: U.S. steel industry split into commodity vs. high-end fields after shocks.

  • Connect: Shows markets are arenas of interpretation and rules, not just price signals.

• Evidence 2: Power Relations (Incumbents vs. Challengers)

  • Cite: Fligstein, Architecture of Markets.

  • Explain: Incumbents use property rights, regulation, and norms to maintain power; challengers push for new rules. Goals include stability and dominance, not only profit.

  • Connect: Demonstrates how power struggles shape market rules and outcomes, central to economic sociology.

• Evidence 3: Conceptions of Control

  • Cite: Fligstein, Architecture of Markets.

  • Explain: Shared understandings of how competition should work guide firm behavior. Firms act rationally within these social rules, not purely in pursuit of abstract efficiency.

  • Connect: Shows how economic sociology reframes rationality through institutions and norms, not just economic models.

• Reason Why: Fligstein embodies economic sociology’s distinctiveness by showing markets as fields of power and control, with rationality shaped by institutions.

---

Counter-Argument / Qualification

• Claim: Critics argue economic sociology overstates the role of social relations.

• Explain: Neoclassical models can predict pricing and firm behavior using competition and transaction cost efficiency. Property rights can be explained without invoking networks or norms.

• Connect: Economic sociology responds that while economics models efficiency, it cannot explain why firms often seek stability over profit, or why incumbents and challengers reshape rules. Fligstein’s societal approach adds crucial insights that pure economics misses.

What is Polanyis critique of smith and economic liberalism? 

Intro / Thesis

• Intro: Polanyi critiques Smith’s assumptions about human motivation and markets, rejecting the idea that profit-seeking and exchange are natural and universal.

• Thesis: Polanyi shows that markets are historically constructed and socially embedded, not spontaneous self-regulating systems. He contrasts Smith’s vision of profit-driven spontaneity with evidence of social motivations, state construction, and society’s protective double movement.

---

Paragraph 1 Claim: Polanyi rejects Smith’s assumption that humans are naturally profit-seeking and exchange-driven.

• Evidence 1: Status, Honor, and Recognition

  • Cite: Polanyi on early societies.

  • Explain: People historically valued wealth as a marker of social standing, not as profit accumulation for its own sake.

  • Connect: Counters Smith’s assumption of universal profit-seeking; human motivation was tied to status, reciprocity, and recognition.

• Evidence 2: Reciprocity, Redistribution, and Householding

  • Cite: Polanyi, The Great Transformation.

  • Explain: Early economies operated through reciprocity, redistribution, and householding, with profit-seeking only later emerging.

  • Connect: Shows profit and markets were not universal conditions of economic life.

• Evidence 3: Markets ≠ Market Society

  • Cite: Polanyi, The Great Transformation.

  • Explain: While local trade and division of labor existed, a market society—where all life is organized by markets—was new and historically specific.

  • Connect: Demonstrates that Smith’s idea of “natural self-regulating markets” was in fact a radical historical break, not a universal truth.

• Reason Why: Together, these points show Polanyi’s rejection of Smith’s universalist anthropology — economic life was embedded in social contexts, not governed by profit-maximization.

---

Paragraph 2 Claim: Polanyi critiques economic liberalism’s claim that markets are natural and self-regulating, showing instead that they are politically constructed and socially embedded.

• Evidence 1: Markets Created by the State

  • Cite: Polanyi — “laissez-faire was planned; planning was not.”

  • Explain: Markets were built through state action: enclosures, legal systems, and infrastructure. They did not arise spontaneously.

  • Connect: Flips Smith’s story: rather than states interfering in natural markets, states constructed and sustained them.

• Evidence 2: The Self-Regulating Market is Recent

  • Cite: Polanyi on “fictitious commodities.”

  • Explain: In the 19th century, land, labor, and money were commodified and subjected to market logic. Earlier economies were embedded in social and political life.

  • Connect: Exposes liberal ideology: economic liberalism universalizes a historically unique arrangement.

• Evidence 3: The Double Movement

  • Cite: Polanyi, The Great Transformation.

  • Explain: Expansion of markets generates social protection (laws, unions, welfare) in response.

  • Connect: Markets are never autonomous; they are always contested and embedded in society and politics.

• Reason Why: These points reinforce Polanyi’s argument that markets are not self-regulating, but constructed, embedded, and politically constrained.

---

Counter-Argument Claim: Smith’s vision of self-interest and spontaneous order captures dynamics that Polanyi underplays.

• Evidence 1: Spontaneity in Market Growth

  • Cite: International trade networks expanded beyond deliberate state planning.

  • Explain: Once markets existed, they developed self-reinforcing dynamics, such as global trade flows.

  • Connect: Suggests Smith helps explain emergent coordination that Polanyi underestimates.

---

Retort to Counter-Argument (Polanyian Perspective):

• Claim Being Countered: Markets, once established, can grow spontaneously (e.g., international trade).

• Retort:

  • Even “spontaneous” trade rested on state scaffolding: naval protection, colonial administration, standardized currencies, property enforcement.

  • What looked like emergent order was actually underwritten by state power (British navy, Dutch East India Co., treaties).

• Connect: Reinforces Polanyi’s core critique: markets are never truly autonomous — even global trade depended on embedded political authority and legal frameworks.

What does lindblom mean by the circularity of polyarchy and the circularity of markets

Intro / Thesis

• Intro: Charles Lindblom studied democratic politics and markets as systems of control using authority, exchange, and persuasion.

• Thesis: His central claim is that both markets and polyarchal democracy are circular systems: they reproduce themselves by reinforcing existing power relations and limiting real alternatives.

---

Paragraph 1 Claim: Markets are not neutral reflections of consumer sovereignty; they are circular systems.

• Evidence 1: Consumer Demands Influence Corporate Strategy

  • Cite: Lindblom — markets are structured around consumer sovereignty: firms respond to consumer demands (9-25 Lindblom).

  • Explain: Liberal theory suggests firms make what consumers want, with prices guiding resource allocation.

  • Connect: On the surface, markets appear to empower individuals and reflect their preferences.

• Evidence 2: Corporate Strategies Shape Consumer Demands

  • Cite: Lindblom — corporate strategies (advertising, product design) reshape consumer preferences (9-25 Lindblom).

  • Explain: Firms create demand for products consumers did not previously desire, undermining neutrality.

  • Connect: Consumer choice and corporate strategy reinforce each other, making markets self-reproducing systems.

• Evidence 3: Corporate Discretion

  • Cite: Lindblom — firms exercise discretion over technology, workforce size, and location (9-25 Lindblom).

  • Explain: These decisions shape jobs, wages, and communities independently of consumer choice.

  • Connect: Markets are not demand-driven alone; corporate power adds to their circularity.

• Reason Why: These dynamics show markets reproduce power through feedback loops, rather than reflecting pure consumer sovereignty.

---

Paragraph 2 Claim: Polyarchal democracy is not pure popular sovereignty; it is circular.

• Evidence 1: Popular Demands Shape Leader Strategies

  • Cite: Lindblom — leaders respond to citizens’ preferences for legitimacy (9-25 Lindblom).

  • Explain: Elections and opinion polls pressure leaders to adapt to public signals.

  • Connect: Matches the democratic ideal of government responsiveness.

• Evidence 2: Leaders Shape Popular Demands

  • Cite: Lindblom — leaders also reshape popular demands through persuasion, rhetoric, and agenda-setting (9-25 Lindblom).

  • Explain: Politicians redefine what citizens want, blurring responsiveness with manipulation.

  • Connect: Democracy becomes a feedback loop where elites and masses co-produce preferences.

• Evidence 3: Limits of Democratic Control

  • Cite: Lindblom — voting is a blunt instrument, and elites are insulated from pressure (9-25 Lindblom).

  • Explain: Citizens cannot fully direct outcomes because institutions filter and dilute their input.

  • Connect: Popular sovereignty is structurally constrained, making democracy self-reinforcing and circular.

• Reason Why: Together, these features show polyarchy mirrors markets — each reinforces itself and limits deep change.

---

Counter-Argument Claim: Friedman defends markets and democracy as mutually reinforcing, not circular traps.

• Evidence 1: Economic Freedom as Political Freedom

  • Cite: Friedman — economic freedom is a component of political freedom (9-25 Lindblom context).

  • Explain: Markets disperse power and protect individuals from state overreach.

  • Connect: Corporate discretion = safeguard against concentrated political authority.

• Evidence 2: Responsiveness of Markets

  • Cite: Friedman — competition forces firms to respond to consumers.

  • Explain: Even if advertising exists, ultimate power lies with consumer choice.

  • Connect: Markets are democratic, not circular.

• Evidence 3: No Democracy Without Markets

  • Cite: Friedman — there are no democracies without market economies.

  • Explain: Markets create pluralism and independence that sustain democracy.

  • Connect: Instead of constraining, markets form the foundation of liberty.

• Lindblom’s Rebuttal:

  • While Friedman sees mutual reinforcement, Lindblom argues polyarchies and markets co-evolve in ways that limit alternatives like socialism or planning.

  • Their circularity does not vanish — it defines what liberty looks like, narrowing choices within existing systems.

How does Harvey build on Marx and how does he depart from Marx

Intro / Thesis

• Intro: Both Marx and Harvey analyze capitalism as a dynamic but crisis-prone system.

• Thesis: Harvey builds on Marx by extending the theory of capital circulation and crises, but he departs by emphasizing the spatial and global dimensions of crisis, adapting Marxism to the realities of late-20th and 21st century capitalism.

---

Paragraph 1 Claim: Harvey extends Marx’s critique of capitalism by emphasizing capital circulation and crises.

• Evidence 1: Circulation of Capital

  • Cite: Marx distinguished C–M–C (commodities exchanged for money) vs. M–C–M (money invested to make more money) (9-4 Neo-Marxists).

  • Explain: Harvey builds on this by showing circulation of capital is inherently unstable and crisis-prone.

  • Connect: Extends Marx’s insight that capitalism is dynamic but internally contradictory.

• Evidence 2: Crisis of Overaccumulation

  • Cite: Harvey — capitalism is prone to overaccumulation crises (9-4 Neo-Marxists).

  • Explain: When too much capital lacks profitable outlets, profits fall, unemployment rises, and instability spreads.

  • Connect: Deepens Marx’s crisis theory by stressing systemic bottlenecks in accumulation.

• Evidence 3: Surplus Capital and Labor

  • Cite: Harvey — capitalism must find outlets for surplus capital and labor (9-4 Neo-Marxists).

  • Explain: Echoing Marx’s “reserve army of labor,” Harvey shows surpluses drive pressures for expansion.

  • Connect: Positions Harvey firmly in the Marxist tradition — contradictions make crises inevitable.

• Reason Why: Harvey builds directly on Marx’s foundations of circulation and crisis, updating them with modern accumulation dynamics.

---

Paragraph 2 Claim: Harvey diverges by focusing on the spatial dimension of crisis and globalization.

• Evidence 1: The Spatial Fix

  • Cite: Harvey introduces the concept of a “spatial fix” (9-4 Neo-Marxists).

  • Explain: Crises are displaced geographically as surplus capital and labor move abroad (outsourcing, foreign investment, imperialism).

  • Connect: Diverges from Marx’s national-industrial focus, adding geography as structural.

• Evidence 2: Globalization of Crisis

  • Cite: Harvey — once surpluses are exported, crises become global (9-4 Neo-Marxists).

  • Explain: Contradictions spread internationally through trade and finance, not confined to one state.

  • Connect: Adapts Marx’s theory to a globalized capitalist economy.

• Evidence 3: Geopolitical Conflict

  • Cite: Harvey — spatial fixes spur geopolitical rivalries (9-4 Neo-Marxists).

  • Explain: States compete for outlets for surplus capital/labor, producing conflict and imperial rivalry.

  • Connect: Departs from Marx’s expectation of proletarian revolution, emphasizing interstate competition as central to capitalism.

• Reason Why: Harvey diverges by situating capitalist contradictions within global geography, explaining crisis management through expansion and conflict.

---

Counter / Qualification: Gramsci

• Gramsci’s View: Capitalism survives not only by displacing crises spatially but also by securing cultural and ideological consent (9-4 Neo-Marxists).

• Explain: While Harvey stresses material dynamics (overaccumulation, spatial fixes), Gramsci shows ruling classes stabilize capitalism via hegemony (schools, media, religion).

• Connect: Tempers Harvey’s geographic emphasis — capitalism reproduces itself through both material fixes and cultural power.

how does the Law and Poltiical Economy Manifesto build on legal realism such as the work of Hale? and how does it critique Law and Economics? 

Intro / Thesis

• Intro: The Law and Political Economy (LPE) manifesto revives insights from legal realism while mounting a critique of Law & Economics.

• Thesis: LPE builds on Hale’s argument that law always structures markets and power relations, and it critiques Law & Economics for treating law as neutral and efficiency-driven while ignoring inequality, hierarchy, and politics.

---

Paragraph 1 Claim: LPE revives and extends Hale’s insight that law always structures markets and power relations.

• Evidence 1: Law is Not Separate from Politics

  • Cite: Legal realists deny law can be separated from politics (9-16 LPE).

  • Explain: Law isn’t a neutral set of rules — it actively shapes property rights, contracts, and markets.

  • Connect: LPE builds on this by insisting all economic life is structured through political-legal choices.

• Evidence 2: Hale on Coercion and Distribution

  • Cite: Hale shows laissez-faire rests on coercion: property and contract law allocate power and resources (9-16 LPE).

  • Explain: Wage labor looks voluntary, but workers accept terms under threat of exclusion from resources.

  • Connect: LPE extends this: law doesn’t just protect freedom, it allocates coercive power and sustains inequality.

• Evidence 3: Normative Turn

  • Cite: Hale argues that since law already structures markets coercively, it should be reshaped consciously for justice (9-16 LPE).

  • Explain: Neutrality is impossible — better to design institutions toward democratic and egalitarian goals.

  • Connect: LPE takes up this project, urging scholars to imagine alternatives that expand democracy and equality.

• Reason Why: LPE inherits Hale’s central claim — markets are legal constructs of power — and makes this the foundation of its normative agenda.

---

Paragraph 2 Claim: LPE rejects efficiency-focused Law & Economics for ignoring power, inequality, and distribution.

• Evidence 1: Efficiency vs. Power

  • Cite: Law & Econ (Posner) — law should assign property rights to maximize efficiency (9-16 LPE).

  • Explain: This frames law as a neutral, technical mechanism.

  • Connect: LPE critiques this as obscuring how rules systematically benefit capital over labor and wealthy over poor.

• Evidence 2: Ignoring Inequality and Hierarchy

  • Cite: LPE insists law, politics, and economy are intertwined and reproduce race, gender, and class inequalities (9-16 LPE).

  • Explain: Law & Econ sidelines distributional effects, but LPE makes them central.

  • Connect: Shifts analysis from maximizing aggregate wealth to asking: who benefits, who pays, who holds power?

• Evidence 3: Rejecting the Public/Private Divide

  • Cite: LPE rejects the split between “private” and “public” law (9-16 LPE).

  • Explain: Law & Econ treats contracts and property as neutral, separate from constitutional principles.

  • Connect: LPE argues all economic law is political; democracy and equality must apply inside the market too.

• Reason Why: LPE critiques Law & Econ for reducing law to efficiency and stripping it of its political and distributive dimensions.

---

Counter-Argument Claim: Law & Economics as Clarity vs. LPE’s Response

• Evidence 1: Predictive Power of Law & Econ

  • Cite: Law & Econ offers clarity by modeling behavior in terms of incentives.

  • Explain: Provides neat predictions about how individuals respond to legal rules.

  • Connect: Can be defended as a pragmatic, technical tool.

• Evidence 2: Institutional Blind Spot (LPE Response)

  • Cite: LPE stresses those predictions abstract away coercion, distribution, and hierarchy — the very issues Hale identified.

  • Explain: By ignoring these, Law & Econ misrepresents law’s actual role in shaping markets.

  • Connect: LPE builds on Hale’s realism and critiques Law & Econ for reducing law to efficiency while ignoring law’s constitutive power.