Download Summary of 30 March class

Summary of 30 March class
• What is “management” within “capitalism”?
2 Ways of Defining “capitalism”
Institutional definition:
as an economic system
• Private property (John
Locke, David Hume);
private ownership of
capital
• (“Free”) Markets (Adam
Smith, The Wealth of
Nations)—to be studied
during Week 3
Moral definition: as a
“spirit” (Geist), ethos,
ethic, or system of values
(Max Weber, The
Protestant Ethic and the
Spirit of Capitalism)—to
be studied during Week 4
2 Types of Basic Questions of Economy
• Production: How will production occur?
•
•
•
•
What will be produced?
How much will be produced?
By what means will production occur? What resources will be used?
Who will get what is produced?
• Market Economy: answers these question through the market mechanism,
based upon the interplay of supply and demand
• Planned (or Command) Economy: answers these question through some
centralized authority (king, pharaoh, dictator, planning board), which might
be with autocratic or democratic
• Ownership of Capital: Who will own or control the means of
production?
• Capitalism: private ownership of capital; capital as private property
• Communism: capital collectively owned and available to all who can use it
• Socialism: capital owned by the state in the name of the people
Capitalism ≠ (Free) Market Economy
(Free) Market Economy
Capitalism
An economy that answers the
basic questions of production—
An economic system wherein the
means of production, or capital,
are private property
•
•
•
•
What will be produced?
How much will be produced?
What resources will be used?
Who will get what is produced?--
through the mechanism of the
market, operating upon the
principles of supply and demand.
Capitalism ≠ democracy
Communism/socialism ≠ authoritarianism
• Market economy + capitalism
• Democratic (e.g., United States, Canada, most of Europe)
• Authoritarian (e.g., Chile under Pinochet, Philippines under Marcos)
• Planned economy + socialism/communism
• Democratic (e.g., Israeli Kibbutzim, Nepal, Tanzania)
• Authoritarian (e.g., Soviet Union, Cuba, North Korea)
• Market economy + socialism = “market socialism”
• Democratic (e.g., Portugal, India?, Venezuela?)
• Authoritarian (e.g., former Yugoslavia, under Tito)
• Planned economy + capitalism
• Democratic (Mondragon?)
• Authoritarian (e.g., Nazi Germany, Saudi Arabia)
Defining “capitalism” as an economic system
• Market economy, governed by supply and demand
• Private ownership of the means of production (vs. communism and
socialism)
• A "system which favors the existence of capitalists“ (Oxford English
Dictionary)
• The “regime of capital” (Robert Heilbroner), i.e., the rule by capital
• An economic system wherein capital hires labor, and labor serves
capital (vs. a system wherein labor owns capital—”laborism”?)
What does it mean to “own” something (e.g., capital)?
2 types of ownership
“possession”
“property”
• Owning something by having
power over it, e.g., physical
force, the power of law
• “posse” (Latin) = to be able or to
have power (to do something)
• Political concept
• Owning something properly;
having moral or ethical
entitlement to something
through, e.g.,
• Need
• Labor
• Moral or ethical concept
“Private Property” vs. “Stewardship”
“Private Property”
“Stewardship”
• The right to the exclusive use of
something; the right to do with
something whatever one wants,
regardless of the needs of others
or of the community
• The responsibility to manage
something for the well-being of the
community
• “Property” that is limited by the
needs of others and of the
community
• Medieval Christian concept (e.g.,
Thomas Aquinas)
• Replaced communistic ideal
advocated by early Church (e.g.,
Acts of the Apostles, St. Ambrose,
St. Basic, St. John Chrysostom, St.
Augustine)
“privare” (Latin) = to exclude or to
deprive
• Roman law: “the right use or to
abuse”
• Rejected by Christianity (e.g.,
Thomas Aquinas, John Paul II)
Pope John Paul II, 3rd Encyclical Letter, Laborem Exercens (1981)
“the right to private property is subordinated to the
right to common use, to the fact that goods are meant
for everyone….From this point of view, the position of
‘rigid’ capitalism continues to remain [morally]
unacceptable [to Christianity], namely the position that
defends the exclusive right to private ownership of the
means of production as an untouchable ‘dogma’ of
economic life.”
Summary of 30 March class
• What is “management” within “capitalism”? What does it mean to be a
“manager” or business administrator within that system?
• “Capitalism”
• distinguished from “market economies”
• as a system of private property, wherein capital is privately owned
• “Property” distinguished from “Possession”
• “Private Property” distinguished from “Stewardship”
• Question to you: As a manager, or business administrator, do you
see yourself as
• An agent of capital, whose sole or primary responsibility is to maximize
profits for the owners of capital (Friedman; “rigid capitalism”—John Paul
II)? Or,
• A steward of capital, viz., as entrusted with capital to use it for the benefit
of the entire community, including workers (Catholic social teachings, e.g.,
John Paul II)?
Questions for today: What is “wealth”?
What is wealth good for?
• Recall Aristotle’s distinction between “means” and “ends”
“Means” versus “Ends”
Means
Ends
Those things that are
good, valuable, or
desirable for the sake of
something else.
Those things that are
good, valuable, or
desirable for their own
sake.
Questions for today: What is “wealth”?
What is wealth good for?
• Recall Aristotle’s distinction between “means” and “ends”
• What kind of “wealth” is good, valuable, and desirable as a means
(for the sake of something else)?
• What kind of “wealth” is good, valuable, and desirable as an end in
itself (for its own sake)?
Xenophon (420-354 BCE)
• Socrates’s second most famous student (after Plato)
• Author of earliest treatise in Western philosophy on economics,
Oeconomicus (The Economist)
British Economist Kenneth Boulding
(1910-1993)
“Economist are obsessed with
‘growth’, but they fail to
distinguish types of ‘growth’.
There is, first, the growth of
health tissue—muscle, bone,
and brain—but then there is also
fat and cancer. Economists
count them all the same.”
2 Kinds of “Wealth”
Absolute (Critobulus)
Relative (Socrates)
Wealth = what one has, or owns
Wealth = what one has, or owns
– what one wants or needs