Author Archives: mrhoward

MONOPSONY

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Alyssa Mazer
Department of Politics, University of California, Santa Cruz

Monopsony is a theoretical description of imperfect capitalist markets, articulated by Joan Robinson in her book The Economics of Imperfect Competition (1933). Very simply, monopsony is the monopolistic control of price by a buyer, who is able to dictate their desired price because they face little to no competition. This theory established Robinson’s legacy as an economist, and has more recently been used to consider issues of labor exploitation around the world (see Manning 2003; Ashenfelter et al. 2010; Autor et al. 2017; Kumar 2020).

The turn to the twentieth century saw the thriving success of economist Alfred Marshall, the dominant figure of the discipline at Cambridge University by the time Robinson and her husband arrived on the campus in 1929. In the words of Zachary Carter, Marshall’s economic theories emphasized “beautiful symmetries” in which “the market would respond to consumers and the wealth of society would increase” (2021). Following Marshall, mainstream economics assumed that, with the exception of rare monopolies, markets were naturally—and perfectly—competitive.

Robinson argued that the competition-monopoly paradigm was an unrealistic description of real markets. Instead, she theorized “imperfect competition” to be the norm, in which any genuinely perfect competition represented deviation. Through Robinson’s understanding, it was clear that not only monopolistic producers, but also the control of a few consumers could fundamentally alter the conditions for competitive market exchange. As Carter notes in his book on the work of John Maynard Keynes, this important theory was especially meaningful when applied to the labor market, which allowed Robinson to demonstrate that capitalists “were chronically underpaying their staff.” It was through monopsony— imperfect competition controlled by a few select buyers—that capitalists were able to exploit their workers.

The importance of this application was celebrated by Robinson herself; the second edition of Imperfect Competition includes a preface in which Robinson explains that “the main point,” for her, was that she “succeeded in proving within the framework of the orthodox theory, that it is not true that wages are normally equal to the value of the marginal product of labour” (1969, xii).

While the concept has taken a backseat to economic debates about neoliberalism in the 88 years since Robinson’s book was first published, Carter asserts that monopsony is once more a crucial consideration for economists. As the discipline becomes “increasingly comfortable with the idea that large government budget deficits are … a normal part of a high-functioning economy,” they must also recognize that government regulation is similarly necessary (2021). 

The American government apparently agreed with Carter a handful of years before his prescription. As provided to the Obama administration in 2016, a Council of Economic Advisers Issue Brief describes a growing problem in the labor market as: “a general reduction in competition among firms, shifting the balance of bargaining power towards employers.” They go on to identify sources of this monopsony, including obvious factors, such as employer collusion and non-compete agreements, as well as more complicated social and personal conditions, such as “frictions” in the labor market, employer-sponsored health insurance, and barriers to worker mobility. 

Although the Brief includes several pages of more detailed policy considerations, they summarize their recommendation thusly: “Promoting competition must therefore include, but not be limited to, aggressive anti-trust enforcement. Additional important policies include those that facilitate job search, increase worker options, and directly counter the wage-setting power of employers.” All of these things can be enabled in various ways, including expanding protections for workers via reforms in legislation regarding equal pay, sick leave, licensing, and overtime, among other issues (2016). 

Whether such reforms, when put in practice, actually benefit the worker is still contingent upon a multiplicity of other factors, each context-specific for the worker in question; thus, it’s obvious that the mitigation of monopsony is not a cut and dry process. However, monopsony appears to be a growing concern in the twenty-first century, suggesting that regulation purposefully designed to curtail monopsony is not only important for workers, but also for the overall longevity of capitalism.

BIBLIOGRAPHY

Ashenfelter, Orley C., Henry Faber, and Michael R. Ransom. “Labor Market Monopsony.” Journal of Labor Economics 28, no. 2 (2010): 203-10.

Autor, David, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen. “Concentrating on the Fall of the Labor Share.” American Economic Review 107, no. 5 (2017): 180-5.

Carter, Zachary. “The End of Scarcity.” In The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. New York: Random House, 2020.

____________. “The Woman Who Shattered the Myth of the Free Market.” New York Times (2021).

Council of Economic Advisers Issue Brief. “Labor Market Monopsony: Trends, Consequences, and Policy Responses.” October 2016.

Kumar, Ashok. Monopsony Capitalism: Power and Production in the Twilight of the Sweatshop Age. Cambridge University Press, 2020.

Manning, Alan. Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton University Press, 2003.

Robinson, Joan. The Economics of Imperfect Competition, 2nd ed. McMillan St. Martin’s Press, 1969.

CRITICAL POLITICAL ECONOMY 

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Mark Howard
Department of Politics, University of California, Santa Cruz

Critical political economy pertains to the negative and/or positive judgment of the public management of private resources, and in practice denotes two broad intentions: (1) a disciplinary approach to inquiry; and (2) an attitude towards (a) existing literature in the field of Political Economy, and (b) existing political economic practices.

The term critical political economy can be broken into its constituent parts to form a preliminary etymological definition of its subject matter. Starting in reverse order the term ‘economy’ is derived from the Greek composite of oikos, meaning ‘house’, and nemein, meaning ‘manage’, giving us an approximate definition of economy as ‘household management.’. The derivative form of this meaning in contemporary usage relates to the management of material resources at various levels and meanings of the term ‘household,’ though always generally denoting a private sphere of operation: the private sphere of actual households of individuals and families, of local and somewhat autonomous government jurisdictions such as municipalities, or of sovereign states interacting with an international market economy. In all cases there is the notion of managing ‘incomings’ (incomes, imports) and ‘outgoings’ (expenditures, exports) within a sphere of privation. The word ‘political’ is also derived from Greek, in this case polis, meaning ‘affairs of the cities’. Putting this into historical context, its origin derives from the Ancient Greek era of city-states, such as Athens and Sparta, and is therefore now also associated with matters of the state. Even when operating in a local context (e.g. municipal government), politics are generally subject to state jurisdiction of laws (e.g. the necessary compatibility of constitutional and state law), and sometimes extend to partial budgetary limitations. Affairs of the city are never without controversy, and the everyday meaning of politics today suggests something of a contest over who gets to determine the affairs of the city, and how they go about it. Politics thus comes to be associated with struggle played out in the public sphere; struggle over the social form of jurisdiction in question, be it a city, sovereign state, or other social entity of significant size. Putting this definition of ‘political’, together with ‘economy’ we arrive at something like the public struggle over management of private material resources. Though this may seem a counterintuitive definition when speaking of an entity such as a sovereign state government, which should be setting policies for both public and private management of state resources, it in fact still captures the meaning that a sovereign state has certain private material resources specific to that state that it wishes to manage in the public sphere of the international economy, for example in trade practices. The same principle of public and private applies at various levels of political and economic activity.

The term ‘critical’ in itself denotes a number of different meanings each of which may color the meaning of the composite term critical political economy. It may be linked with related terms such as criticism or critique, both of which suggest a judgment of sorts, but differ in the scope and aims of such judgment. Criticism tends to evoke the idea of negative assessment, of challenging the very substance of the subject matter in question without necessarily offering positive suggestions for improvement; it has both an everyday and a professional or scholarly context. Critique instead evokes a practice more open to both positive and negative assessments, and applies more to a scholarly context of systematic assessment and interrogation. 

The ambivalence of the term ‘critical’ is not in fact limited to a difficulty of etymological definition, but also points to an ambivalence in the actual usage of the term as it emerges as both a scholarly approach and attitude.

Speaking to the first of these two interpretations (scholarly approach), it is useful to draw on a distinction made by the international political economist Robert Cox (1981, 128-130) between problem solving theory and critical theory. Problem solving theory is an approach that takes the world as it finds it, and attempts to solve problems arising in discrete parts of the complex whole with the aim of smoothing out the functioning of the whole. In its unquestioning assumption of the whole as a given, it therefore constitutes a conservative approach that is either consciously or unconsciously value-laden—ideological, even—and serves to preserve, and perhaps even strengthen, the status quo. Conversely, critical theory is an approach that takes an outside perspective on the world and questions how it is that this world came about, and whether normative alternatives to that world should be considered. In contradistinction with problem solving theory, critical theory is directed at the whole rather than discrete parts of the whole, and is radical in that it seeks change as opposed to stasis. Critical theory subsumes problem solving theories within its own frame of analysis and renders them as distinct ideologies. For problem solving theory this detracts from the practicality of theoretical work, however, critical theory is not so much unconcerned with practical matters of the ‘real world’ as it is attempting to transcend the existing order and question its underlying (unquestioned) assumptions.

Benjamin Cohen (2016) makes reference to this distinction in specific relation to Political Economy, by criticizing the paucity of scholarship aimed at addressing international, or systemic, matters of monetary policy and management since the global financial crisis (GFC) of 2008-2009. His argument is that the shortage of academic work on this matter is a result of prevailing methodologies in the discipline, methodologies that focus on narrowly focused, segmented, quantitative work—‘hard science’ as it were (Cohen 2016, 3). This amounts to problem solving theory as defined by Cox. Critical Political Economists instead reject the otherwise hegemonic focus on segmented analysis, and focus on the progression of change and stasis within the system as a whole (Cohen 2016, 15), which in Cohen’s argument manifests as a focus on the neglected area of international monetary policy. This further relates to Cox’s definition of critical theory, in that Cohen points out the work in this domain has largely focused on power and crisis, both of which would point to ideological factors impacting Political Economic discourse and practice, as well as bringing a normative perspective into view in addressing how to deal with perennial crises that problem solving theorists of Political Economy otherwise treat as unquestioned and unavoidable, perpetual but transitory (i.e. cyclical) features of Political Economy.   

This critical theoretical approach is also brought into view in the work of figures such as Karl Marx (1976) who specifically situates his analysis as operating in with an historically distinctive moment, with a particularized (though lawful, in the sense of forming predictable patterns of observable behavior) social form that is, because historical, consequently vulnerable to change (Marx 1976, 126). Hence his critique of Capitalism looks beyond surface appearances of entities such as the commodity (cf. Marx 1976, 125) in order to determine how it is that this entity came about historically, and to render visible otherwise concealed assumptions that go unquestioned in traditional political economic analysis (cf. Marx 1976, 138). Indeed, one of the great qualities of Marx’s critique of Capital is that contains within it the problem solving theories of classical political economists such as Adam Smith and David Ricardo, and critique’s those theories on their own terms, revealing their (intentional or unintentional) ideological leanings, and tendency to support status quo practices. Max Tomba (2009) similarly points to the state violence of primitive accumulation (i.e. original possession of the means of production), and, instead of taking it as an unquestioned assumption about the origins of the modern economy (and therefore irrelevant for contemporary political economic analysis), treats it as an ongoing and permanent process of disaccumulation (Tomba 2009, 55). This has implications not merely for scholarly theorizing about Political Economy, but also for real political action related to economic affairs in contemporary society. Such analysis draws our attention to injustices embedded within the dominant mode of political economy and challenges us to develop a normative framework that looks beyond such injustice.

The second interpretation of the term critical political economy above, was broken into two subforms relating to attitude. The first of these related to a critical attitude towards existing literature in the field. It has already been noted that Marx’s analysis critiques the classical political economists on their own terms, and therefore shows that this interpretation of critical political economy is linked to the critical theoretical approach. Marx, for instance, postulates that the value of commodities is independent of the labor process, in an apparent refutation of John Locke’s notion of value being a mix of human labor with nature (Marx 1976, 126). Such an attitude becomes apparent in more general terms as well. Smith, for instance, in postulating the origins and benefits of productivity of machinery, offers an anecdote in which a child automates part of the labor process with the outcome of creating for himself additional leisure (liberty) time (Smith 1776, 17). Marx’s response is to immediately recognize that the time freed up to automation would not immediately be given to leisure, but would instead be diverted to other work tasks so as to compound the productivity gains given by innovation. Marx refers to this as ‘relative surplus-value (Marx 1976, 429-438). Another example is Cohen’s (2016, 6) criticism of scholars who apply monolithic analytical terms–e.g. “all voters”–in their analyses. The problem with such a move, he argues, is that the theoretical convenience of using such an analytical device (‘all voters’) obscures the messy reality in which money in politics has a significant effect on skewing voting preferences through advertising, campaign funding, and so on.

The second critical political economic treatment of attitude relates to existing practices. Of course, this is already linked to that which has already been discussed both in terms of the approach of critical theory, and by derivation, in the attitude of political economic literature criticism. However, it extends to practices that may be observed and not necessarily theoretically documented. Smith, in his discussion of productivity, notes three specializations deriving from the division of labor: dexterity, task consistency, and machinery (Smith 1776, 14-17). While these results are perhaps true in practice, what Smith fails to note is that dexterity as a result of performing one sole operation leads to drudgery, task consistency leads to the unbroken intensity of labor in the workhouse (and later factory), and machinery leads to mass unemployment. Another practice that may be criticized is the trend towards private sector management of finance and monetary governance, demonstrated by the contemporary influence of US bond-rating agencies in being able to determine which economic actors are deemed creditworthy and of economic worth in doing business with (Cohen 2016, 11). Leaving such matters to private institutions which may be influenced by private, partisan interests leaves the practice open to critical analysis in that it may serve the needs of an elite few rather than the public. The lists could go on and on.

The various meanings of critical political economy discussed above overlap with each other to the extent that it becomes difficult to clearly demarcate or distinguish the content of these definitions in any strict way. What they all specifically share, however, is a commitment to challenging the status quo, and contesting descriptive and normative assumptions about how the economy should be organized. At the beginning it was noted that ‘Politics’ denotes something approximating a contest over the determination of social form. If this is true, we may ultimately say that in the end critical political economy constitutes a genuinely Political Economy.

(See Capital, Feminist Economics, Neoliberalism, Neocolonialism, Fetishism, Urban Political Economy)

Bibliography

Cohen, Benjamin. “The IPE of money revisited.” Review of International Political Economy, 24, no. 4 (2017): 657-680.

Cox, Robert W. “Social forces, states and world orders: beyond international relations theory.” Millennium, 10, no. 2 (1981): 126-155.

Marx, Karl. Capital, Modern Library. New York, NY, 1906.

Smith, Adam. The Wealth of Nations. New York: Bantam Dell, 2003 [1776].

Tomba, Massimiliano. “Historical temporalities of capital: An anti-historicist perspective.” Historical Materialism, 17, no. 4 (2009): 44-65.