An Abridged Welfare-State Minded Introduction to the Art of Microeconomics

Gerasimos T Soldatos

doi:10.4172/2167-0358.1000184

Abstract

This is an abridged set of notes on an introductory course in microeconomics designed to show how the welfare state is the only way to reconcile the central conclusion of this discipline, namely the harmony of consumer sovereignty, with the disharmony of capitalism especially when the need for merit goods is acknowledged. The first part of the paper presents the basic ingredients needed to have consumer sovereignty when only private goods are considered, and then characterizes consumer sovereignty in the presence of market failures and public goods, too. The second part introduces into the discussion merit goods preparing the ground for the conclusion that only the welfare state can alleviate the antithetic trends of capitalism and foster consumer sovereignty as a second-best approach to the system even when merit goods are present. It does so by noting that either the unfettered capitalism of globalization or the interventionist socialist market can be exploited politically and upset the system. The embedded liberalism of welfare state as the only successful means of “managed disharmony” is then concluded in the last section of these notes.

Highlights

In the beginning, that is, at the times of Adam Smith [1,2] and David Ricardo [3], economics was political economy, that is, interdisciplinary social science, economics-sociology-political science together, so to speak, acknowledging the antithetic character between labor wages and capitalist profits
As we shall see in due course below, this analytical context which makes Microeconomics be an “art” rather than a strictly scientific discipline, does manage to provide the recipe for a managed disharmony of the system to the interest of all socioeconomic classes
Excessive demands on the part of organized labor led the mixed economy to a crisis which in the late 1970s and early 1980s gave way to excessive demands on the part of capitalists, and the welfare state collapsed; demands justified theoretically by manipulating the normative aspect of microeconomics in any case

Summary

Introduction

That is, at the times of Adam Smith [1,2] and David Ricardo [3], economics was political economy, that is, interdisciplinary social science, economics-sociology-political science together, so to speak, acknowledging the antithetic character between labor wages and capitalist profits. Excessive demands on the part of organized labor led the mixed economy to a crisis which in the late 1970s and early 1980s gave way to excessive demands on the part of capitalists, and the welfare state collapsed; demands justified theoretically by manipulating the normative aspect of microeconomics in any case.

Results

Conclusion