Capitalism has created a global industrial economy. An economy with deep interdependences among people, both as producers and as consumers. We don't think about this very often, but it's fundamentally important if we are to understand the world in which we live. Think of the things you consume on any given day. Where did your breakfast come from? Think of every single item. How many people do you think were involved in the work to produce, transport, and prepare all of the things in your breakfast? When you think about it for a while, you realize that your breakfast was the outcome of the work of millions of other people. Almost all of them were people you don't know. In fact, there are people who don't know you either and don't necessarily care about you and yet there you were this morning, having your breakfast. Think about all of the things other people want to consume and how they may affect you. In a market economy, if there are many, many people who want to consume things that you would also like to consume, it's very likely that the prices for those goods will be high. If you think about it for a moment, you realize that your well-being doesn't just depend on your income, your wealth, and your choices. It also depends on everybody else's incomes, wealth and choices. Consider people's work, making goods, and providing services. Virtually all of us use good and services supplied by other people in order to produce the goods and services we are producing. While people in many economies tend to think of production in terms of individual enterprises or firms, industrial production is in fact the outcome of production systems that involve large numbers of interdependent enterprises. This point was really driven home by the COVID-19 pandemic. When a microchip factory in China shuts down a car assembly line in Indiana cannot work. When families cannot get their kids to school, millions of people, predominantly women, will not be able to do their paid jobs as usual, disrupting production efforts across the economy. Capitalism has made us deeply interconnected and interdependent on a planetary scale. In our work producing goods and in our consumption of what we collectively produced, the economic and human outcomes individuals experience depend on the actions and interactions taking place all over the economic system. Our individual well-being is determined socially. By our own actions? Sure, but also by the actions of millions of people around the world. Economic outcomes are social. At the same time, a capitalist economy functions in a decentralized way. In other words, most economic decisions are taken by individuals based on very local considerations driven by self-interest. Producers will ask themselves, "Hey how much profit will these products make for the enterprise?" They will also ask themselves things like, How should we finance investment? How much cash should we have on hand in the event of unforeseen circumstances? For all of those considerations and questions are very local and individual, their effects are global or systemic, as we'll see in our discussions. So, capitalism presents us with a potential mismatch between the systemic or global nature of economic outcomes and the individual or local nature of economic decisions and motives. How can we be sure that the self-driven actions of individuals will result in outcomes that are in some sense desirable across the economy? Are the plans of all of these individuals in the economy even compatible with each other? Putting the question a little bit more formally, can a capitalist industrial economy be expected to organize itself in ways that reliably satisfy the material needs of its members in reasonably efficient ways? That is one of the great questions of political economy, and we call it the question of economic coordination. Now, the social nature of our economic outcomes poses a second great question that political economy has tackled. The question of the social content of economic outcomes. That is, do economic outcomes in a capitalist economy embody relationships between social groups that cannot be understood simply in terms of individuals? Put differently, do economic outcomes reflect realities of class, of gender, of race, of place of birth, or immigration status? If so, do they do so in ways that are extractive or exploitative of certain social groups? This module has three lessons on the questions of economic coordination and social content in a decentralized market economy. Lessons on The Good, The Bad, and The Ugly in the functioning of those economies. The Good; we'll talk about that in the first lesson, which considers arguments that economic competition, the functioning of markets, and the signals provided to individuals by the price system are enough to ensure that individual local decisions give us systemic global effects that are socially good. Now if that is true, that would mean that competitive markets can coordinate individual self-interested actions so that collectively they give rise to outcomes that are overall good by some measure. We will take up these arguments in the first lesson of the module, drawing on the work of Adam Smith and Friedrich Hayek. The Bad, which we'll discuss in the second lesson, which is going to consider instability and crisis and market functioning and arguments that a decentralized capitalist economy has persistent difficulties in coordinating individual decisions in ways that can sustain high measures of economic activity, incomes, and employment. We'll draw an arguments by Karl Marx and Joseph Schumpeter about profit-driven innovation and its potentially destabilizing macroeconomic effects. We'll also draw on arguments by John Maynard Keynes and Michał Kalecki, who considered how individual decisions to spend or invest could have destabilizing global consequences. Then we'll consider more recent arguments about financial instability and how the search for individual profitability can result in risky financial behaviors that destabilize the economy as a whole. Finally, we will turn to The Ugly in the third lesson, which draws on a large number of contributions to consider a vital question about the social content of capitalist economies. In what way do those economies rely on extractions from certain groups and on the individual appropriations from our collective or common resources? In other words, to what extent do profits depend simply on taking things from people and from the planet? Now that we know what we're going to be discussing in this module, let's get started.
