The ABCs of Political Economy: A Modern Approach [Paperback]

In "The ABCs of Political Economy" Robin Hahnel presents radical economic theory in an accessible and competent manner. Hahnel rejects Marxian economics and largely uses neoclassical models (there are a number of passages based upon Sraffian economics though). Using theories developed by radical neoclassical economists since the 1970s, Hahnel demonstrates why the term "market failure" is all but completely redundant. Of course, I am a supporter of heterodox economics, particularly Marxian economics. I do not think Hahnel's reasons for dismissing Marxian economics is very sound.

Chapter 1 is a general discussion of people and social institutions. Chapter 2 discusses conservative, liberal, and radical views of economic justice and desert. Even as a hardcore utilitarian, I can appreciate Hahnel's demolition of the liberal and conservative positions. Even if one decides to make value judgments about desert, these particular ones are especially incoherent. Beyond theoretical problems with these views of justice, Hahnel reviews the evidence on distribution under capitalism and shows that reality couldn't square with liberal justifications of capitalism even if they were logically sound.

Chapter 3 develops a "corn model" (an economy in which corn is the only consumer good produced) and draws some conclusions about equality and inequality from it. This is almost identical to the model in John Roemer's tedious and pointless book "Free To Lose." The amazing conclusion that people with more wealth have to work less than those with less wealth is drawn. Corn models, some quite similar to this, are used to better effect elsewhere in the book. However, they don't really require this chapter at all. Chapter 3 should have been completely dropped.

Chapters 4 and 5 are on microeconomics, and are the best chapters in the book. Using E.K. Hunt's "invisible foot" theorem, Hahnel extends a conventional discussion of market failure to show how inefficiency snowbalss in capitalist economies. The "conflict theory of the firm," the most important contribution of radical political economy, is reviewed in excellent fashion. Profit maximizing firms may choose inefficient techniques if these techniques redcue the bargaining power of labor (e.g. a team production technique may be more efficient than one with a minute division of labor, but the former will give workers a better chance to communicate and maybe organize). It is also shown that in Sraffian models, efficiency will only be achieved if the profit rate is 0.

Chapters 6 and 7 competently offer a left position on macroeconomics.Chapter 8 is an excellent discussion of how trade can be highly inefficient, all the while only diverging a little bit from the assumptions of standard trade theory. What you can discover if only you don't ignore it! However, there are some tecnical problems in parts of this chapter. Ron Baiman corrects them (and salvages the general conclusion,s basically) in the January 2006 issue of Review of Radical Political Economics in an article called "Unequal Exchange Without a Labor Theory of Prices." Chapter 9 is an excellent and innovative model of banks and financial crashes. Chapters 10 and 11 offer conclusions and policy suggestions.

Most of the ideas in this book have been developed elsewhere in a rigorous fashion for professional economics. If you want to try your hand at this more difficult literature, Hahnel and Michael Albert's "Quiet Revolution in Welfare Economics" covers many of the issues discussed in this book. "Markets and Democracy," edited by Bowles, Gintis, and Gustaffson would also be of interest.

Noam Chomsky's praise for this book says a lot: this book will appeal to people who are not satisfied with conventional wisdom, who sympathize with economic democracy and who want a good introduction to political economy. Robin Hahnel managed to write an easy to read, yet thorough book that discusses basic conventional micro, macro, finance, trade theories supplemented with very reasonable critiques from political economy point of view. Some of the best moments in the book occur when he takes on orthodox theory within in its own framework, e.g. he uses the mainstream Hecksher-Ohlin-Samuelson trade model to show that gains from trade will mostly accrue to countries with relatively abundant capital, and within those countries - to people who are highly skilled or own capital. This book criticizes clearly and thoroughly, and presents alternative paths. Above all it is a great way to review basic micro/macro material you might have forgotten. The only criticisms I can think of is that some people may find this book way too basic and that its use of graphs/formulas is not as efficient as it could be.

This book is a good introduction to political economy for people like myself who have little previous knowledge of the subject. Its both very informative and very accessible. I would definitely recommend at least attempting to read through the chapters containing models for those who might be a little adverse to doing some math. On the other hand, Hahnel is right when he says you don't have to read them to understand the rest of the book.

Although I have only taken a couple of econ courses in college, I've taken a great deal of math and I was still a little confused by how some of the computations were written out. I actually found it easier to sort of skip the written computations and work backwards from the solutions/conclusions to understand them.

The only other issues I have with the book is that it can be redundant at times and Hahnel used enough double negatives for me to take notice.

On the whole, a good introduction. I am however tempted to read Capitalism and Freedom or some other conservative econ book to determine how salient Hahnel's arguments really are.