Reading Blog 6: Labour Market, Human Capital and Economic Competitiveness

To this point we aimed to gain, mostly theoretical, knowledge and formulate a view about what the market exactly is, and how it works. As I understand, now, armoured with this new body of knowledge, we take on the parts of the system. The first one is the labour market. My thoughts about the labour market, before I read the pieces, were quite straightforward. Market solves it all, rigidities and distortions are bad for efficiency, growth and employment. Needless to say, my view has been challenged.

Baldwin and Wyplosz presented the basics, the labour market economics 101. But one of their points is exceptionally important: “Labour markets are very special, people’s time, talent and effort is what exchanged, which are not standard goods.” (Baldwin, Wyplosz, 2009). This view is substantially and explicitly reflected in the humanist pieces of Kwon Dae-Bong and Amartya Sen. While Sen is more theoretical and philosophical about the question, differentiating between the human capital and human capability, and tracing back his analysis to Adam Smith’s work.  On the other hand, Kwon Dae-Bong’s is more operational and practical, but builds on the same, not so, underlying argument that humans are not mere factors of production, but strive to live lives they have reason to value. Both authors emphasize the importance of broader organizations and institutions (education, healthcare), in addition to economic growth to develop human capability, and therefore to live a fuller, freer life. An interesting picture emerges here from the arguments. If we consider what Sen writes: “Human beings are not merely means of production but also the end of the exercise.” (Sen, 1997), we realize that the system is interdependent. This interdependence is present not just between the narrow notion of human capital and economic growth, but in the broader sense between human capability and institutions/organizations and consequently between the social order. By getting back to the cited statement from Baldwin and Wyplosz, we understand, that this interdependent complexity is what makes the labour markets very special.

While the previous paragraph, in this reading blog, concerns an attribute of the labour market, and the questions, what is the labour markets main purpose and why is it complex. This paragraph, and the last two pieces by Kuttner and Freeman aim to tackle the issue that how should it be governed. Trying to answer the how question results in the authors discussing more specific labour market institutions, rather than the broad societal ones (education, healthcare).

Kuttner argues, in a more ideologically laden, but scientific way, that full employment is a desirable, but in today’s world not necessarily attainable, goal for a society. He argues that welfare capitalists got the whole picture wrong when they assumed that it’s possible to put together a system without full employment, which will be just and equal. So, his conclusion is that a welfare state with full employment solves the centuries old dilemma of equality or efficiency, which inarguably has to be solved. Through this view he establishes a strong relation to Keynes, Sen and the second paragraph of this writing.

Freemans more evidence based approach yields a less radical answer to the how question. Based on a methodological study of the literature on the matter, he argues that labour market institutions do have distributional effect. The country with more labour market institutions has higher income equality. On the other hand, he argues that the presence of labour market institutions can’t be directly linked to the aggregate performance of the economy.

In conclusion, my view has changed. Now I see the labour market as a more complex and interdependent system, where the market approach should not be trivial and where the labour market and broader societal institutions are key to a great performance. By great performance I mean economic growth and well-being of citizens.


  • Baldwin and Wyplosz – The Economics of the European Integration, 2009
  • Dae Bong Kwon – Human Capital and its Measurement, 2009
  • Amartya Sen – Editorial: Human Capital and Human Capability, 1997
  • Robert Kuttner – The Economic Illusion: False Choices between Prosperity and Social Justice, 1984
  • R. Freeman – Labor Market Institutions around the World, 2007



Reading Blog 5: Development, Economic Openness and Democracy

I just need to press again what I wrote in the previous reading blog that everything starts to culminate in a coherent understanding of how markets function. However, the first two readings for this class present the phenomenon more from a macroeconomic and historical point of view, while the solid theoretical microeconomic/collective action foundations are underlying each piece.

Charles Tilly argues, with brilliance and sometimes considerable wit, based on the European history, that war making, state making and capital accumulation are mutually reinforcing processes. Additionally, he argues that the size of the government is the function of the effort devoted to extraction, state making, protection and war making. In general, his argument favours Underhill’s proposition that governance is endogenous to the markets, but Tilly’s theory adds another layer, the role of violence and wars in this process.

The second reading (North, Wallis and Weingast, 2009) goes on with elaborating on the role of violence in the making of social orders, and in a broader sense on the different developmental trajectories of countries. North et al differentiates three social orders, the foraging order, the natural state and the open access order. Their main proposition is that the open access order has several institutional characteristics, which favour growth and welfare. They argue that open access order societies have not just the most developed economic apparatus and highest degree of welfare, but also the most articulate and democratic political institutions, therefore political and economic development is closely interrelated. They argue that in order to attain this degree of development violence has to be curbed, which is done through institutions, which embody the rules of the game. The goal of these institutions is to support complicated and sophisticated contractual organizations, both inside and outside the state, therefore control violence. Development is the function of the number and sophistication of these organizations and institutions. But it’s important to note that this process is not teleological, the internal dynamics of elites, can yield multiple equilibria and create a constant instability. This point is vividly illustrated in the third chapter, that even Britain lingered back and forth between the different developmental stages.  The book’ underlying argument intersects and builds on the insight of Buchanan, that individual act the same, but outcomes are determined by the institutional framework. The proposition that rent-seeking is a natural behaviour, present in all systems, but institutions can tame it and make it beneficial to the society. Implicitly arguing that the inherent logic of markets does not make a country more developed, institutions are needed to make it happen.

Brousseaue and Glachant also underpin what has been said before, that markets need institutions and they are closely interrelated, but from the microeconomic point of view. They argue that markets are manufactured, therefore imperfect, before they are made by humans (who are boundedly rational), therefore they need governance. But on the other hand governance is also imperfect due to the short-sightedness of collective action. Based on this they argue that market as a system is difficult to and is rarely the result of an optimization process.

In the last piece, the great A. O. Hirschman revisits exit and voice. The main argument related to our inquiry is on the end of the third essay. He argues that public goods increase loyalty in a society, and understood complexity is the ultimate factor preventing exit. So, he implicitly argues that a developed institutional framework and a historically developed social order in a society can serve to prevent one from “voting with his feet”. This also corresponds to the conclusions of the other three readings, institutions are key in the success of a society.


  • Charles Tilly – War-making and State-making as Organized Crime, 1985
  • North, Wallis and Weingast – Violence and Social Order, 2009
  • Brousseau and Glachant – Introduction: Manufacturing Markets – what it means and why it matters, 2014
  • Hirschmann – Around Exit, Voice and Loyalty, 1981

Reading Blog 4: Diversity and Market Integration

The whole literature of this seminar builds on the observation of Adam Smith that economic agents sometimes stick together to “widen the market and narrow the competition”. This motive is also present at Fligstein (Fligstein, 2001), when he argues that the goal of entrepreneurs is not profit maximization but survival, which implies the pursuing of stability, which results in continuous efforts to attain a monopolistic position on the market. I think the starting point of this argument is arguable since the underlying motivation to pursue stability is profit maximization. If the firm is profitable in a stable manner for a longer period, it constitutes to the overall return to the entrepreneur, therefore a stable environment serves profit maximization. However, this argument does not change the fact that economic agents aim to become monopolists, the sole players on the market.

The previous readings and this seminar’s papers (Tullock, 1967, Krueger 1974 and Peltzman 1989) culminate in Underhill’s beautiful paper as a big picture and interdependent model of how markets work.

In the first reading Gordon Tullock argues that tariffs, thefts and monopoly have additional welfare costs to those observed in the classic analysis of welfare effects (Harberger’s triangle). The paper not just urged me to rethink my bicycle lock buying habits, but additionally refined the picture why such behaviour (monopolies and cartels) outlined by Smith and Fligstein should be overcome more efficiently by means of control. Plainly stated, Tullock made it clear why a “Third Order” (Underhill, 2016) of governance is needed.

Krueger’s argument is similar to Tullocks, she deals with the welfare costs of competitive rent-seeking in the case of import licenses. Both authors arguing in favour of free trade or the correct type of policies (Third order governance). But pure, neo-classical free trade is something, which slowly has become overly simplistic, unrealistic and not sufficient as an answer. It lacks institutions, the essential manner of those is proven in the following paragraphs.

Peltzman’s overview and update of the economic theory of regulation offers valuable insights into why regulations emerge (or disappear). We should consider three of Peltzman’s arguments, one is, which comes from Olson (Olson, 1982), that “Compact, well-organized groups will tend to benefit more from regulation than broad, diffuse groups.” (Peltzman, 1989), the other is that incumbents favour regulation until the point it favours them, and the third is that regulation usually emerges as an answer to a crisis.

Since Coase we know that due to transaction costs being greater than 0, free market yields two co-ordination mechanisms, and therefore the emergence of firms. From Smith and Fligstein we know that once firms are in the system they aim to become monopolists. Additionally, from Buchanan we know that acting this way is not that straightforward, since some goods can be attained only in partnership with other economic agents (Buchanan, 1965). Adding all this together we arrive at Underhill’s theory, which states that “Governance is endogenous to the self-interested and rational utility-maximising behaviour of economic agents.” (Underhill, 2016).

All in all, I must say that this the point when everything starts to make a truly interconnected and coherent sense. The fragments were put together in these readings perfectly to make a theory of markets and society going from micro to macro and back.


  • Gordon Tullock – The Welfare Costs of Tariffs, Monopolies and Theft, 1967
  • Anne Krueger – The Political Economy of the Rent-Seeking Society, 1974
  • Sam Peltzman – The Economic Theory of Regulation after Decade of Deregulation, 1989
  • Geoffrey Underhill – Markets Institutions, and Governance: the Endogeneity of Governance, 2016

Why I do what I do?

As a business bachelor and a business oriented person why I am pursuing an Msc. in Political Economy?

  • It is interesting and intellectually challenging, I think it’s quite an important criterion regarding one’s studies.
  • It teaches you to think. To think independently, critically and in a structured way about anything in the World.
  • Throughout my business administration bachelor studies, internships and the year I spent in the investment banking industry I had to realize that businesses don’t exist in a vacuum. I want to understand what’s outside the firm and the industry, make a step beyond Michael Porter’s beautiful frameworks, the discounted cash flow model and the trading comparable valuations. I believe it’s essential to understand the broader working environment of a firm to be able to navigate and make sense of a business organization in a successful manner.

After finishing my graduate studies, armed with plethora of new knowledge, I plan to return to the world of business, most preferably investments (venture capital & private equity) and NOT plan to pursue any career in politics or international relations. If you think I could add value to your company please do not hesitate to hit me up with a message here in LinkedIn.

A nyugat és mi

Életemben először történt meg velem, hogy valaki be akarta nekem magyarázni, hogy a kommunizmus működik. És most nem „az ötlet szép, de a megvalósítás el lett rontva” típusú szólamokra gondolok, hanem arra, amikor valaki hithűen, csillogó szemmel érvel amellett, hogy a kommunizmus az egyetlen megoldás az emberiség problémáira. Ami pedig a leginkább meglepett, hogy mindezt vitathatatlan társadalomtudományi képzettsége ellenére mondta.

A vita közben, mivel a pengeváltás tempójától köpni nyelni nem tudtam, csak a piaci rendszer melletti érveken gondolkodtam, és igyekeztem megtalálni a réseket a másik logikájában. Eszembe jutott Hayek elegáns érvelése a tudás szétaprózodottságával kapcsolatban, az empíria területén maradva pedig a hasonló rendszerek kudarca (Kuba, Venezuela), vagy épp a Szovjetunió tündöklése és bukása.

Meggyőzni természetesen nem tudtam, ő sem engem. Ennek kapcsán felmerül a kérdés, vajon miért ennyire meglepő számomra egy ilyen vélemény, és hogy miért nem voltunk meggyőzhetőek?


A válasz a háttérben keresendő, több szinten. Én közgazdaságtant tanultam és üzleti tanulmányokat folytattam, vitapartnerem politológiát. Én a racionális döntések, hasznossági függvények, profitmaximalizálás és Michael Porter szellemében pallérozódtam, míg ő a demokrácia, igazságosság, nemzetközi lobbi és a választási rendszer bűvkörében. Nézeteink szöges ellentétét magyarázhatná akár ez a tanulmányokbeli különbség is, valamilyen szinten talán magyarázza is, de biztos vagyok benne, hogy nem kizárólagosan. Voltak már vitáim politológusokkal, de sosem ilyen jellegűek. Inkább arról szóltak, hogy az ember hogy dönt, egy politikust mi motivál, az állam allokálja-e a javakat vagy sem, de sosem jutottunk el odáig, hogy bárki is a kommunizmus mellett érvelt volna. Valamennyien közép-kelet európaiak voltak, jelenlegi vitapartnerem viszont francia.

A háttér következő eleme tehát az ember származása. Mi, Közép-Kelet Európában úgy nőttünk fel, hogy számunkra a kommunizmus egy szitokszóval ért fel, hasonlóan ahhoz, amikor egy németnek a nemzeti szocializmus vívmányait bizonygatják. A mi olvasatunkban a kommunizmus maga a mészárlás, rablás, elnyomás és minden, amit az ember nem akar. Mi ezt tanultuk nagyszüleinktől, szüleinktől, a történelemkönyvekből és ezt sugallta a mindennapi politika retorikája is. Egy közép-kelet európai zsigeri undort, elutasítást és némi dohszagú nosztalgiát érez, ha ezzel a fogalommal találja szemben magát.

Szerintünk Franciaország maga a felvilágosodás, Napóleon, de Gaulle, a jólét, sajtok, borok és persze az észak-afrikai bevándorlók. És a franciák szerint? Egy nagy, etatista állam, ahol magas a redisztribúció, mégis nagyok az egyenlőtlenségek. Viszont vegyük észre, hogy ez egy gondoskodó, és nem egy ragadozó állam képe. Amikor egy francia azt mondja, hogy egy adott jövedelem fölött 75%-os személyi jövedelemadót kell kivetni, arra gondol, hogy az államnál jobb kezekben lesz a pénz, mint egy magánembernél, mivel ezzel a Robin Hood-i transzferrel biztosítani lehet az elharapódzó egyenlőtlenség ellenpólusát. Nehéz belekötni, mégis, közép-kelet európaiként teljesen egyértelmű, hol az érv gyenge pontja. Még hogy az állam jobban bánik a pénzzel? Nem lopja el? Nos, a mi régiónkban még nem találkoztam olyan emberrel, akinek nem egy korrupt államkép élne a fejében. Megint csak elmondatjuk, hogy nagyszüleinktől, szüleinktől, a hírekből és a mindennapi diskurzusból ezt tanultuk meg. Az állam lop, az állam nem átlátható, nem hatékony és nem elszámoltatható.

Lépjünk egyet hátra. Csak Franciaország olyan, amilyennek leírtam? Csak ott nagyok az egyenlőtlenségek a magas újraelosztás és évszázados kapitalizmus ellenére? Csak ott él gondoskodó, elszámoltatható és (relatíve) hatékony állam képe az emberekben? Mivel a vitában két német, egy skót és egy holland is részt vett, állíthatom, hogy nem. Egyszerűen Nyugat-Európa így vélekedik önmagáról. Ennek fényében, hogy is várhatnánk, hogy valaki megértse a meglepettségünket, amikor felmerül a kommunizmus, mint alternatíva? Vagy esetleg az állami szerepvállalás növelésével szembeni frusztrációnkat?

Mivel ennyire markánsan más kontextuális hatások értek minket, közép-kelet európaiakat a történelem során, ezért csak nagyon kis valószínűséggel történhet meg az, hogy egy, a nyugati kultúrkörben szocializálódott ember teljes mértékben megértsen minket. Viszont fontos észrevennünk, hogy ezen csak egy dolog változtathat: ha nyitottak vagyunk. A nyugati kontextuális ignoranciát csak a mi, háttérhatásokat kiiktató nyitottságunk tudja áthidalni.

Reading Blog 3: Market Exchange and the Emergence of Firms

The article by John R. Commons contains several stellar points, but here I’d like to focus on the underlying logic in the article. At first he defines the universal unit of activity in society, which represents conflict of interest, mutual dependency and security of expectations, which is the transaction. He argues that what holds together the system are the well-articulated and reality tested (due to the precedent based law system) laws, which make expectations and consequences straightforward in each type of transactions. Furthermore Commons writes, that there are additional means of control (moral, economic), which regulate the flow of affairs in case the disputes are not resolved by the state. Finally, he argues that the laws are based on the ethical assumption of willingness, which as it holds together the economic system of transactions, which we call the market. This willingness in his terms is that in each transaction, which is taking place there’s a “willing buyer and a willing seller” (Commons, 1933).

Building on transactions, Coase raises the essential question why are there two forms of coordination in the system (managerial and price)? Coase brings an argument based on transaction costs and uncertainty to theoretically prove the existence of the firm in the economic system. He argues that a firm emerges due to the savings in transactions costs. In his words “
The operation of a market costs something and by forming an organisation and allowing some authority (an ” entrepreneur “) to direct the resources, certain marketing costs are saved.” (Coase, 1937) At the later part in the paper he elaborates on the entrepreneur, arguing that his art is to navigate in uncertainty (to forecast) and then based on the forecasts to rearrange the means of production in the firm.

In this brief, 4 page long essay, Buchanan summarizes his main points regarding the mechanics of collective choice. Argues that the same individual is making the choice in the market and in the political environment, while the observable differences come from the different institutional settings. Therefore implicitly argues that institutional settings alter rational choice. Based on this it’s easy to concede that setting the sufficient rules is vital in any environment, since it is what clearly determines outcome.

Williamson aims to establish a connection between institutional environment and the forms of institutional governance (market, hybrid, hierarchy), by arguing that the environment is the locus of shift parameters (Williamson, 1991). The paper is the continuation of the transaction cost tradition, however reaches a different conclusion. While at Commons the willing participants of a transaction are the one shaping the institutions (through precedents), and at Coase the entrepreneurs interpretation of uncertainty was the determinant, Williamson’s point is exactlythe opposite.

Fligstein’s central argument is that economic growth is dependent on social factors (governments, institutions). The underlying, political-cultural logic of the argument is the field theory. Fields contain collective actors who try to produce a system of domination, which requires a local culture. This culture is then reproduced by the powerful (state, workers or firms) in the system (Fligstein, 2001). Fligstein’s theory maps how a new social space emerges, how it becomes and remains stable. Being stable means path-dependent, since the interests of the ruling group are predictably favoured. He also changes the profit maximizing motive to a survival motive, which implies the need for stability, which is attained through political means. This stability is what underlies economic growth. The theory builds from the micro to the macro level elegantly, and connects several dots, which haven’t been connected yet during our inquiry. 

This week’s readings put more color in the discussion about what market is and how it operates. Introducing new types of coordination, apart from the price mechanism and also putting collective choice on its place in this vast system. In addition to these a new front line has been opened, the relationship of market and the institutions. The question of institutions is not settled, since we were presented with opposing views, but the obsolescence of the state vs. market dichotomy is now obvious, it’s clear that the system is more complex, interdependent and reflexive than that.


  • Commons, John R. (1932). “The Problem of Correlating Law, Economics, and Ethics.”
  • Coase, Ronald (1937), “The Nature of the Firm.”
  • Buchanan, James M. (1987). “The Constitution of Economic Policy,”
  • Williamson, O.E. (1991). “Comparative Economic Organization: The Analysis of Discrete Structural Alternatives.”
  • Neil Fligstein (2001). The Architecture of Markets

Reading Blog 2: The Political Economy of Agency, Aggregation, Co-ordination, and Collective Action

The readings present a beautifully designed architecture of thoughts.  Each piece deals with the topic in a different way. James Buchanan’s Calculus of Consent outlines a “methodologically individualistic” decision making model of the individual regarding when to get involved in different types of actions (individual, voluntary/contractual, collective). He argues that a rational person would minimize his interdependence costs in each situation, is transitive in his preferences and is able to rank all the actions. This theory is determined by the rational-logical decisions of each individual, not by the decision of the group. In plain words we could say that Buchanan describes when an individual chooses to act collectively.

On the other hand, Mancur Olson in the first chapter of his book, The Rise and Decline of Nations, describes when collective actions work. He argues that large groups comprised of rational individuals do not act in their interest. This happens due to fact that the larger a group the smaller the per capita benefit from collective action, therefore an individual is not incentivized to take action in favor of the collective good. Partly because the costs to act is lower that the received benefit, partly because of the free rider problem.

Buchanan in his other paper, An Economic Theory of Clubs, introduces club goods. While he outlines the analysis of club goods, he also defines the private and public goods in relation to the group size and total costs and benefits per person. At the end of the analysis he concludes that this theory is essentially the theory of optimal exclusion, which could be applied to reality with the continuous adjustment of property rights. Therefore implicitly arguing that the cost/benefit relations derived from individual, group-size enhanced, utility functions should determine the rules. In my understanding this perfectly corresponds to the logic described in the Calculus of Consent, that causation goes from the individual to the rules in collective action, not the other way around.

This is further strengthened by the results of Elinor Ostrom’s scientific work. She argues that there are 4 types of goods (adds common-pool resources). Based on this she elaborates her theory that if users of common-pool resources are let to communicate, set rules and sanction, they’ll yield much better results on the long-run than conventional game theory (common pasture) predicts. We see that this corresponds with logic described, rules set by the participant individuals are the key determinant to success in these situations.

The only paper, which challenges this logic is Phil G. Cerny’s Globalization and the Changing Logic of Collective Action. Cerny argues that the logic of collective actions is cemented in the current notion of territorial state, but this notion is transformed by globalization and the state’s relevance in providing possibilities to collective action will diminish. He argues: “In this new context the logic of collective action is becoming a heterogeneous, multilayered logic, derived not from the on particular core structure, such as the state but from the structural complexity embedded in the global arena.” (Cerny, 1995). However, as seen in the previous theories, collective actions is not derived from the state, but from the participating individual itself. Therefore I tend to be critical with Cerny’s argument since it completely neglects the individual.

To conclude, it’s more the individual’s affect how the whole comes to be, and not the macro, ‘system’ level is the main influencer. What makes the connection between the two, are the rules made by participating individuals.


  • James Buchanan & Gordon Tullock (1962). The Calculus of Consent
  • Mancur Olson (1982). Rise and Decline of Nations
  • James Buchanan (1965). “An Economic Theory of Clubs,”
  • Elinor Ostrom (2010). “Beyond Markets and States.”
  • Phil Cerny (1995). “The Changing Logic of Collective Action.”


Reading Blog 1: Retro-fitting Neoclassical Economics

Adam Smith wrote his seminal book in times of historically significant economic growth, on the beginning of the industrial revolution. His theory is based on the benevolent notion of sympathy, which develops into an elaborate model of the commercial society. To assume that a kind of mutual sympathy is the key to the harmony of our society is as optimistic as the conclusions of his theory, continuous growth thanks to innovation spurred by the division of labor. (Smith, 1759 and Gopnik, 2010)

Ricardo and Malthus experienced population growth and most importantly obscenely high food prices due to the market distorting measures imposed by the ruling landowner class (Corn Laws). This resulted in their gloomy conclusions based on the subsistence theory of wages. As Ricardo’s abstract system puts: the capitalist save, invest and raise wages (to lure workers to their industries), the workers consume and multiply (in relation to wages) and the landowners increase the rent and reap the benefits of the whole system. As Robert Heilbroner puts it: “ Ricardo’s exposition the young industrialist class saw the theory that just fitted their needs. Were they responsible for low wages? No, since it was only worker’s own blindness that drove him to multiply his numbers. Were they responsible for the progress of society? Yes…” (Heilbroner, 1953, p. 57). Ricardo’s theory perfectly fits his background and the call of those times. (Heilbroner, 1953)

Friedrich List on the other hand put the whole thing on its head, going against the mighty power of free trade and arguing that that system serves just the already developed nations. No wonder he was seeing the problem from this angle, since he owned vast lands in the developing United States of America. What other things can we derive from the context? USA was the country, which in the turbulent times of the late 18th century gave the world the notion of political union of states. This by the time of List emerged into also a thriving commercial union. Again it’s not a surprise that based on these experiences List argued that political unionization of states should precede free trade between parties, since perpetual peace is not the result of commerce but its condition. (List, 1841)

The point I’m trying to make is that each theory depicted in the readings is conditional on the context it was originally written in. Adam Smith could be best understood and regarded true in the late 18th century Britain, List’s context is the burgeoning USA (and Germany waiting to be unified) in the 1830’s, Quesnay’s is the middle of the 18th century in France and Ricardo’s and Malthus’s is the time of the Corn Laws in Britain.

Of course universal and still holding arguments were raised in all of the works. But as a matter of fact this is the great feat of the neoclassical school, they managed to extract several not context dependent notions, arguments and processes from the preceding theories and build a coherent, yet a bit mathematically dogmatic, system of political economy. We can discover Ricardo’s tool of abstraction, Adam Smith’s self-interest and an updated theory of value in the neoclassical theory. However to correspond to logical purity the Neoclassical model lacks several truly important notions, for example economic inequality (present at Ricardo and Malthus) and economic boom and bust processes (elaborated by Malthus and the Physiocrats).


  • Adam Gopnik – New Yorker, 2010, “Market Man”
  • Adam Smith – Wealth of Nations, 1776
  • Adam Smith – The Theory of Moral Sentiments, 1759
  • Guy Routh – Origin of Economic Ideas, 1975
  • Friedrich List – National System of Political Economy, 1841
  • Robert Heilbroner – The Wordly Philosophers, 1953
  • John Caporaso, David Levine – Theories of Political Economy, 1992

Emmanuel Macron and the right thing

In the August 26th issue of the Economist appeared an article about Emmanuel Macron with the title “Macron stumbles”. It tried to explain that how and why his popularity plunged in the recent months. The writer raises three arguments of which two are completely dealing with the French president’s communication and political strategies (inviting Trump to the Bastille Day parade and giggling with Rihanna at the Elysée Palace). Perhaps the third argument has my interest from the perspective of political economy.

Mr. Macron’s strategy to stick to the budget deficit rules of the EU is not to raise taxes but to cut spending. This means curbing the famously elaborate French bureaucracy by freezing public-sector pay. On the other hand he aims to cut taxes, levy less on work and business to create more jobs. It can be interpreted that he plans to go in the direction of some kind of laissez fair economic governance. Less government, more free market, a rather unusual stance in the contemporary France, which is used to a more paternalistic state.


Let’s examine how the president’s recent measures fit into the picture of classical economic theory. If we take List, we can say that Mr. Macron evaluated his country’s position well. France is a developed economy with strong, mature industry operating in a fairly well-functioning political (and therefore commercial) union, the EU. In this sense, according to List, more free market indeed makes France wealthier. The president’s steps in order to strengthen the EU and take leadership also fit the picture. A better functioning political and commercial union (or one, which is not falling apart) is inarguably more favorable for France in its current position.

This Mr. Macron…


We can also find parts in Adam Smith’s Wealth of Nation, which reinforce Mr. Macron’s actions. Smith argued that productivity is the sole source of wealth. More simply stated the ability and the efficiency of making products is what determines the wealth of nations and not the gold/foreign reserves/etc… they currently have. Smith also argues that the sovereign is clearly an unproductive part of the economy, its only role should be regulating the productive forces. Mr. Macron’s steps can be interpreted as pointing to the direction of Smith’s theory. By taxing work and business more and freezing the pay in the public sector he aims incentivize the labor force to shift from an unproductive to a productive activity.


On the other hand the new labor laws also fit into the picture. The president aims to break the power of trade unions by introducing new laws, which make it easier for small- and medium sized enterprises to hire and fire, therefore catalyzing the division of labor. Till this SMEs could not negotiate with workers directly on terms and conditions of contracts just indirectly through a labor union. Needless to say this practice substantially slowed down the agility of the workforce (and the firms also).  By increasing the speed of the circulation of laborers can increase the degree of division of labor in the economy since workers wouldn’t be stuck in bad positions for long and will faster find a new place, maybe a new specialization. As increasing the degree of division of labor it also should increase productivity (if we take Adam Smith’s theory).


All these measures look beautiful in the light of classical economic theory, but not as stellar in today’s France, which is used to heavy unionization, large government and traditions in the labor arena. So if we accept that Mr. Macron is doing the right thing (in the light of classical economic theory), then he’s punished for doing that in terms of plunging popularity figures. Should Mr. Macron change his mind or go on with his ambitious project to change France from the large state based to a more free market oriented economy? Or on the other hand the French people should remember that they voted for change and should not be surprised when they get it?

…or this Mr. Macron will be seen more often?


  • Economist, August 26th 2017,  “Macron stumbles
  • Friedrich List – National system of political economy, 1841
  • Adam Smith – Wealth of Nations, 1776
  • Guardian, August 26th 2017, “Macron government launches overhaul of France’s labor laws

Skin in the game

Avagy miért tiszteljük azokat, akik kockázatot vállalnak?

Elon Musk, Hannibál, Jurij Gagarin, Lech Walesa, Oskar Schindler. Valamennyien köztiszteletnek és világhírnévnek örvendenek. Férfiak, akik nagy dolgokat hajtottak végre a történelem során. De vajon mi a közös bennük? Miért tiszteljük pont őket?

„Bátor emberből kevesebb van, mint géniuszból” – Peter Thiel

A bátorság. Elon Musk a mobilitást szeretné úgy megreformáni, hogy befektetők több milliárd dollárnyi felelőssége nyomja a vállát. Hannibál elefántokkal kelt át az Alpokon, hogy odaálljon Róma kapuja elé. Jurij Gagarin első emberként repült az űrbe. Lech Walesa a kommunizmus elleni első sikeres forradalom vezetője volt. Oskar Schindler pedig zsidók ezreit mentette meg a második világháborúban, azzal, hogy gyárában foglalkoztatta őket. Mindannyian kétségkívül kivételes emberek, nagyságukat azonban bátor természetük adja. Ideje feltennünk a kérdést, hogy:

Miért olyan tiszteletreméltó dolog a bátorság?

Francis Fukuyama, sokat vitatott művében, A történelem vége és az utolsó ember-ben behatóan foglalkozik Hegel és Kojéve gondolataival. Többek között a természetes állapot és az első ember leírásában is rájuk támaszkodik. Képzeljünk el egy absztrakciót, filozófiai gondolatkísérletet, amelynek kiindulópontja, hogy Hegel szerint az ember legfőbb dologként más emberek vágyára vágyik (elismerésre).

„Az ember alapvetően társas állat, de társaságkeresésének nem egy békés civil társadalom az eredménye, hanem a puszta tekintélyért vívott élethalálharc. E „véres diadalnak” háromféle kimenete lehetséges. Az első: mindkét küzdő meghal, s ez esetben maga az élet is, az emberi természetes élet véget ér. A második: az egyik fél meghal, s ez esetben a másik kielégítetlen marad, mivel nincs már olyan emberi tudat, amely elismerhetné őt. És végül a harmadik lehetőség: a párbaj úr-rabszolga viszonnyal fejeződik be, miután az egyik fél inkább a teljes behódolást választotta, mint az erőszakos halált.” Francis Fukuyama – A történelem vége és az utolsó ember

Hegel szerint az első pillanatban két teljes mértékben egyenlő ember volt. A történelmet végigkísérő úr-rabszolga rend ebben a helyzetben alakult ki. Az az ember kerekedett felül a másikon, amelyik az életét is hajlandó volt kockáztatni ezért. De miért emel minket úrrá az életünk kockáztatása? Azért, mert teljes mértékben ellentmond mindennek, ami maga az ember. Életösztönünkkel szinte lehetetlen szembemenni, ezért Hegel úgy gondolta, hogy akkor, amikor ez az emberfeletti erőfeszítés megtörtént, akkor a rabszolga behódolt. Hegel és Kojéve magyarázata szerint így alakult ki és maradt fenn a nemesség és a jobbágyság. A nemesek nem dolgoztak, de ha az uralkodó hadba hívta őket, akkor harcolniuk kellett, a harcban újra megmutatva viszonyukat az erőszakos halálhoz, ezzel is megerősítve uradalmi pozíciójukat. Természetesen az évszázadok során, itt most nem részletezett okokból (Fukuyama kitér rá) a nemesség elpuhult, míg a jobbágyság szorgalmával új helyzetet teremtett (kapitalizmus).

A fent leírtakból levonhatjuk a következtetést, hogy az úr bátor, a rabszolga fél. Az urat tiszteljük, a rabszolgát nem. Finomítva a kijelentéseken, azért tiszteletreméltó a bátorság, mivel erre a hegeli archaikus első küzdelemre vezethető vissza, arra, hogy valaki olyan mértékben viselkedik kockázatosan, ami a társadalom nagy részének már felfoghatatlan.

Vajon vállalkoztál volna Gagarin első repülésére?

Természetesen az életnek ez a fajta kockáztatása, a vérbosszú és a párbaj, csak a primitív társadalmakban volt (van) jelen. A világ fejlett részének liberális demokráciáiban már más színtereken zajlik a harc az elismerésért.

Ezen okfejtés mentén a gazdasági életben is azonosíthatjuk ezt a küzdelmet, ezeket a viszonyokat. Pontosan a fent leírtak miatt tiszteljük jobban a vállalkozókat, mint a multikatonákat. A vállalkozónak van mit veszítenie, a bőrét viszi vásárra (skin in the game), tehát a fogyasztói társadalom játékszabályai szerint élethalálharcot vív. A társadalom nagy részéhez képest relatíve irracionálisat cselekszik. Pontosan úgy, mint ahogy a Hegel természeti állapotából úrként kikerülő ember.

Kockázatvállalás = tisztelet

Véleményem szerint, az elismerésért való küzdelem állandó, mint ahogy az elismerés bátor magatartással való kivívása is. Ebből kifolyólag mindig a Musk-okat, Hannibálokat, Walesa-kat Gagarinokat és Schindlereket fogjuk tisztelni.