CHAPTER 17
Robinson Crusoe
Two Perspectives on Microeconomics
LEARNING OBJECTIVES
Explain the key differences between neoclassical economics and progressive political
economy
OUTLINE OF CHAPTER
I. Two Different Lenses to View the World
II. Robinson Crusoe
KEY TERMS
neoclassical economics
asserts a basic policy conclusion that free-market capitalism works well as long as government
does not intervene in the economy
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Explain the key differences between neoclassical economics and progressive political
economy.
1. What are the two key assumptions that neoclassical economists make about
individuals? What are those assumptions used for?
Neoclassical economics assumes that individuals make rational decisions or choices and
2. What do progressive political economists claim is a key factor for individuals making
decisions? Give an example.
A key factor for progressive political economics is the relationships between groups in
3. Neoclassical economists talk about how individuals are free to spend their dollars in the
market. What does this mean? What problems do progressive political economists see
Neoclassical economists emphasize the right of all individuals to spend their money to
4. What is the difference between microeconomics and macroeconomics?
Microeconomics is the study of how individual consumers, individual firms and
Describe how the different models or views of neoclassical economists and progressive
political economy lead to different policies in dealing with social issues.
5. What role should the government play according to neoclassical economists? According
to progressive political economists?
Neoclassical economics believe the government should not intervene in the economy to
6. Should the government do much spending in the economy according to neoclassical
economists? Why or why not?
7. What types of spending does each group think the government should do in the
economy?
8. What do the neoclassical economists have to say about taxes? How do taxes interfere
with the individual?
economy.
9. Briefly describe the Robinson Crusoe metaphor underpinning the traditional economics
perspective.
10. What happens if transactions are not voluntary? Can you give an example of a
transaction that might not be voluntary?
If a transaction is not voluntary, then exchange cannot be assumed to be the outcome of
11. What shortcomings do critical economists see in the neoclassical use of the Robinson
Crusoe metaphor?
The Robinson Crusoe metaphor is criticized for ignoring the initial distribution of
12. How does relative power enter into transactions between employers and employees?
The employment relationship is inherently unequal, because the individual employee does
13.
vote? Why or why not?