ABSTRACT
In perfectly competitive markets firms pay competitive wages, and labor, capital, managers, and capitalists all receive their opportunity cost. There is hardly any role for government in that model as everything is running smoothly. Everyone receives their just rewards and since there are no profits at all to quarrel over, all problems are solved conveniently by the market. The takeaway impression that millions of students retain years after their introductory course ended is that competition solves all the important problems in the economy and hence markets left to their own devices will be efficient. Government guidance is superfluous and mostly inefficient. As we see below, this is not a reasonable description of the real existing economy made up of oligopolies and monopolies rather than perfectly competitive firms. Because of the absence of countervailing power to defend wages and because of the constant threat of unemployment, wages have not kept pace with productivity growth. In turn imperfect competition meant that the profits of corporations have exploded, which has led to an offensive distribution of income. We accentuate the need for thinking creatively about two of these outcomes: the determination of the rewards of labor and of the distribution of income in the real existing economy.
