Ceteris Paribus

By Phil Polizatto,WWH – I had three majors in college: Political Science, History, and Economics. I did just fine in the first two. If it weren’t for Economics, I might have been close to the top of my class. But I did terribly in Economics… D’s, C’s, and even an F! What was wrong? How could I be so stupid? Or was I just plain stubborn?

I was always getting into arguments with my professors. I couldn’t or wouldn’t grasp the fundamentals upon which a capitalist economy is based. I had to spend the summer after my senior year making up an economics course in order to graduate. I did, and got a B! But it was at the expense of swallowing my pride and disavowing what I believed in: that these laws of economics, always qualified by the ubiquitous ceteris paribus, were all a bunch of bullshit!

What I remember most from those economics courses; what scarred my brain forever, was the phrase “ceteris paribus.” It meant “all things being equal.” Whether we were studying the Law of Supply and Demand, The Law of Diminishing Returns, or The Law of Wages, there was always that one persistent phrase, ceteris paribus. It drove me nearly insane! It really meant “all things being constant and unchanging,” which is pretty rare when it comes to anything to do with humans!

The Latin expression is used to explain the effect of changes in one variable on another variable, without having to acknowledge any other factors that might affect the outcome of the economic law. It’s like putting all the “other factors” behind a curtain and pretending they don’t exist. Factors like the weather, natural disasters, and most of all, human beings with their damned complexity of needs and wants… any factor that might upset the mathematical apple cart and interfere with the equations that help maximize the profits of business. It is a giant cop-out qualifier many economists use to justify corporate behavior.

Maybe some of these “laws” worked in the early days of a market economy, when a person made a profit off of something actually produced. Maybe some of these “laws” worked up until the Great Depression. In fact, before the Great Depression, unemployment wasn’t even much of a factor in any law of economics. Before the Depression, the structure of the economy was fairly stable. But through globalization and computerization, flash trading, short-selling, hedge funds, derivatives, etc., the economy of today looks a lot different than it did just a few decades ago.

Take the law of supply and demand for example. It’s the backbone of a market economy. It states that the price for a particular good, ceteris paribus, is determined by the quantity demanded and the quantity supplied. In this case, ceteris paribus assumes that the market is a competitive one, that the consumer has money to spend, that the suppliers do not artificially manipulate the availability of the product, and a host of other assumptions.

For example, an increase in the price of zucchini will result, ceteris paribus, in less zucchini being sold. The ceteris paribus here implies that other vegetables have not also increased proportionately in price, that consumer incomes have not increased by the same percentage or more, and that CNN has not just announced that zucchini cures cancer. If none of these other variables occur, then the demand for zucchini will decrease.

On the other hand, if the price of gasoline increases, ceteris paribus, there should be less gasoline sold. Yet, the automobile has become a necessity and people may forego other purchases in order to keep buying gasoline. Necessity is a variable which is not taken into account, nor is the fabricated scarcity of a product, because both invalidate the equation.

Economic laws are not the same as scientific laws, though they are both derived from scientific method. Scientific laws, like the laws of physics, are quite reliable, and most often, irrefutable. According to the Law of Gravity, what goes up must come down. There are no variables I can think of that could refute this law, unless you are an astronaut in space. No physicist would say “what goes up, ceteris paribus, must come down.” The laws of physics and other natural sciences do not need to hide other variables behind the curtain of ceteris paribus so that their laws will work. The application of the laws may change, but not the basic laws of the universe.

Economics is a social and behavioral science. Its laws and theories are vulnerable to many factors and influences. The laws of corporate capitalism use ceteris paribus to hide any variable that would interfere with a corporation’s ability to increase shareholder value through any means possible. The well-being of the citizen is merely one of those pesky variables hiding behind the curtain. It can be ignored, along with consumer confidence, and a shift in societal consciousness towards the product or service.

In other words, no matter how low the price of beef might fall, the law of supply and demand has no effect if large segments of the population decide that vegetarianism is healthier and more moral. This variable would throw off the equation, so it doesn’t count and isn’t used. Ceteris paribus does not allow any interference with the laws of economics.

In other words, ceteris paribus means that a lot, if not most, of capitalist economics is garbage! Every time my economics professor would quote a law of economics, with the mandatory ceteris paribus included, I would think, “bullshit!” I may have thought it out loud now and then. Maybe that explains the looks of anger on my professor’s face and why I flunked.

At the same time I was taking this “bullshit,” I was also studying the expansion westward of the United States. The attitude of American industry was that natural resources were infinite. For example, when the forests of the “old” Northwest were almost depleted, the Pacific Northwest would provide the unlimited supply necessary for the continual growth of corporate profits. If the myth of infinite resources were dispelled it would bring into question corporate capitalism as a viable economic system that could benefit the common citizen without destroying the environment. The truth was conveniently hiding behind the curtain of ceteris paribus.

In my political science classes, I studied colonialism and imperialism, both of which were necessary for capitalism to yield greater profits than the homeland alone could provide. It required the investment of capital in under-developed countries and economies. This capital was/is generated by banking and industrial cartels, many of which border on monopolies.

The major European powers were engaged in this behavior and it essentially led to dividing the world among the corporations with the greatest power. This exploitation of a large part of the world’s resources and people has caused wars among the colonizing countries and the oppression of the indigenous peoples being colonized. Furthermore, in order to sustain this colonialism and the super-profits yielded by the exploitation of a people and their resources, corporations bribed native politicians to prevent any kind of revolt by workers. They put puppet dictators in power and even after most colonies declared their independence from their imperialist rulers, the dictatorships remained entrenched and the tentacles of the corporations remained intact.

This is why Lenin said in his 1920 essay, “Imperialism, the Highest Stage of Capitalism,” that the exploited workers in the colonies of the European powers would become the revolutionary vanguard for deposing the global capitalist system. I think it’s quite obvious that is what is happening right now all over the world including within the homelands of those imperialist powers. It is the last stage as predicted by Lenin, before the emergence of true democracy. And true direct democracy will eventually choose Socialism as the system most conducive to satisfying the needs of a country’s citizens.

One of the most distasteful laws of economics I was taught was The Law of Wages. It asserts that, ceteris paribus, the real wages of a worker will always tend toward the minimum wage necessary to sustain the life of the worker. If the wages fall below what is necessary to sustain a worker the worker will be unable to work. Competition for jobs among the unemployed will drive wages down to a minimal level, which has the dubiously attached Malthusian corollary that when wages increase above a subsistence level, so does the population and when wages fall below a subsistence level, the population decreases. So a subsistence wage is ideal for not only population control, but the way to get the most out of a worker for the least amount of money; a corporate dream come true.

Why on earth would a corporation want to help create an environment of full employment when unemployment will bring about lower wages, therefore lower costs, therefore increased profits? In fact, I think corporations would like to foster even greater unemployment. That’s why you can’t rely on the private sector to create jobs. The government must do it.

For a while, unionism countered this Iron Law of Wages quite well, and a healthy, thriving middle class emerged. Now, too easily explained by the greed and corruption of corporatism, unions get busted and collective bargaining is outlawed or threatened. Just another variable easily dismissed because it makes the laws of capitalist economics work so much better without its consideration.

Ceteris paribus: all things being equal? All things are NOT equal. That’s the problem. We, the people, are NOT variables to be dismissed so that a law of economics might work for a few. Ceteris paribus? So much for the families of workers, if they have work at all. So much for the lack of food on their table, or the lack of health care, education, shelter, and security.

Ceteris paribus? If only it were true. If only all things were equal, or at least fair and just. But that is not the case and that’s the problem. It will remain a problem until something other than profit and wealth are the benchmarks of success. It will remain a problem until a minimum standard of living is reached by all the people of the earth. It will remain a problem until corporate profits and executive salaries and bonuses are regulated in such a way that a worker need not live a life of mere subsistence. The true standard of a successful economy is one which allows its citizens a healthy and productive life, and allows the creation of leisure time in which they can make art, music, dance, literature and inventions that further the well-being of the citizenry, the country, and the world.

We need a new set of economic laws. Are we smart enough to wean ourselves from the obsolete paradigm we have today? Are there economists smart enough to say ceteris paribus is a myth perpetuated to dismiss the common good from the equation and keep the ruling class in power? Will they be willing to create new laws of economics that put the welfare of people foremost into their equations? Are they ready for the paradigm shift? Are you? It’s coming to your town sooner than you think! Be prepared. Expect it!

To contact Phil or find out more: check out his website and blog For a copy of HUNGA DUNGA
Phil Polizatto – Worldwide Hippies Bureau Chief – West Coast USA, is a graduate of The School of Foreign Service, Georgetown University. He was a feature writer for the overseas division of UPI, a copywriter for CBS, and an award-winning corporate film producer. Mr. Polizatto is a published poet and a regular contributor to Worldwide Hippies as well as a variety of other arts and literary journals. Hunga Dunga is his first published novel. He resides in the Pacific Northwest.