political economy

1. The social science that deals with political science and economics as a unified subject; the study of the interrelationships between political and economic processes.
2. The early science of economics through the 19th century.

The traditional meaning of the term political economy is that branch of the art of government concerned with the systematic inquiry into the nature and causes of the wealth of nations, although it is now often used loosely to describe political aspects of economic policy-making. Since the seventeenth century the meaning of the term has fluctuated widely. It is possible nevertheless to identify three broad traditions of political economy which currently influence political science. These are, first, the tradition of classical political economy; secondly, the Marxian tradition; and finally, the tradition of political economics which uses statistical and modelling techniques to test hypotheses about the relationship between government and the economy.

The first recorded usage of the term political economy, is in the opening decades of the seventeenth century (generally attributed to Antoine de Montchretien in 1615). In the French courts of Henry IV the traditional meaning of economics as ‘household management’, when combined with politique, created the new science of the public management of the affairs of state. Under the influence of François Quesnay (1694-1774), physician to Louis XV, the study of political economy received its first systematic exposition in the work of the physiocrats. Challenging the mercantilist view that value was synonymous with money and that trade itself was productive, the physiocrats defined value in terms of the production of physical goods with all prosperity dependent on a successful agricultural sector. This view overturned the mercantilist obsession with increasing the riches of the merchants, and by stressing the interdependence of individuals within society made political economy the doctrine of the whole nation. By the mid-eighteenth century in the hands of the Scottish Enlightenment philosophers political economy was established as the forerunner of modern social science. Political economy was now seen as a study concerned with the chief domestic business of a statesman, which according to James Steuart (Principles of Political Economy, 1767) was to secure a certain fund of subsistence for all the inhabitants of a society.

Adam Smith defined political economy as a ‘branch of the science of a statesman or legislator’ concerned with the twofold objective of ‘providing a plentiful revenue or subsistence for the people … and [supplying] the state or commonwealth with a revenue sufficient for the public service. It proposes to enrich both the people and the sovereign’ (The Wealth of Nations, 1776). Smith built on the work of his Scottish colleagues Francis Hutcheson, Adam Ferguson, David Hume, and John Millar to propose that the key to understanding the development of human society lay in identifying the mode of subsistence which was dominant at each stage. Although Smith worked with a crude four-stage model (hunting, pasturage, agriculture, commerce), his analysis of early industrial capitalism led him to conclude that commerce was the pinnacle of economic civilization and that liberty was fundamental to the growth of commerce. The human propensity to truck, barter, and exchange one thing for another had led, Smith argued, to the creation of that most perfect economic mechanism, the self-regulating market, which simultaneously satisfies self-interest and the needs of the community. The benefits of the division of labour, the true source of social progress and individual well-being, were limited simply by the extent or size of the market—hence Smith's preference for free trade and winding back the economic role of the state.

Unlike the later Marginalist approach to economics developed principally by Stanley Jevons (1835-82), Carl Menger (1840-1921), and Leon Walras (1834-1910), the economy is not seen by Smith as a self-propelling mechanism isolated from the wider society of which it is a part. From Sir William Petty to John Stuart Mill the concern of the classical political economists was to identify the social classes which comprise society, define the economic relationships between these classes and discover the laws which regulate these relationships. The structure of society is thereby conceptualized on the basis of an understanding of its economic foundation. This view was well stated by William Robertson (1812) who argued that, ‘in every inquiry concerning the operations of men when united together in society, the first object of attention should be their mode of subsistence. Accordingly as that varies, their laws and policy must be different.’ In addition to an economic theory of historical progress, an understanding of wealth comprising commodities (not solely treasure), and a justification for free trade based on the principle of an unfettered global division of labour, the classical political economists developed the labour theory of value which saw labour as a measure, and occasionally as a source, of all value. This latter aspect of classical political economy was fully developed by David Ricardo (1772-1823) whose Principles of Political Economy and Taxation sought to determine the laws which regulate the distribution of rent, profit, and wages. A vociferous opponent of the Corn Laws and the Old Poor Law, both seen as fetters on production and distribution, Ricardo refined the ‘embodied labour theory of value’ and concluded that the national product available for distribution was determined principally by the productivity and availability of labour. Although Ricardo believed that competitive capitalism was the ideal form of society, his analysis of value enabled the so-called Ricardian Socialists to posit the existence of a conflict of interest between capital and labour, and his theory became a radical weapon in the unrest leading up to the 1832 Reform Bill.

The doctrines of classical political economy exert a significant though often unacknowledged influence on modern political science. The technical determination of social class (on the basis of the division of labour) and the harmony of interest which is said to obtain between the classes underpins many liberal and consensus theories of politics. Most liberal writers demonstrate the advantages of market economies in terms almost identical to those laid down by Adam Smith. Within international political economy the liberal tradition draws heavily on Smith and Ricardo to justify arguments for the removal of all forms of protectionism in the world economy. In particular Ricardo's theory of ‘comparative advantage’ arguing that the distribution of industry among nations should not be regulated by absolute costs of production but by relative costs, occupies a central position in liberal views on development and underdevelopment.

The latter half of the nineteenth century saw the rise of the marginal utility theories of Jevons and the Austrian school under Menger. The marginalists redefined economics as a branch of praxiology—the science of rational action. In an attempt to introduce a more scientific and mathematically precise discipline, political economy as an economic theory of society became ‘positive economics’, defined later by Lionel Robbins as ‘the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses’. Economics could now be narrowly interpreted as an isolated study of utility-maximizing individuals expressing their subjective preferences in a taken-for-granted market situation. This left space for the growth of complementary ‘disciplines’ studying social action (sociology) and political action (political science). The organic study of law, government, and society on the basis of the mode of subsistence as undertaken by the classical writers became a study of the determination of price and resource allocation in accord with individual choice.

Karl Marx, by contrast, developed his own organic conception of capitalist society through a thoroughgoing critique and reformulation of the theories of classical political economy. Marx's early economic and philosophical studies led him to question the naturalistic basis of classical political economy. The error of the classical writers was to naturalize (or present as universal) the historically specific social relations of capitalist society. Behind the formal abstractions of classical political economy (land, labour, and capital producing rent, wages, and profit) lay an unexamined historically specific postulate, private property. Only by taking for granted the existence of private property could the classical writers assume that classes were derived technically from the division of labour. The best exponents of classical political economy for Marx provided an analysis of value and its magnitude (however incomplete) but failed to ask the vital question, ‘why this content has assumed that particular form’ (Capital, vol. i). Capital begins therefore with an analysis of the commodity-form in order to emphasize, in contrast to the classical writers, that the products of labour only become commodities in historically specific and thereby transitory forms of society. On this historical and materialist basis Marx builds a theory of capitalist society rooted in the concepts of value, surplus value, and class. The isolated individual of liberalism is parodied since private interest is itself already a socially determined interest and the symmetrical exchange relation is shown to conceal exploitation thereby exploding Smith's theory of a harmony of interest existing between classes. Capitalist society is based on a particular social form of production within which the production of useful goods is subordinated to the expansion of surplus value. Although, therefore, Marx agrees with the classical writers that ‘the anatomy of civil society is to be sought in political economy’, his total reformulation of the classical concepts inaugurated a revolution in social and political theory the results of which have yet to be fully assimilated into mainstream political science.

Despite the dominance of marginalist definitions of economics in most orthodox academic circles, radical Marxian political economy continued to develop in the early part of the twentieth century and received a stimulus from the Keynesian critique of neoclassical economics in the initial post-1945 period in Western Europe and the United States. In addition the new discipline of international political economy studies the reciprocal influence of politics upon economics in the global system, whilst radical environmental politics is premissed on rejecting marginalist economics in favour of a more explicitly political conception of the world economy.

In an attempt to break free from the ideological connotations which surround the term political economy, a growing number of political scientists now work in the field of political economics. This principally studies the role of politicians in the making of economic policy and the effect of economic performance on the popularity/electability of governments. The methodology of modern political economics relies heavily on statistical and econometric modelling and emphasizes that hypotheses must be both logically formatted and capable of falsifiability. The theory of the political business cycle, which claims that governments suspend their particular policy orientation in the run-up to an election in favour of policies which enhance popularity with voters, is a well-known hypothesis from the subdiscipline of political economics.

The traditions of classical and Marxian political economy have survived and are flourishing because the school of neoclassical economics is often reluctant to consider the political basis and the social implications of capitalist production and distribution. Political economy as a reflexive discipline analysing the fundamental political issues which arise from the accumulation and distribution of the surplus product in capitalism offers a vigorous challenge to the disciplinary boundaries which characterize modern social science.

— Peter Burnham

For more information on political economy, visit Britannica.com.

The noun has one meaning:

Meaning #1: the branch of social science that deals with the production and distribution and consumption of goods and services and their management
  Synonyms: economics, economic science

Not to be confused with Economic policy.

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Political economy originally was the term for studying production, buying and selling, and their relations with law, custom, and government. Political economy originated in moral philosophy. It developed in the 18th century as the study of the economies of states—polities, hence political economy.

In late nineteenth century, the term "political economy" was generally replaced by the term economics, used by those seeking to place the study of economy upon mathematical and axiomatic bases, rather than the structural relationships of production and consumption (cf. marginalism, Alfred Marshall).

Contents 1 History of the term 2 Current approaches to political economy 3 Disciplines related to political economy 4 See also 5 Notes 6 References 7 External links

History of the term

Originally, political economy meant the study of the conditions under which production or consumption within limited parameters was organized in the nation-states. The phrase économie politique (translated in English as political economy) first appeared in France in 1615 with the well known book by Antoine de Montchrétien: Traité de l’economie politique. French physiocrats, Adam Smith, David Ricardo and Karl Marx were some of the exponents of political economy. In 1805, Thomas Malthus became England's first professor of political economy, at the East India Company College, Haileybury, Hertfordshire. The world's first professorship in political economy was established in 1763 at the University of Vienna, Austria; Joseph von Sonnenfels was the first tenured professor.

In the United States, political economy first was taught at the College of William and Mary; in 1784 Adam Smith's Wealth of Nations was a required textbook.^[1]

Glasgow University, where Smith was Professor of Logic and Moral Philosophy, changed the name of its Department of Political Economy to the Department of Economics (ostensibly to avoid confusing prospective undergraduates) in academic year 1797–1798, leaving the graduating class of 1798 as the last to be graduated with a Scottish Master of Arts degree in Political Economy.

Current approaches to political economy

Contemporarily, political economy refers to different, but related, approaches to studying economic and political behaviours, ranging from the combining of economics with other fields, to the using of different, fundamental assumptions that challenge orthodox economic assumptions:

• Political economy most commonly refers to interdisciplinary studies drawing upon economics, law, and political science in explaining how political institutions, the political environment, and the economic system—capitalist, socialist, mixed—influence each other. When narrowly construed, it refers to applied topics in economics implicating public policy, such as monopoly, market protection, government fiscal policy,^[2] and rent seeking.^[3]
• Historians have employed political economy to explore the ways in the past that persons and groups with common economic interests have used politics to effect changes beneficial to their interests.^[4]
• "International political economy" (IPE) is an interdisciplinary field comprising approaches to international trade and finance, and state policies affecting international trade, i.e. monetary and fiscal policies. In the U.S., these approaches are associated with the journal International Organization, which, in the 1970s, became the leading journal of international political economy under the editorship of Robert Keohane, Peter J. Katzenstein, and Stephen Krasner. They are also associated with the journal The Review of International Political Economy. There also is a more critical school of IPE, inspired by Karl Polanyi's work; two major figures are Susan Strange and Robert W. Cox.^[5]
• Economists and political scientists often associate the term with approaches using rational choice assumptions, especially game theory, in explaining phenomena beyond economics' standard remit, in which context the term "positive political economy" is common.^[6]
• Anthropologists, sociologists, and geographers, use political economy in referring to the neo-Marxian approaches to development and underdevelopment postulated by André Gunder Frank and Immanuel Wallerstein.
• Contemporary political economy students treat economic ideologies as the phenomenon to explain, per the traditions of Marxian political economy. Thus, Charles S. Maier suggests that a political economy approach: interrogates economic doctrines to disclose their sociological and political premises....in sum, [it] regards economic ideas and behavior not as frameworks for analysis, but as beliefs and actions that must themselves be explained.^[7] This approach informs Andrew Gamble's The Free Economy and the Strong State (Palgrave Macmillan, 1988), and Colin Hay's The Political Economy of New Labour (Manchester University Press, 1999). It also informs much work published in New Political Economy an international journal founded by Sheffield University scholars in 1996.^[8]

Disciplines related to political economy

Because political economy is not a unified discipline, there are studies using the term that overlap in subject matter, but have radically different perspectives:

• Sociology studies the effects of persons' involvement in society as members of groups, and how that changes their ability to function. Many sociologists start from a perspective of production-determining relation from Karl Marx.
• Political Science focuses on the interaction between institutions and human behavior, the way in which the former shapes choices and how the latter change institutional frameworks. Along with economics, it has made the best works in the field by authors like Shepsle, Ostrom, Ordeshook, among others.
• Anthropology studies political economy by studying the relationship between the world capitalist system and local cultures.
• Psychology is the fulcrum on which political economy exerts its force in studying decision-making (not only in prices), but as the field of study whose assumptions model political economy.
• History documents change, using it to argue political economy; historical works have political economy as the narrative's frame.
• Economics focuses on markets by leaving the political—governments, states, legal frameworks—as givens. Economics dropped the adjective political in the 19th century, but works backwards, by describing "The Ideal Market", urging governments to formulate policy and law to approach said ideal. Economists and political economists often disagree on what is preeminent in developing production, market, and political structure theories.
• Law concerns the creation of policy and its mediation via political actions that have specific results, it deals with political economy as political capital and as social infrastructure—and the sociological results of one society upon another.
• Human Geography is concerned with politico-economic processes, emphasizing space and environment.
• Ecology deals with political economy, because human activity has the greatest effect upon the environment, its central concern being the environment's suitability for human activity. The ecological effects of economic activity spur research upon changing market economy incentives.
• International Relations often uses political economy to study political and economic development.
• Cultural Studies studies social class, production, labor, race, gender, and sex.
• Communications examines the institutional aspects of media and telecommuncation systems, with particular attention to the historical relationships between owners, labor, consumers, advertisers, and the state.

See also

• Economic study of collective action
• Public Choice
• EAEPE
• Economic system
• Economist
• Economic ideology
• Institutional economics
• Important publications in political economy
• Socioeconomics
• Social Capital

Notes

1. ^ Image of "Priorities of the College of William and Mary"
2. ^ Groenwegen (1987, p.906).
3. ^ Anne O. Krueger, "The Political Economy of the Rent-Seeking Society," American Economic Review, 64(3), June 1974, pp.291–303
4. ^ McCoy, Drew R. "The Elusive Republic: Politcal Ecocomy in Jeffersonian America", Chapel Hill, University of North Carolina, 1980.
5. ^ Cohen, Benjamin J. (2007), ‘The transatlantic divide: Why are American and British IPE so different?’, Review of International Political Economy, Vol. 14, No. 2, May 2007
6. ^ Alt, James E. and Kenneth Shepsle (eds.) (1990), Perspectives on Positive Political Economy (Cambridge [UK]; New York: Cambridge University Press).
7. ^ Charles S. Mayer "In search of Stability: Explorations in Historical Political Economy", Cambridge University Press, Cambridge, 1987, pp.3–6.
8. ^ cf: David Baker, "The political economy of fascism: Myth or reality, or myth and reality?" New Political Economy, Volume 11, Issue 2 June 2006, pp.227–250.

References

• Groenwegen, Peter (1987). "'political economy' and 'economics'", The New Palgrave: A Dictionary of Economics, v. 3, pp. 904–07.
• Pressman, Steven, Encyclopedia of Political Economy Routledge, 1999
• Pressman, Steven, Interactions in Political Economy: Malvern After Ten Years Routledge, 1996
• Winch, Donald, Riches and poverty : an intellectual history of political economy in Britain, 1750–1834 Cambridge [etc.]: Cambridge U.P., 1996.
• Winch, Donald, "The emergence of Economics as a Science 1750–1870". In: The Fontana Economic History of Europe, Vol. 3. London: Collins/Fontana, 1973.

External links

Wikibooks has a book on the topic of Political Economy

• National System of Political Economy—Major work on political economy by Friedrich List.
• Harmony of Interests—Work contrasting American System and British System of political economy by Henry C. Carey
• International Political Economy at Jacobs University Bremen

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