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

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Not to be confused with Economic policy.

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Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. Originating in the field of moral philosophy (Adam Smith for example, held the Chair of Moral Philosophy at the University of Glasgow^[1]), it developed in the 18th century as the study of the economies of states (also known as polities, hence the word "political" in "political economy"). In contradistinction to the theory of the Physiocrats, in which land was seen as the source of all wealth, some political economists proposed the labour theory of value (first introduced by John Locke, developed by Adam Smith and later Karl Marx), according to which labour is the real source of value. Many political economists also attracted attention to the accelerating development of technology, whose role in economic and social relationships grew ever more important.^{[citation needed]}

In late 19th century, the term "political economy" was generally replaced by the term economics, which was used by those seeking to place the study of economy on a mathematical and axiomatic basis, rather than studying the structural relationships within production and consumption. (See marginalism, Alfred Marshall)

History of the term

The term political economy originally meant the study of the conditions under which production was organized in the nation-states of the new-born capitalist system.^{[citation needed]} The term was first used in England in the 18th Century, to replace the earlier approach of the (French) physiocrats. The main exponents of Political Economy are Adam Smith, David Ricardo and Karl Marx. In 1805 Thomas Malthus became Britain's first professor of political economy at the East India Company College at Haileybury in Hertfordshire. The world's first professorship for political economy was established in 1763 at the University of Vienna, with Joseph von Sonnenfels as the first professor.

In America, political economy was first 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 held the chairs 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 1997-98, leaving the class of 1998 as the last to graduate with a Scottish MA degree in Political Economy.

Current approaches to political economy

In the present, political economy refers to a variety of different, but related, approaches to studying economic and political behavior, which range from combining economics with other fields, to using different fundamental assumptions which challenge those of orthodox economics:

• Political economy is most commonly used to refer to interdisciplinary studies that draw on economics, law, and political science to explain how political institutions, the political environment, and the economic system — whether capitalist, socialist, or mixed — influence each other. More narrowly construed, it may refer to applied topics in economics implicating public policy, such as monopoly, protection, government fiscal policy,^[2] and rent seeking.^[3]

• Within political science, the term refers to modern liberal, realist, Marxian, institutionalist and constructivist theories concerning the relationship between economic and political power among and within states.^{[citation needed]}

• Historians have employed the term to explore the various ways in the past that individuals or groups with common economic interests have utilized the political process to effect change over time that is beneficial to their interest.^{[citation needed]}

• "International political economy" (IPE) is an interdisciplinary field comprising a variety of approaches that are concerned with international trade and finance, and state policies that affect international trade, such as monetary and fiscal policy. In the U.S. these approaches are associated with the journal International Organization, which became the leading journal of international political economy in the 1970s under the editorship of Robert Keohane; subsequent editors Peter J. Katzenstein and Stephen Krasner. They are also associated with the journal The Review of International Political Economy. There is also a more critical school of IPE that draws on the work of Karl Polanyi for inspiration, and counts as two of its major figures Susan Strange and Robert W. Cox.^[4]

• Economists and political scientists often associate the term with approaches using rational choice assumptions, particularly game theory, to explain phenomena beyond the standard remit of economics. In this context, the term "positive political economy" is common.^[5]

• Others, especially anthropologists, sociologists and geographers, use the term "political economy" to refer to neo-Marxian approaches to development and underdevelopment set forth by Andre Gunder Frank and Immanuel Wallerstein.

• Some contemporary students of political economy treat economic ideologies as the phenomenon to be explained, following the traditions of Marxian political economy without following its deterministic class war assumptions. 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.” ^[6] This approach informs research such as 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). This approach also informs much of the work published in New Political Economy an international journal founded in 1996 by scholars at Sheffield University in the UK.^[7]

Disciplines which relate to political economy

Because political economy is not a unified discipline, there are a variety of studies that use the term which have overlapping subject matter, but radically different viewpoints.

Sociology is the study of the effects of involvement in society on individuals as members groups, and how this changes their ability to function. Many sociologists begin from a framework of production determining relationship drawn from Karl Marx.

Anthropology often studies political economy by studying the relationship between the world capitalist system and local cultures.

Psychology is frequently the fulcrum around which political economy centers, in that it deals with decision making, not as being a black box whose effects are seen only in price decisions, but as being a source of study, and therefore the assumptions in a model of political economy.

History since it documents change over time, is often used as a means of arguing in political economy, and often historical works have a framework of political economy which they assume or argue as the basis for the narrative structure.

Economics focuses on markets by leaving the political - governments, states, legal frameworks - as given. Economics dropped the "political" in the 19th century, but works backwards by describing the ideal market and urging governments to shift policies and laws to approach this ideal. Economists and political economists often do not see eye-to-eye on what is preeminent when developing theories of production, markets and political structures.

Law since it concerns the creation of policy, or the mediation of policy ends through political acts which have specific individual results, is seen, in political economy, as both political capital and social infrastructure, on one hand - and as the result of the sociology of a society on the other.

Human Geography is concerned, amongst others, with economic and political processes with an emphasis on spatial and environmental aspects thereof.

Ecology is often involved in political economy, because human activity is one of the single largest effects on the environment, and because the suitability of the environment for human beings is a central concern. The ecological effects of economic activity on the environment have spurred research on changing incentives in the market economy.

International Relations often uses political economy to study political and economic development.

Cultural Studies has had a long and often contentious relationship with political economy, particularly Marxist political economy. Some in cultural studies embrace the study of class, production, and labor alongside a focus on race, gender, sexuality. Others see political economy as a competing (and inappropriate) interdisciplinary approach to the study of ideology and culture.

References

1. ^ Bucholz (1989) New Ideas from Dead Economists, p.12
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. ^ 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
5. ^ Alt, James E. and Kenneth Shepsle (eds.) (1990), Perspectives on Positive Political Economy (Cambridge [UK]; New York: Cambridge University Press).
6. ^ Charles S. Mayer "In search of Stability: Explorations in Historical Political Economy", Cambridge University Press, Cambridge, 1987, pp. 3-6.
7. ^ See for instance: 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.

• Groenwegen, Peter (1987). "'political economy' and 'economics'," The New Palgrave: A Dictionary of Economics, v. 3, pp. 904-07.
• 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.

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

External links

• 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
• History of Economic Thought - This compendium hosted by the New School has collected bios on over 500 economists and introductions to many schools of thought.
• Global Political Economy Net Mailing lists and other reference material by scholars of "The Global Political Economy"
• Political Economy of Space Development
• New Political Economy Research Center, University of Sheffield.
• The Murphy Institute, Tulane University.
• Constitutional Political Economy Most recent issues online.
• George Mason University: Buchanan Center for Political Economy
• Political Economic Research Institute, University of Massachusetts, Amherst
• The Journal of Australian Political Economy
• Discipline of Political Economy at The University of Sydney
• Union for Radical Political Economy
• The Center in Political Economy, Washington University, St. Louis
• Global Social Change reports Includes reports on global political and economic change.

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Political Economy

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