What is a political economy?
Political economy is an interdisciplinary branch of the social sciences that focuses on the interrelationships between individuals, governments and public policies.
Political economists study how economic theories such as capitalism, socialism, and communism work in the real world. Basically, all economic theory is a methodology which is adopted as a means of orienting the distribution of a finite quantity of resources in a way which is beneficial to the greatest number of individuals.
In a broader sense, political economy was once the common term used for the field we now call economics. Adam Smith, John Stuart Mill, and Jean-Jacques Rousseau all used the term to describe their theories. Short-term economics was replaced at the start of the 20th century by the development of more rigorous statistical methods for analyzing economic factors.
The term political economy is still widely used to describe any government policy that has an economic impact.
Key points to remember
- The field of political economy is the study of how economic theories such as capitalism or communism play out in the real world.
- Those who study political economy seek to understand how history, culture and customs influence an economic system.
- Global political economy studies how political forces shape global economic interactions.
Understanding political economy
Political economy is a branch of the social sciences that studies the relationship that forms between a nation’s population and its government when public policies are adopted. It is therefore the result of the interaction between politics and economics and forms the basis of the discipline of social sciences.
As mentioned above, there are several notable types of political savings:
- Socialism: This type of political economy promotes the idea that the production and distribution of goods and wealth is maintained and regulated by society, rather than by a particular group of people. The reason behind this is that whatever is produced by society is produced because of those who participate in it, regardless of status, wealth or position. Socialism aims to bridge the gap between the rich and the power, where one or more individuals do not have the majority of the power and the wealth.
- Capitalism: This theory advocates profit as a motive for advancement. Simply put, the idea behind capitalism is that individuals and other actors are motivated by their own interests: they control production and distribution, set prices, and create supply and demand.
- Communism: People often confuse communism with socialism, but there is a clear difference between these two theories. Communism was a theory developed by Karl Marx, who believed that capitalism was limited and created a big wedge between rich and poor. He believed in the sharing of resources, including ownership, and that production and distribution should be overseen by the government.
Those who study political economy are called political economists. Their study generally involves examining the impact of public policies, the political situation and political institutions on the economic situation and future of a country through a sociological, political and economic lens.
Political economy can draw on sociology, economics, and political science to define how government, an economic system, and politics influence each other.
History and development of political economy
The roots of political economy as we know it today go back to the 18th century. Researchers of the period studied how wealth was distributed and administered among people. Some of the earlier work that examined this phenomenon included that of Adam Smith and John Stuart Mill.
But the term is probably best attributed to the French writer and economist Antoine de Montchrestien. He wrote a book called “Treatise on Political Economy” in 1615, in which he examined the need to distribute production and wealth on an entirely larger scale – and not in the household as Aristotle suggested. The book also analyzed how economics and politics are interrelated.
Smith was a philosopher, economist, and writer who is commonly referred to as the father of economics and political economy. He wrote about the function of a self-regulated free market in his first book, titled “The Theory of Moral Sentiments”. His most famous work, “An Inquiry into the Nature and Causes of the Wealth of Nations” (or “The Wealth of Nations”) helped shape classical economic theory. It also served as a foundation for future economists.
Mill combined economics and philosophy. He believed in utilitarianism – that actions that lead to people’s goodwill are right and those that lead to suffering are bad. Essentially, he believed that economic theory and philosophy were needed, as well as a social conscience in politics in order to make better decisions for the good of the people. Some of his works, including “Principles of Political Economy”, “Utilitarianism” and A System of Logic, have led him to become one of the most important figures in politics and economics.
Political economy in academia
Political economy has become an academic discipline in its own right in recent years. Many large institutions offer the study as part of their political science, economics and / or sociology departments.
Research by political economists is conducted to determine how public policies influence behavior, productivity and trade. Much of their study helps them establish how money and power are distributed among people and between different groups. They can do this by studying specific areas such as law, bureaucratic politics, legislative behavior, the intersection of government and business, and regulation.
The study can be approached in three ways:
- Interdisciplinary studies: The interdisciplinary approach draws on sociology, economics and political science to define how government institutions, an economic system and a political environment affect and influence each other.
- New political economy: This approach is studied as a set of actions and beliefs, and seeks to formulate explicit assumptions that lead to political debates on societal preferences. The new political economy combines the ideals of classical political economists with new analytical advances in economics and politics.
- International political economy: Also called global political economy, this approach analyzes the link between economics and international relations. It draws on many academic fields, including political science, economics, sociology, cultural studies and history. International political economy is ultimately concerned with how political forces such as states, individual actors, and institutions interact with the global economy.
Modern applications of political economy
Modern applications of political economy study the work of more contemporary philosophers and economists, such as Karl Marx.
As mentioned above, Marx became disenchanted with capitalism as a whole. He believed that individuals suffered under regimented social classes, where one or more individuals controlled the greatest proportion of the wealth. According to communist theories, this would be eradicated, allowing everyone to live equally while the economy functions according to the capabilities and needs of each participant. Under communist regimes, resources are controlled and distributed by the government.??
Most people confuse socialism with communism. It is true that there are some similarities, not least that both focus on bridging the gap between rich and poor, and society should relegate the balance between all citizens. But there are inherent differences between the two. While resources in a communist society are owned and controlled by the government, individuals in a socialist society hold property. People can still buy goods and services under socialism, while those who live in a communist society receive their basic necessities from the government.??
Political economy faq
What does political economy mean?
The term political economy refers to a branch of the social sciences that focuses on the relationships between individuals, governments and public policies. It is also used to describe policies set by governments that affect the economies of their countries.
What is the primary concern of political economy?
The main concern of political economy is to determine the relationship between governments and individuals, and how public policy affects society. This is done through the study of sociology, politics and economics.
What are the characteristics of political economy?
Some of the characteristics or themes of a political economy include the distribution of wealth, the way goods and services are produced, who owns goods and other resources, who benefits from production, supply and asks, and how public policy and government interaction impact society.
What are the types of political economy?
Types of political economy include socialism (which states that all production and wealth must be regulated and distributed by society), capitalism (where private owners control a nation’s industry and commerce for profit) and communism (the theory that all property is publicly owned and everyone works according to their own needs and strengths).
Who coined the term political economy?
Adam Smith is widely regarded as the father of economics and the father of political economy. But the term is generally attributed to the French economist Antoine de Montchrestien, who wrote the book “Treaty of political economy”, which translates into the treaty of political economy.