APPROACHES OF POLITICAL ECONOMY

INTRODUCTION

Political economy  is the study of production and trade and their relations with law, custom and government as well as with the distribution of national income and wealth. Political economy as a discipline originated in moral philosophy in the 18th century and sought to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie" or "household management". The earliest works of political economy are most often attributed to British scholars like Adam Smith, Thomas Malthusand David Ricardo, although the case is sometimes made that the still earlier works of the French physiocrats constitute the true beginnings of the discipline.

In the late 19th century, the term "economics" gradually began to replace the term "political economy" with the rise of mathematical modelling coinciding with the publication of an influential textbook by Alfred Marshall in 1890. Earlier, William Stanley Jevons, a proponent of mathematical methods applied to the subject, advocated economics for brevity and with the hope of the term becoming "the recognised name of a science". Citation measurement metrics from Google Ngram Viewer indicate that use of the term "economics" began to overshadow "political economy" around roughly 1910, becoming the preferred term for the discipline by 1920.[4] Today, the term "economics" usually refers to the narrow study of the economy absent other political and social considerations while the term "political economy" represents a distinct and competing approach.

Political economy, where it is not used as a synonym for economics, may refer to very different things. From an academic standpoint, the term may reference Marxian analysis, applied public choice approaches emanating from the Chicago school and the Virginia school. In common parlance, "political economy" may simply refer to the advice given by economists to the government or public on general economic policy or on specific economic proposals developed by political scientists.

Current approaches

Political economy most commonly refers to interdisciplinary studies drawing upon economics, sociology and political science in explaining how political institutions, the political environment, and the economic system—capitalist, socialist, communist, or mixed—influence each other.[7] The Journal of Economic Literature classification codes associate political economy with three sub-areas: 

(1) the role of government and/or class and power relationships in resource allocation for each type of economic system; 

(2) international political economy, which studies the economic impacts of international relations; 

(3) economic models of political or exploitative class processes.[10] Much of the political economy approach is derived from public choice theory on the one hand and radical political economics on the other hand, both dating from the 1960s.

Public choice theory is a microfoundations theory that is closely intertwined with political economy. Both approaches model voters, politicians and bureaucrats as behaving in mainly self-interested ways, in contrast to a view, ascribed to earlier mainstream economists, of government officials trying to maximize individual utilities from some kind of social welfare function. As such, economists and political scientists often associate political economy with approaches using rational-choice assumptions,[12] especially in game theory and in examining phenomena beyond economics' standard remit, such as government failure and complex decision making in which context the term "positive political economy" is common. Other "traditional" topics include analysis of such public policy issues as economic regulation, monopoly, rent seeking, market protection, institutional corruption and distributional politics. Empirical analysis includes the influence of elections on the choice of economic policy, determinants and forecasting models of electoral outcomes, the political business cycles, central-bank independence and the politics of excessive deficits. 

A more recent focus has been on modeling economic policy and political institutions as to interactions between agents and economic and political institutions,[21] including the seeming discrepancy of economic policy and economist's recommendations through the lens of transaction costs.[22] From the mid-1990s, the field has expanded, in part aided by new cross-national data sets that allow tests of hypotheses on comparative economic systems and institutions. Topics have included the breakup of nations,[24] the origins and rate of change of political institutions in relation to economic growth, development, financial markets and regulation, backwardness, reform and transition economies, the role of culture, ethnicity and gender in explaining economic outcomes, macroeconomic policy, the environment, fairness and the relation of constitutions to economic policy, theoretical and empirical. 

Other important landmarks in the development of political economy include:

• New political economy which may 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". 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.[37]

• International political economy (IPE) an interdisciplinary field comprising approaches to the actions of various actors. In the United States, these approaches are associated with the journal International Organization, which in the 1970s became the leading journal of IPE 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 thinkers such as Antonio Gramsci and Karl Polanyi; two major figures are Matthew Watson and Robert W. Cox. 

• The use of a political economy approach by anthropologists, sociologists, and geographers used in reference to the regimes of politics or economic values that emerge primarily at the level of states or regional governance, but also within smaller social groups and social networks. Because these regimes influence and are influenced by the organization of both social and economic capital, the analysis of dimensions lacking a standard economic value (e.g. the political economy of language, of gender, or of religion) often draws on concepts used in Marxian critiques of capital. Such approaches expand on neo-Marxian scholarship related to development and underdevelopment postulated by André Gunder Frank and Immanuel Wallerstein.

• 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.

• Political economy and law is a recent attempt within legal scholarship to engage explicitly with political economy literature. In the 1920s and 1930s, legal realists (e.g. Robert Hale) and intellectuals (e.g. John Commons) engaged themes related to political economy. In the second half of the 20th century, lawyers associated with the Chicago School incorporated certain intellectual traditions from economics. However, since the crisis in 2007 legal scholars especially related to international law, have turned to more explicitly engage with the debates, methodology and various themes within political economy texts.

 

References 

Alesina, Alberto F. (2007:3) "Political Economy," NBER Reporter, pp. 1-5. Abstract-linked-footnotes version.

Brandt, Loren, and Thomas G. Rawski (2008). "Chinese economic reforms," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.

Gilpin, Robert (2001), Global Political Economy: Understanding the International Economic Order, Princeton. Description and ch. 1, " The New Global Economic Order" link.

Groenwegen, Peter. (1987 [2008]). "'political economy' and 'economics'", The New Palgrave: A Dictionary of Economics, v. 3, pp. 905-06. [Pp. 904–07.]

Helsley, Robert W. (2008). "urban political economy," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.

 Jevons, W. Stanley. The Theory of Political Economy, 1879, 2nd ed. p. xiv.

Mark Robbins (2016) "Why we need political economy," Policy Options, [1]

Marshall, Alfred. (1890) Principles of Economics.

Mitra, Devashish (2008). "trade policy, political economy of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.

Weingast, Barry R., and Donald Wittman, ed., 2008. The Oxford Handbook of Political Economy. Oxford UP. Description and preview.