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In the late 19th century, the term economics came to replace political economy, coinciding with 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."
Today, political economy, where it is not used as a synonym for economics, may refer to very different things, including Marxian analysis, applied public-choice approaches emanating from the Chicago school and the Virginia school, or simply the advice given by economists to the government or public on general economic policy or on specific proposals. A rapidly growing mainstream literature from the 1970s has expanded beyond the model of economic policy in which planners maximize utility of a representative individual toward examining how political forces affect the choice of economic policies, especially as to distributional conflicts and political institutions. It is available as an area of study in certain colleges and universities.
EtymologyOriginally, political economy meant the study of the conditions under which production or consumption within limited parameters was organized in the nation-states. In that way, political economy expanded the emphasis of economics, which comes from the Greek oikos (meaning "home") and nomos (meaning "law" or "order"); thus political economy was meant to express the laws of production of wealth at the state level, just as economics was the ordering of the home. 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 German philosopher and social theorist Karl Marx were some of the exponents of political economy. The world's first professorship in political economy was established in 1754 at the University of Naples Federico II, Italy (then capital city of the Kingdom of Naples); the Neapolitan philosopher Antonio Genovesi was the first tenured professor; in 1763 Joseph von Sonnenfels was appointed a Political Economy chair at the University of Vienna, Austria. In 1805, Thomas Malthus became England's first professor of political economy, at the East India Company College, Haileybury, Hertfordshire.
In the United States, political economy first was taught at the College of William and Mary; in 1784, Adam Smith's The Wealth of Nations was a required textbook.
Current approachesIn its contemporary meaning, political economy refers to different, but related, approaches to studying economic and related behaviours, ranging from the combination of economics with other fields to the use of different, fundamental assumptions that challenge earlier 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, or mixed—influence each other. The Journal of Economic Literature classification codes associate political economy with three subareas: the role of government and/or power relationships in resource allocation for each type of economic system, international political economy, which studies economic impacts of international relations, and economic models of political processes. The last area, derived from public choice theory and dating from the 1960s, models voters, politicians, and bureaucrats as behaving in mainly self-interested ways, in contrast to a view ascribed to earlier economists of government officials trying to maximize individual utilities from some kind of social welfare function. An early and continuing focus of that research program is what came to be called constitutional political economy.
- Economists and political scientists often associate political economy with approaches using rational-choice assumptions, 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 recent focus has been on modeling economic policy and political institutions as to interactions between agents and economic and political institutions, including the seeming discrepancy of economic policy and economists' recommendations through the lens of transaction costs. 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, the origins and rate of change of political institutions in relation to economic growth, development, backwardness, reform, and transition economies, the role of culture, ethnicity, and gender in explaining economic outcomes, macroeconomic policy, the environment, fairness, the relation of constitutions to economic policy, theoretical and empirical.
- New political economy 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.
- International political economy (IPE) is an interdisciplinary field comprising approaches to the actions of various actors. In the US, 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 Matthew Watson and Robert W. Cox.
- Anthropologists, sociologists, and geographers use political economy in referring 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, of religion) often draw on the 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.
Related disciplinesBecause 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. Marx's theories on the subject of political economy are contained in his book, Das Kapital.
- Anthropology studies political economy by investigating regimes of political and economic value that condition tacit aspects of sociocultural practices (for example, the pejorative use of pseudo-Spanish expressions in the US-American entertainment media) by means of broader historical, political, and sociological processes; analyses of structural features of transnational processes focus on the interactions 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.
- Human geography is concerned with politico-economic processes, emphasizing space and environment.[clarification needed]
- 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.
- Cultural studies studies social class, production, labor, race, gender, and sex.
- Communications examines the institutional aspects of media and telecommuncation systems. Communication, the area of study which focuses on aspects of human communication, pays particular attention to the relationships between owners, labor, consumers, advertisers, structures of production, the state, and power relationships embedded in these relationships.