David Balaam and Michael Veseth, writing in Encyclopaedia Britannica, define political economy as the “branch of social science that studies the relationships between individuals and society and between markets and the state, using a diverse set of tools and methods drawn largely from economics, political science, and sociology.”
Balaam and Veseth write:
“Political economy emerged as a distinct field of study in the mid-18th century, largely as a reaction to mercantilism, when the Scottish philosophers Adam Smith (1723–90) and David Hume (1711–76) and the French economist François Quesnay (1694–1774) began to approach this study in systematic rather than piecemeal terms. They took a secular approach, refusing to explain the distribution of wealth and power in terms of God’s will and instead appealing to political, economic, technological, natural, and social factors and the complex interactions between them. Indeed, Smith’s landmark work – An Inquiry into the Nature and Causes of the Wealth of Nations (1776), which provided the first comprehensive system of political economy – conveys in its title the broad scope of early political economic analysis.” ).
Economics and political economy
Balaam and Veseth describe how political economy differs from contemporary economics:
“The relationship between political economy and the contemporary discipline of economics is particularly interesting, in part because both disciplines claim to be the descendants of the ideas of Smith, Hume, and John Stuart Mill. Whereas political economy, which was rooted in moral philosophy, was from the beginning very much a normative field of study, economics sought to become objective and value-free. Indeed, under the influence of Marshall, economists endeavoured to make their discipline like the 17th-century physics of Sir Isaac Newton (1642–1727): formal, precise, and elegant and the foundation of a broader intellectual enterprise. With the publication in 1947 of Foundations of Economic Analysis by Paul Samuelson, who brought complex mathematical tools to the study of economics, the bifurcation of political economy and economics was complete. Mainstream political economy had evolved into economic science, leaving its broader concerns far behind.
“The distinction between economics and political economy can be illustrated by their differing treatments of issues related to international trade. The economic analysis of tariff policies, for example, focuses on the impact of tariffs on the efficient use of scarce resources under a variety of different market environments, including perfect (or pure) competition (several small suppliers), monopoly (one supplier), monopsony (one buyer), and oligopoly (few suppliers). Different analytic frameworks examine the direct effects of tariffs as well as the effects on economic choices in related markets. Such a methodology is generally mathematical and is based on the assumption that an actor’s economic behaviour is rational and is aimed at maximizing benefits for himself. Although ostensibly a value-free exercise, such economic analysis often implicitly assumes that policies that maximize the benefits accruing to economic actors are also preferable from a social point of view.
“In contrast to the pure economic analysis of tariff policies, political economic analysis examines the social, political, and economic pressures and interests that affect tariff policies and how these pressures influence the political process, taking into account a range of social priorities, international negotiating environments, development strategies, and philosophical perspectives. In particular, political economic analysis might take into account how tariffs can be used as a strategy to influence the pattern of national economic growth (neo-mercantilism) or biases in the global system of international trade that may favour developed countries over developing ones (neo-Marxist analysis). Although political economy lacks a rigorous scientific method and an objective analytic framework, its broad perspective affords a deeper understanding of the many aspects of tariff policy that are not purely economic in nature.”
Atlas topic, subject, and course
David N Balaam and Michael A Veseth (2014), Encyclopaedia Britannica, Political economy, at https://www.britannica.com/topic/political-economy, accessed 9 March 2019.
Page created by: Ian Clark and Bryan Roh, last modified 9 March 2019.
Image: From Arse to Elbow, The Return of Political Economy, 13 April 2014, at http://fromarsetoelbow.blogspot.com/2014/04/the-return-of-political-economy.html, accessed 9 March 2019.