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.

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. 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. 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 — 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.
• 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.
• "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

• Groenwegen, Peter (1987). "'political economy' and '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.