What is 'Political Economy'
Political economy is the study of production and trade and their links with custom, government and law. It is the study and use of how economic theory and methods influence and develop different social and economic systems, such as capitalism, socialism and communism, and it analyzes how public policy is created and implemented. Since various individuals and groups have different interests in how a country or economy is to develop, political economy as a discipline is a complex field, covering a broad array of potentially competing interests.
BREAKING DOWN 'Political Economy'Political economy also involves the use of game theory, since groups competing for finite resources and power must determine which courses of action will give the most beneficial results, and what the probability of those results being reached are.
In the contemporary setting, political economy talks about the different but linked approaches to defining and studying economics and other related behaviors. Political economy may be approached in three different ways.
Political economy approached from an interdisciplinary angle draws upon sociology, economics and political science to define how political institutions, the economic system and the political environment affect and influence each other. With an interdisciplinary approach, political economy is associated with three subareas: economic models of political processes and the links of different factors to each other, international political economy and the impact of international relations, and the role of the government in resource allocation for each kind of economic system.
New Political Economy
The new political economy approach treats economic ideologies not as frameworks that must be analyzed but as actions and beliefs that must be explained and discussed further. This approach combines the ideals of classical political economists and new, analytical advances in the field of economics and politics. This approach rejects old ideas about agencies, structures, material interests, states and markets. It seeks to make normative and explicit assumptions that encourage progressive political debates about societal preferences. The new political economy approach encourages the discussion of real-world political economy that is grounded on cultural, social and historical details.
International Political Economy
International political economy, also known as global political economy, stems from an interdisciplinary approach. It analyzes the link between economics and international relations. As it stems from an interdisciplinary approach, it draws from many different academic areas such as political science, economics, sociology, cultural studies and history.
International political economy is ultimately concerned with how political forces like states, individual actors, and institutions shape systems through global economic interactions and how such actions effect political structures and outcomes.