What Is Political Economy?
Political economy is an interdisciplinary branch of the social sciences that focuses on the interrelationships among individuals, governments, and public policy.
- The field of political economy is the study of how economic theories such as capitalism or communism play out in the real world.
- Those who study political economy seek to understand how history, culture, and customs impact an economic system.
- Global political economy studies how political forces shape global economic interactions.
Political economists study how economic theories such as capitalism, socialism, and communism work in the real world. At its root, any economic theory is a methodology that is adopted as a means of directing the distribution of a finite amount of resources in a way that is beneficial for the greatest number of individuals.
In a wider sense, political economy was once the common term used for the field we now call economics. Adam Smith, John Stuart Mill, and Jean-Jacques Rousseau all used the term to describe their theories. The briefer term economy was substituted in the early 20th century with the development of more rigorous statistical methods for analyzing economic factors.
The term political economy is still widely used to describe any government policy that has an economic impact.
Understanding Political Economy
The study of political economy may be approached in any of three ways:
1. Interdisciplinary Studies
The interdisciplinary approach draws upon sociology, economics, and political science to define how government institutions, an economic system, and a political environment affect and influence each other.
In this approach, political economy is concerned with three subareas: economic models of political processes and the links of various factors to each other; the international political economy and the impact of international relations, and the role of the government in resource allocation for each kind of economic system.
2. New Political Economy
The new political economy approach does not treat a political ideology as a framework that must be analyzed. Rather, it is studied as a set of actions and beliefs. It seeks to make explicit assumptions that lead to political debates about societal preferences.
Political economy may draw upon sociology, economics, and political science to define how government, an economic system, and politics influence each other.
The new political economy approach encourages the discussion of a real-world political economy that is grounded in particular cultural, social, and historical details.
This approach combines the ideals of classical political economists and newer analytical advances in the field of economics and politics. It rejects old ideas about agencies, structures, material interests, states, and markets.
3. International Political Economy
Also known as global political economy, this approach analyzes the link between economics and international relations. As it stems from the interdisciplinary approach, it draws from many academic areas including 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 affect political structures and outcomes.