Political economy

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. It developed in 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, 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. Political economists also attracted attention to the accelerating development of technology, whose role in economic and social relationships grew ever more important.

General paradigms of political economy

Political economists are divided over the nature of two paradigms: the paradigm of distribution and the paradigm of production. These paradigms may be related, especially at the extremes, but there are a vast number of individuals who hold almost diametrically opposite views on these two paradigms in the same context.

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Paradigms of distribution

Societies produce more than isolated individuals, and labour with the aid of capital produces more than labour alone. Societies also generate more waste, and capital makes demands for investment and organization. The first can be referred to as the social surplus and capital surplus respectively, and the second as social costs and capital requirements. One of the most important social costs is war. Indeed the difference between political economy and economics is that, in economics, war is a temporary alteration in price variation, the old joke being that "World War III, should it come, will be noted in two sentences in the Wall Street Journal, with an article inside on its effect on soybean futures."

Related Topics:
Social surplus - Capital surplus - Social cost - Capital requirements

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The paradigms of political economy may be classified based on their view of distributing the social costs and benefits, and the capital costs and benefits.

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Libertarianism: Libertarianism denies that there is any significant difference between capital surplus and social surplus: it claims that all improvements to productivity are capital surplus and belong to the individual. Libertarianism further contends that by paying for inputs, an individual has already paid for the social cost of their activity, and that to avoid disutility, individuals will rationally trade effects of economic activity that are adverse. Libertarians, therefore, generally believe in an absolute standard of value, generally the gold standard. They point to John Locke, Thomas Jefferson, Adam Smith and Ralph Waldo Emerson as antecedents, and argue that they are merely continuing "classical liberalism". In the libertarian framework, since there is no social surplus, any attempt to distribute is unjustified - that is, economics is separate from the political sphere.

Related Topics:
Libertarianism - John Locke - Thomas Jefferson - Adam Smith - Ralph Waldo Emerson

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Libertarianism's main school of thought was the Austrian School of economists, and found expression in laissez-faire economics. Libertarians may be said to be economic and social extreme individualists. Important, or at least widely cited, thinkers in Libertarian thought include Ayn Rand, Hayek, Franz Oppenheimer and Ludwig von Mises.

Related Topics:
Austrian School - Laissez-faire - Ayn Rand - Hayek - Franz Oppenheimer - Ludwig von Mises

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Liberalism: Liberalism believes that capital surplus should accrue to the individual, but that social surplus and cost should be distributed as widely as feasible within the context of maintaining the individuals' expectation to the surplus of their own efforts. Liberals therefore support state intervention in political economy to measure and distribute social costs and benefits. Many thinkers are, therefore, held in common between libertarianism and liberalism - since when the social surplus is perceived of as being low, or in particular areas, liberals believe that there is nothing to distribute. Liberals also agree with Conservatives about the need to protect against the ill effects of social disorganization, even though the manner of doing so differs.

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Liberalism sees the expansion of individual rights (from the philosophy of Jean-Jacques Rousseau and Thomas Jefferson) as being the entitlement to a certain reasonable standard of life for all members of society. From the pragmatic viewpoint, this is the necessity of human capital sufficient to engage in the full range of production.

Related Topics:
Jean-Jacques Rousseau - Thomas Jefferson

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Liberalism has been proposed by such thinkers as John Dewey, John Rawls, Isaiah Berlin, economists such as John Maynard Keynes and educators such as Mortimer Adler.

Related Topics:
John Dewey - John Rawls - Isaiah Berlin - John Maynard Keynes - Mortimer Adler

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Conservatism: Conservatism believes that capital surplus accrues to the individual, and that there is little or no social surplus, but that there are significant social costs, which must be distributed across the society. Examples of this include military service, standards of personal morality and charity.

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Conservative thought became established in English philosophy with the work of Thomas Hobbes, but became a political doctrine with Edmund Burke. Conservatism in the modern period looks to libertarian economic thinkers, but toward the absolute need for social structure enforced by normative institutions such as religion and nationalism. Prominent modern schools of Conservative thought include the work of Leo Strauss in the USA.

Related Topics:
Thomas Hobbes - Edmund Burke - Religion - Nationalism - Leo Strauss

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Socialism: Socialism believes that the ratio of capital surplus to social surplus is very low, that most of the surplus involved in human production is predicated on the producer being a member of society, and therefore argues for social control of the means of production and an egalitarian distribution of wealth, in order to provide benefits to all members of a society.

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Socialism evolved from critiques of human misery in the late 18th century, such as those of the political philosopher Fourier. In the view of the socialists, the market could never efficiently distribute the social surplus, and private ownership merely substituted one form of tyranny for another (the tyranny of the capitalists replaced the tyranny of feudal lords). In the present day, many social democratic parties believe in some form of socialism which requires that corporations and major public works be guided by political as well as economic factors, for social goals. In addition, most socialists adhere to some form of utilitarian philosophy, which states that the best form of society is the one that produces the best results for the greatest number of its members.

Related Topics:
Fourier - Social democrat

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Communism: Communism believes that there is no difference between capital surplus and social surplus, which is a view it shares with libertarianism. But, in the reverse of the libertarian viewpoint, it argues that all surplus is socially created. The most prominent communist thinker was Karl Marx, who was the founder of the school of thought known as Marxism. Other important Marxists include Friedrich Engels, Vladimir Lenin and Leon Trotsky.

Related Topics:
Communism - Karl Marx - Marxism - Friedrich Engels - Vladimir Lenin - Leon Trotsky

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Paradigms of production

The ability of some individuals to create capital or perform work with a far greater impact on society than others creates the question of the basis on which production should be measured.

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Individualism: Individualist paradigms state that the single person, with his or her will and his or her own desires, is the basis of production, and that only individual accomplishment and happiness matter. Society is an instrument in so far as it produces individual happiness or utility. In addition, the individualist paradigm relies on the assumption that individual contributions to production are always measurable, so it makes sense to view one individual's contribution as separate from those of others.

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Communitarianism: Communitarian paradigms state that it is the action of a group, with particular exceptional individuals, which forms the basis of production. Communitarian thinkers work in concepts such as inter-subjectivity and the dynamics of group production. The individual, within a community, is considered to be the basic unit.

Related Topics:
Communitarianism - Inter-subjectivity

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Collectivism: Collectivist paradigms state that it is impossible to show with any degree of precision what the contribution of each individual is, and all artifacts and accomplishments must therefore be regarded as the result of a group effort.

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The two issues of production and distribution generally move in this same direction. However, this is far from being always the case. It is entirely possible, for example, to take the stance of an individualist, and then conclude that individuals will be happiest in a communist society.

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