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.

The scope of political economy

Political economy is centrally focused on the development of the polity. It pays particular attention to whether the polity is running a surplus or a deficit, since in the view of most political economy, any deficit must be met by selling assets, such as gold or other capital, to other polities - or by some form of borrowing or externalization.

Related Topics:
Surplus - Deficit

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Political economy, then, studies the mechanism of human activity in organizing material, and the mechanism of distributing the surplus or deficit that is the result of that activity. Note the difference between this paradigm and that of economics which sees human wants as unlimited, resources as generically scarce, historical context as not particularly important, and income distribution issues as less important than efficiency and growth. While for some there is no difference between the two terms, for others the difference is one of basic method. Economics studies trade-offs through measurable values, whereas political economy focuses on structural relationships. However, there is no generally accepted distinction between these terms, and they are most often used on a case by case basis.

Related Topics:
Economics - Scarce

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