Political Economy. The Revival of an 'Interdiscipline'

Political Economy. The Revival of an 'Interdiscipline'

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Chapter One Political Economy The Revival of an 'Interdiscipline'

Political Economy: What's in a Name?

Political economy is a venerable intellectual tradition that has undergone a recent revival. It was the name given to a version of social science prevailing in Europe until late in the nineteenth century, closely linked to its progenitor, moral (meaning social and political) philosophy. Its roots lie deep in the liberal Enlightenment that emerged across Europe in the seventeenth and eighteenth centuries, but it was given particular vigour through such figures of the 'Scottish Enlightenment' as David Hume, James Steuart, and Adam Smith in the latter half of the eighteenth century.

In the eighteen seventies, political economy informed every budding civil servant or member of the political and economic elites how to run the affairs of state. The social movements of the French Revolution and in Britain during the eighteen twenties brought forth a wave of radical or 'popular' political economy upon which Marx built his 'critique', challenging the very bases of modern civil society (private property, capital, market exchange, money). Legislation in Britain and elsewhere was subject to heated debates (the 'general glut' debate concerning the possibility of general crisis; the banking-currency school controversy about the nature of money and credit; the debate on free trade; the debate on the freedom of the labour 'market'). All were fought in public as well as in academic publications, and because many of the leading political economists were politicians as well (famously, the free-trade advocate David Ricardo), there was no clear-cut divide between 'academic' and 'political' debates.

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Drawing attention to the potential social conflicts that would result from underlying socioeconomic relationships dividing society into classes, political economy was designated the 'dismal science'. Long before Marx, political economists were accused of inciting class struggle. From the eighteen seventies on, several political economists provided the core of what was to become-and was immediately proclaimed as-a 'pure theory' of political economy comparable to a social physics or mechanics, focusing on the analysis of market exchange under the hypothetical conditions of 'absolute (perfect) competition'. The idea was to develop a more optimistic and 'pure' science of economics free of its roots in social and political analysis. This emergence of modern 'neo-classical' economics as orthodoxy marked a divide between analysis of (conflictual) political and social relationships, on the one hand, and the analysis of (harmonious) market exchange, on the other, but true political economists rebelled against this division in a series of revivals in the twentieth century, preferring to see the patterns of market exchange as an integral part of broader social and political phenomena.

At the same time, the analytical techniques of 'utilitarian calculus' and marginal utility theory based on the utility or 'pleasure'-maximizing behaviour of self-interested 'rational economic man', which came to be employed in economic 'science', have also heavily influenced the emergence of other social sciences, especially sociology, political science, and international relations. The so-called 'rational choice' approach is very much an offspring of neo-classical economics, analyzing politics and political interactions as 'markets'. These approaches are at odds with broader institutional or historically based approaches to these disciplines, which maintain their (often tenuous) links with classical political economy. However, given that political economy was itself a compromise between these various modes of analysis, there is no reason why they cannot complement each other if the intention to do so is present.

On the other hand, political economy is back in economics as well. Since the nineteen seventies there is an ongoing revolt uniting all sorts of dissidents- Keynesians, institutionalists, Marxists, Ricardians-against the mainstream. History, evolution, time, space, and various social relationships in economic theorizing have returned to the agenda of critical economists, symbolized by the student protests in two thousand against the 'autism' of established neo-classical economics.

Political economy today has come to have at least four meanings, and students should be careful to identify the version with which they are dealing because mainstream economists, critical economists, and political scientists mean quite different things when they use the same term 'political economy'. First, many economists still use the term to denote the study of economic policy issues within economics. Political economy in this sense is the application of neo-classical analysis to specific policy issues, wherein analysts attempt to identify optimal policy solutions for key variables such as inflation or unemployment. Second, what is called the 'economic theory of politics' is little more than the strict application of the concepts and analytical methods of neo-classical economics to the realm of political interactions and bargaining, which are consequently transformed into something looking very much like a 'market'. Neo-classical techniques are employed to determine how policy decisions are taken, given stylized conflicts among identifiable actors. Third, the name 'political economy' is used as a rallying cry by heterodox economists, indicating a more or less radical critique of the allegedly 'unpolitical' mainstream economics. Various strands of heterodox economics may be lumped together under this heading, including post-Keynesian, neo-Ricardian, Marxian and neo-

Marxian, Austrian school (von Hayek), and institutionalist and neo-institutionalist traditions. Specifically, the term 'political economy' is in denote 'radical economics', a potential amalgam of Marxian economics plus some feminism, eco or postmodernism. Finally, political economy indicates the recent rediscovery by political scientists of the importance of economic issues and, in particular, of the political nature allegedly of economic facts, structures, and processes. This has led to a series of efforts to reoccupy what was once a man's land between the realms of economics and political science. In this respect, the term also indicates the revivalist move across disciplinary boundaries-and the venture into a new 'inter-discipline' which is the subject of this chapter.

This chapter will develop several key points concerning political economy and revival. It will begin by reviewing the origin of political economy in the 'classical' period of Enlightenment, then follow the progress of debate through the emergence of radical or 'critique' political economy and the eventual emergence of the separate disciplines of economics and political science/international relations. The chapter then turns to the contemporary revival of political economy as a study with domestic (comparative and international aspects focused on the relationship of national political economies to the political process of global economic integration. The chapter will conclude by examining the crucial question of the relationship between political authority and markets, and how the political institutions of the state are embedded in the market as a thoroughly social phenomenon.

The overall argument of the chapter is that political economy should remain in touch with classical and radical roots. Successful approaches to political economy do not embrace a series of 'sub-fields' but rather constitute an inter-discipline, however difficult a project that might be emphasized in the Introduction to this volume of political economy consists of analyzing a series of socio-political relationships that can be summarized as follows: one, there is a systematic reciprocal relationship between the political economic domains; two as the ways in which societies produce and distribute their means of subsistence and surpluses changes, so the nature and structure of the societies themselves will evolve over time; three there is a dynamic and systematic relationship between the changing structures of production and exchange, on the one hand, and the forms that political authority and governance will take over time, on the other. Therefore the political institutions we call states are embedded in the social relationships around which production and exchange are organized, and the state and the market, as in the classical period, should be conceptualized as forming a single, integrated ensemble of governance.