Defination of Political Economy

Political Economy

The term political economy came into general use in the eighteenth century and meant the measures taken by governments to regulate trade, exchange money and taxes (roughly what would now be called economic policy). By a natural progression the term came to be applied to the study of these and other economic questions; political economy became a recognized academic profession and was increasingly considered a science. In some places (Scottish universities, for example) it is still the term normally used to denote what is elsewhere more usually called economics. But, especially under the influence of W.S. Jevons (1879; 1905) and Alfred Marshall (1890), ‘economics’ had for the most part replaced ‘political economy’ by the end of the nineteenth century, although some economists continued to distinguish between the two, reserving the term political economy for questions of policy (e.g. Robbins 1939).

The most significant distinctions to have been made between the two terms have, however, been associated with the history of Marxism. In 1843 Engels, shortly to become Marx’s close collaborator, published an article with the title ‘The outlines of a critique of political economy’ (Engels 1975 {1844}). He argued that the new economic thinking, favoring competition and free trade, which began with Adam Smith, was ‘half an advance’ on the mercantilism which had gone before, but, by not questioning private property, was guilty of covering up the fact that capitalism necessarily led to social and economic evils. Such ‘sophistry and hypocrisy’ tended to increase with time so that Ricardo was more guilty than Smith, and Mill more guilty than Ricardo.

Over the next thirty-five years, Marx, in his own economic writings, greatly enlarged, deepened and refined this critique in works such as Contribution to a critique of Political Economy Marx (1976 {1859}), which itself bears the subtitle, A Critique of political economy. By political economy Marx meant the body of economic thinking which began with Adam smith and included Ricardo, Malthus and others, roughly corresponding to what are now known as the classical economists. In using the term, Marx was not departing from the general usage known as the classical economists. In using the term, Marx was not departing from the general usage of the day but his critique paved the way for a change in meaning.

Marx was both a strong critic and an admirer of the tradition of political economy, especially of Smith and Ricardo. But he distinguished the honest, if sometimes mistaken, pursuit of truth by some political economists and those increasingly abundant economic writings whose purpose was merely to legitimize capitalism (which he sometimes called ‘vulgar economics’). Marx and Engels believed that political economy as a science arose alongside capitalism: because the exploitative nature of pre-capitalist economic systems was transparent, they did not require a science to explain them, merely an ideology (generally a religion) to legitimize them; but, since the nature of capitalist exploitation was opaque (being hidden behind the veil of money and market relations), it needed its own economic science (political economy) to reveal it.

For Marx, a truly scientific political economy, in order to reveal this hidden exploitation, must study not only exchange but also the nature of production and labor. Vulgar economics concealed capitalist exploitation by treating all relations as exchange it was therefore, an ideology rather than a science. Marx came apparently to recognize in classical political economy slightly more than Engel’s ‘half an advance’ and dated its definitive vulgarization a little later than Engels had done in 1844.

This distinction between (scientific) political economy and (vulgar) economics has been a constant in critical, and especially Marxist, economic thinking. But there have been moments when the vocabulary has acquired a special importance. The revival of Marxist economic analysis in Western Europe and the USA from the late 1950s onwards took the term political economy as a kind of symbol. This reflected both the desire to re-emphasize methodological differences with an increasingly rampant (vulgar) economics and also the need for a code name in places, such as the exceptional flowering of articles, books and university courses bearing the title of The Political Economy of... (a tendency strongly influenced by Baran 1957). Although this political economy expressed a renewed interest in the questions and methods of the classical economics and of Marx, the use of the term became increasingly loose, often simply denting economic analysis which introduces non-economic (especially political) factors.

In this looser sense the term has come to have attractions for anyone whose view of economic life extends beyond the confines imposed by much orthodox economics. Since around 1980 the term political economy has spread on an unprecedented scale, partly losing its association with Marxism. The growing fields of international political economy, for instance, tends to see political economy rather eclectically as a set of questions in which politics and economics are enmeshed and which can be answered via differing ideological approaches – liberal, nationalist, Marxist and others (see Gilpin 1987). On the other hand, some economists, without describing what they do as political economy have concerned themselves increasingly with the kinds of issues which preoccupied the classical political economists, such as the relationship between the design of wage and labor systems and the profitability of capital (Bowles 1985). In these ways the distinction between political economy and economics is becoming more blurred.

The term has also undergone a number of mutations. In the USA political economics is sometimes preferred, as in the organization, the Union of Radical Political Economics and its Review of Radical Political Economics. Of more recent coinage is ‘political ecology’, an attempt to apply some of the methods of political economy, especially in its Marxist sense, to ecological questions. More confusingly, political economy is being used to connote the economic and political characteristics of a political place (country, city, region). References to such concepts as ‘the European political economy’ (as a replacement for ‘the European economy’) are becoming increasingly common but have almost no relationship common but have almost no relationship to earlier, more analytical meanings and simply raise the level of incoherence in the use of the term.