Political Economy - Essay Example

Comments (0) Cite this document
In this essay,I am going to look at some of the major economic theories and their assumptions especially on the need and role of government action or involvement in the economy.This analysis is based on a review of the Australian car manufacturing industry.
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.4% of users find it useful
Political Economy
Read TextPreview

Extract of sample "Political Economy"

INTRODUCTION: In this essay, I am going to look at some of the major economic theories and their assumptions especially on the need and role of government action or involvement in the economy. This analysis is based on a review of john Freebairn of the Australian car manufacturing industry.
Markets are generally a system of social arrangements that allow people to gain information regarding goods and services. In addition, markets provide a framework where people voluntarily exchange their goods and services for an agreed compensation.
In analyzing the Australian manufacturing industry, Freebairn uses a combination of the Keynesian and the neoclassical theories to drive his point home. The Keynesian theory, which is based on the works of the British economist john Maynard Keynes, is an economic theory that advocates for a system of a mixed economy. According to Keynesianism, the state as well as the private sector has their own roles to play in order to hasten the process of economic development. According to Freebairn, the government has the duty of providing a stable macro economic environment as well as the provision of conducive fiscal and monetary policies. On the other hand, the private sector is charged with the duty of carrying out research and development in order to come up with less labor-intensive modes of production as well as the use of less carbon intensive processes. In so doing the government will compensate for what the private sector lacks in the production systems. In addition, since the government is well equipped to increase aggregate demand, especially at the macro level then the government through increased spending will indirectly increase the demand for industrial goods within the economy.
Freebairn also borrows a leaf from neoclassical economics, since he does concede to the fact that the car manufacturing industry will definitely have to be influenced by the global forces of demand and supply. On top of this Freebairn also observes that the industry's output as well as the distribution of income not only within the industry but also within the entire economy will have to be influenced by the forces of demand and supply. These assumptions are all some of the core assumptions of the neo classical theory of economics.
Concerning markets Freebairn assumes that markets are inherently competitive. In addition to this Freebairn also assumes that pursuing businesses in an area where an economy has comparative advantage will always end up profitable. In addition, Freebairn overlooks the role played by tariffs, quotas and other barriers to trade on determining the volume and extent of output in all sectors of production. The assumption that the incomes flowing from the mining sector, the increasing foreign investment, as well as the increasing global growth of economies will lead to an increase in the demand for Australian agricultural and tourism is not based on a conclusive survey. This is because as globalization takes it tolls more and states that are more industrial are emerging. These countries have huge populations that have provided industries with a skilled workforce that is very cheap as compared to Australia. This cheap labor compounded by high technological advancements will lead to the reduction of production costs. This will in turn lead to the production of highly competitive industrial and agricultural commodities that will compete with Australian goods.
Freebairn also assumes that consumers are always rational. In normal practice, consumers are not always rational. Thus, his assumption that the shift to the production of smaller and more fuel-efficient motor vehicles may be one way out cannot be an optimal solution. This is because if the Australian car manufacturing industry in Australia is targeting the global economy there is need to carry out a global market survey and come up with a detailed report on the different tastes from different market sectors.
Classical economics advocates for a system of free trade. Through free trade the role of government regulation in the forms of tariffs, quotas, the use of subsidies is prohibited. This is due to the fact that, as classical economists point out will lead to a form of indirect transfer payment since all these regulations lead to an increase in the domestic price of goods. Thus, classical economists would propose for the role of government action in the production processes especially in the field of trade to be minimized.
Many economists consider the concept of comparative advantage as well as absolute advantage to be very principle in mainstream economics. What economists fail to realize is that a country can be comparatively and absolutely disadvantaged. On top of this, it is necessary to realize that, there are some industries that governments will inherently support from a political standpoint although the state is comparatively disadvantaged. This is because those industries provide some sense of security to the political regime.
John Freebairn 'Protectionism a short-sighted response to change' the Australian Financial Review: 20 July 2007.
Alan Coddington (2003) Keynesian Economics: The Search for First Principles:
Rout ledge, U.K.
Donald Rutherford (1996), Classical Economics: The Critical Reviews, 1802-1815:
Rout ledge, U.K. Read More
Cite this document
  • APA
  • MLA
(“Political Economy Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Political Economy Essay Example | Topics and Well Written Essays - 500 words. Retrieved from
(Political Economy Essay Example | Topics and Well Written Essays - 500 Words)
Political Economy Essay Example | Topics and Well Written Essays - 500 Words.
“Political Economy Essay Example | Topics and Well Written Essays - 500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Political Economy of Media

...? Political Economy of Media Does the technological revolution change the basic rules of media economics? The technological advancement in the 21st century has had a positive impact on the media economics. A study carried out in over 200 European cities shows that the economic growth was higher in the cities that embraced technology. The era we are in now is marked by globalization technological revolution and democratization, all these areas in one way or another impact media and communication. McChesney observes that the technological revolution does play a defining role in the media industry. He also looks at the economic and cultural globalization and their relation with the global commercial market...
9 Pages(2250 words)Essay

Global political economy

...?Introduction Considering a thorough review is made of the global political system, only a handful of definitions are available with which to fully describe it. These definitions are as follows: imperialistic, polyarchic, or aristocratic. Conversely, currently there are many forms of governance that exist, from a high level of democracy to its complete antithesis – a controlling and repressive dictatorship. All systems of global governance have to integrate with one another at some level in order to achieve certain key goals. I take the stance that the current system of governance displayed within the world is represented as captialist imperialism. Accordingly, this analysis will seek to provide answers on the following subtopics... ....
8 Pages(2000 words)Essay

International Political Economy

...of any of the international unions, trading operations were facilitated by common involvement in the gold systems by the international partners, regardless of their independence and colony status. Great Britain became top on the economic list of best performing countries. The country had developed massive economic, political, industrial influence, and was technically controlling more of the global market. According to Forbes (22), whereas capital controls similar to the Bretton Woods System had not yet been implemented, imbalances in capital flows were rarer than the post 1970 era. In light of its economic dominance, Britain's investment in other countries helped to control any imbalances across the world; the capital...
7 Pages(1750 words)Research Paper

Political Economy

...What does the 'political economy' approach to the study of the Creative and Cultural Industries involve What are its advantages and disadvantages Introduction The world economy in general and the national economies in particular, in twenty first century, are more or less dominated by post-industrial knowledge-based exchanges. Primary production or manufacturing is becoming decreasingly important sectors of the postmodern economy. The importance of cultural industry is not merely limited to its economic capabilities (which is, of course, relatively strong); but also to the prominent role it has on the making and unmaking of peoples' identities,...
15 Pages(3750 words)Essay

European Political Economy

...Libson Treaty The purpose of this essay is to critically assess the effects of the Lisbon treaty on the processes of political and economicintegration in Europe. Firstly, it discusses the terms of the Lisbon treaty briefly then moves on to how the Lisbon treaty can help the 27 member states of the European Union to integrate politically and economically. It also discusses briefly the roles of the EC and EP under the new treaty with regard to the incorporation of the member states. Thesis Statement and Research Methodology In this paper I will critically assess the effects of the Lisbon treaty on the processes of political and economic integration in Europe. For the purpose of research, I...
6 Pages(1500 words)Essay

Political Economy

...and at the same time influencing an increased focused on Environmental pollution. The increase in recession and population growth has had a trickledown effect and things have been getting worse as time has gone by. The primary focus of this thesis will be the effects recession and population growth have on triggering income inequality as well as environmental pollution. Financially, the last decade or so has been a debacle for most countries around the world. The term recession has posed as a pest for most economies and has derailed the massive progress the world was making. Money was being flown out of the economic system that was being injected into it. Supplies were not meeting demands and inflation reached its...
6 Pages(1500 words)Essay

International Political Economy

...International Political Economy The worldwide economy is a critical field for international political economy (IPE) scholars in addition to being an important topic in its own dispensation. The structures for international political economy are an indispensible assistance for analysis, crucial for uncovering the politics of global economy. The imperceptible school of thought in international politics economy has become divided. This division is mainly between the rationalists and critical scholars. However, recent developments point towards a scope in rebuilding it and the dramatic politics of global economy. International political became known as a focal point of study in the 1960s. This was sparked by the drastic advancement... of the...
16 Pages(4000 words)Essay

Political Economy

...Political Economy Nash equilibrium In the first game, player s best response is in UL where he gets 3 pay offs. This is his best response since3>2. At the same instance, player B has his best response of 4 payoffs (4>3 and 3>2). In the second game. At the same point (UL), both players have their best responses. For player 1, 3 payoffs (3>2) while for player 2, 4 payoffs (4>0). Nash equilibrium exists when player 1’s best response is the same as that of player 2. At (UL), both players have their best responses. 2. Condorcet winner and loser Following these election results, candidate A is the Condorcet winner. This is because in the two instances that A is the preferred candidate (ABC and ACB), the...
2 Pages(500 words)Assignment

Political Economy

...Topic: POLITICAL ECONOMY Historically, the United s of America had the responsibility of dictating the rates of tariffs on goods brought to the country. The tariffs played a key role because it was among one of the main contributors of the government revenues. The congresses participated in serious debates in order to harmonize the rates of tariffs as it favored traders from a particular religion. The head of state was also assigned the responsibility of coming up with trade agreements and policies with other trading partners using his political influence. However, there were two landmark legislations that revolutionized the laws that guided trade in the United States of America. In 1930...
5 Pages(1250 words)Essay

International Political Economy

...International Political Economy By: + Challenges Facing International Political Economy The relationship between politics and economics are interrelated in that they affect each other by either controlling the policies or practices. International Political Economy is currently widely appreciated as a subject of high theoretical research and applied policy analysis. It sorts to identify the relation between political influence and the global economy in terms of nation-state political actions and their effects to the international trade and monetary flow. Consequently, this influences the environment in which entrepreneurs make economic choices and nation-states make political choices1. As the International Political Economy grows... and...
8 Pages(2000 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Political Economy for FREE!

Contact Us