Political Economy and Economics - Research Proposal Example

In what ways does study of Political Economy differ from that of Economics s "Political economy" means different things to different people, and one of the reasons for that is that the use of the term has changed a lot in the last few centuries. Classical political economists, like Adam Smith and John Stuart Mill, used the term "political economy" to mean something like the scientific management of the state. (Eggers, 2005) Adam Smith (Wealth of Nations, 1776), defined it as: "Political economy considered as a branch of the science of a statesman or legislator proposes two distinct objects, first, to supply a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public service. It proposes to enrich both the people and the sovereign." The sum of the efforts and activities of the members of the household in acquiring the means to satisfy their wants may be designated as the economy of the household. Where a household is not economically self-sufficing, that is, where households are economically interdependent, we have a broader economy. Where this interdependence is state- or nation-wide, there exists a national economy or political economy. The term political economy is used in yet a third sense. "It is the name of the science, which treats of this nation-wide complexus of economic activities." (Knight, 2005) The subject matter of political economy: Political economy studies the laws, which cover the functions of production and exchange of material means. Both important functions constitute. Production is an independent function but exchange is dependent on production since exchange can only be done of products. Although the external influences effect both of the two functions but in order to put up with these external influences both the functions have there own laws. Production and exchange are the major activities, which constitutes the economics curve. The circumstances effecting these two functions can be different in different countries. The difference in time span in which both of these functions are practised can also change the notion of political economy. "Political Economy belongs to no nation; it is of no country: it is the science of the rules for the production, the accumulation, the distribution, and the consumption of wealth. It will assert itself whether you wish it or not. It is founded on the attributes of the human mind, and no power can change it." (Speech on the Irish bill, 1870) Political economy can be viewed as historical science. The subject matter of political economy keeps on changing with the evolution of material. At first it studies all the special laws related to every stage of the evolution and after the completion of that study, it finally establish specific laws which are same for all the individuals, communities and societies which use the same material. The laws are good for production and exchange in general. The mode of production and exchange formulating a historical society give shape to these laws of distribution of products. The difference in distribution of the product give rises to class system and plays an important role in the formation of different societies. "In a logical division of the field of political economy, that which relates to the distribution of wealth is the final part. For the beginning of all the actions and movements which political economy is called on to consider is in human desire. And their end and aim is the satisfaction of that desire." (The meaning of Distribution) This fundamental law of political economy is, like all other laws of nature, so far as we are concerned, supreme. It is no more affected by the selfishness or unselfishness of our desires than is the law of gravitation. (The Fundamental Law of Political Economy) Although political economy and cultural studies share significant meta-theoretical features, it is less clear whether the two disciplines really grew out of the same theoretical tradition. (Skjerdal, 1998) Political Economy is different from rest of the social sciences with respect to its viewpoint. Economics can be seen as the branch of Political economy, which undertakes the study of scarce resources and the relationship between price and activity. From the point of view of political economy, economics is a branch of the entire study, and economics has, at its basis, a theory of political economy, which should be open to examination. The different schools of political economy have sharply divided by their methods of analysis and by their ideological preferences. The rival camps agreed, however, that the main concern of political economy was the relationship between the public and the private spheres, although they disagreed about the nature of that relationship. (Gamble, Payne, Dietrich, Hoogvelt and Kenny, 1996) Political economy, however, as the science of the conditions and forms under which the various human societies have produced and exchanged and on this basis has distributed their products-political economy in this wider sense has still to be brought into being. (Engels, 1877) "Because political economy is not a unified discipline, there are a variety of studies that use the term, which have overlapping subject mater, but radically different viewpoints." (Wikipedia, 2005) The subject matter of Political economy covers the issues related to social justice on the other hand economics tends to undertake the study of successful allocation of scarce resources and policy evaluation. Political economy is related to basic laws and principles whereas economics concerned with the effective ranking of social states than the arguments underlying a given ranking. There is a very fine line, which differentiate between the role of normative economics of logical decomposition of laws and principles and their clarification. (Parfit 1995), explains this as egalitarianism is wrong because it considers that there is something good in achieving equality by levelling down (even when the egalitarian ranking says that, all things considered, levelling down is bad). Both the discipline use different conceptual tools Normative economics heavily rely on the formal apparatus of economics, which gives powerful means to derive non-intuitive conclusions from simple arguments, although it also deprives the analyst of the possibility of exploring issues that are hard to formalise. With the division of economics and political science into distinct disciplines, economists abstracted from political and institutional factors. The desire for methodological progress and for a more rigorous basis for economic analysis was important motivations in this separation. The development of neoclassical economics stressed optimization by consumers and firms subject to well-defined constraints and a market environment, deliberately downplaying more amorphous political factors. (Drazen, 2002) (Gabriel, 2002) defines Political economy as "the study of the role of economic processes in shaping society and history." During the last few decades or so, economic thinking has moved much further from Robbins view. According to Robbins, "Economics is concerned with the best possible use of the limited resources." But it is now considered that Economics is much more than merely a theory of value or of resources allocation. The credit for bringing about a revolution in economic thinking goes to late Lord J.M. Keynes. According to him Economics studies how the levels of income and employment in a community are determined. Thus, in Keynesian terms, "Economics is defined as the study of the administration of scarce resources and of the determinants of income and employment." In other words, "it studies the causes of economic fluctuations to see how economic stability could be promoted." (Dewett, 1999) (Dewett, 1999) cites Benham's words, "Economics is a study of factors affecting the size, distribution and stability of a country's national income." (Benham, 1960) More recently, the theory of economic growth has come to occupy an important place in the study of Economics with reference to under-developed economies. It studies how the national income grows over years. Thus, a study of economic growth and of economic stability forms an integral and important part of the study of Economics. A good and adequate definition of economics must cover them. No short definition of a growing science like Economics would serve the purpose. To define it as science of wealth is too narrow or uncharitable. To define it as a study of mankind in the ordinary business of life is too broad and to define it as the study of material welfare is too narrow. To define it as a science of scarcity of choice or of-human valuation is again too wide and to define it as that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money is too narrow. Thus, every time we face a dilemma. One may, therefore, agree with Prof. Viner that Economics is what economists do. We know that the economists study resource allocation or resource utilisation. They also study size, distribution and stability of national income and now they study the fascinating subject of economic growth. A proper definition must cover this wide field to indicate correctly what Economics is. In short, Economics may be defined as social science concerned with the proper uses and allocation of resources for the achievement and maintenance of growth with stability. Or "Economics is a social science concerned chiefly with the way the society chooses to employ its limited resources, which have alternative, uses, to produce goods and services for present and future consumption. (Spencer & Milton, 1971 cited in Dewett, 1999) It describes and analyses the nature and behaviour of economy. "Economics is the study of how in a civilised society one obtains the share of what other people have produced and of how the total product of society changes and is determined." (Smith, 1968) This definition covers important aspects of the study of Economics, viz., production and distribution of wealth and the determination of the level and changes in the total product of the nation, which implies the theory of economic growth. In view of the scarcity of means at our disposal and the multiplicity of ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of a consumer and maximum output or profit for a producer. Hence economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends. Fundamental Problems Facing an Economy From the definition of economic problem gives above we can derive the following fundamental problems which an economy has to tackle: (1) What to produce. The first major decision relates to the quantity and the range of goods to be produced. Since resources are limited, we must choose between different alternative collection of goods and services that may be produced. It also implies the allocation of resources between the different types of goods, e.g., consumer goods and capital goods. (2) How to produce: Having decided the quantity and the type of goods to be produced, we must next determine the techniques of production to be used, e.g., labour-intensive or capital-intensive. (3) For whom to produce: This means how the national product is to be distributed, i.e., who should get how much. This is the problem of the sharing of the national product. (4) Are the Resources Economically Used This is the problem of economic efficiency or welfare maximisation. There is to be no waste or misuse of resources since they are limited. (5) Problem of Full Employment: Fullest possible use must be made of the available resources. In full employment not only of labour but also of all its resources. (6) Problem of Growth: Another problem for an economy is to make sure that it keeps expanding or developing so that it maintains conditions of stability. It is not to be static. Its productive capacity must continue to increase. If it is a under-developed economy, it must accelerate its process of growth.(Dewett, 1999) "It is a legitimate exercise of economic analysis to examine the consequences of various value judgments, whether or not they are shared by the theorist." (Samuelson 1947, p. 220) Many economists have done a through scrutiny of values recently. (Sen 1987, Hausman and McPherson, 1996 and Mongin, 2001). References 1. Benham, F. (1960). Economics, cited in Dewett K.k., Modern Economic Theory, 21st edition, Rajendra Ravindra Printers, New Delhi, pp.7-8 2. Dewett, K.k., Modern Economic Theory, 21st edition, Rajendra Ravindra Printers, New Delhi, pp.7-8 3. Drazen, A., What is Political Economy Chapter 1, Political Economy in Macroeconomics, Princeton University Press, 4. Eggers, A. C. (2005), Political Economy in Political Science: A discussion paper, September 21, 2005. 5. Engels, F. (1877), Part II: Political Economy, Subject Matter and Method. 6. Hausman, D. M. McPherson (1996), Economic Analysis and Moral Philosophy, Cambridge: Cambridge University Press. 7. Gabriel, S. (2002), Introduction to Political Economy, available http://www.mtholyoke.edu/courses/sgabriel/political_economy_main.htm 8. Gamble, A., Payne, A., Dietrich, M., Hoogvelt A., and Kenny, M., (1996). Editorial Policy Statement taken from: New Political economy. Vol. 1 No. 1 1996. 9. Knight, K. (2005), Science of Political Economy (Economics), The Catholic Encyclopedia, Volume XII, Robert Appleton Company, Updated 6 October 2005, 10. Mongin, P. (2001), "Value judgments and value neutrality in economics. A perspective from today", Cahier 2001-18, Laboratoire d'conomtrie, Ecole Polytechnique 11. Parfit, D. (1995), "Equality or priority", Lindley Lecture, University of Kansas Press. Rep. in M. Clayton and A. Williams (eds.), The Ideal of Equality, New York: St Martin's Press and London: Macmillan. 12. Samuelson, P.A. (1947), Foundations of Economic Analysis, Cambridge, Mass.: Harvard University Press. 13. Sen, A.K. (1987), On Ethics and Economics, Oxford: Basil Blackwell. 14. Smith, H. (1968), A prospect of Political Economy, p.20, cited in Dewett K.k., Modern Economic Theory, 21st edition, Rajendra Ravindra Printers, New Delhi, pp.7-8. 15. Skjerdal, T. S. (1998), Structures vs. interaction, political economy vs. cultural studies, Center for Cultural and Media Studies, University of Natal, 16. Speech on the Irish Land Bill, (1870), Available http://socserv2.socsci.mcmaster.ca/econ/ugcm/3ll3/leslie/leslie01.html#N_1_ 17. Spencer, Milton, H. (1971), Contemporary Economics, p.2 cited in Dewett K. K., Modern Economic Theory, 21st edition, Rajendra Ravindra Printers, New Delhi, pp.7-8 18. The Fundamental Law of Political Economy, Chapter 10 available from http://www.henrygeorge.org/science/speI_10.htm 19. The Meaning of Distribution: Chapter 1, Part IV, The Distribution of Wealth. 20. Wikipedia, (2005). Political economy, the free encyclopedia, available http://en.wikipedia.org/wiki/Political_economy Read More