Political economy originally
referred to the study of the conditions that
determined the relative wealth or poverty of
polities (e.g. nation-states). The term was first
widely used in the 18th Century by philosophers such
as the
physiocrats and
Adam Smith.
In the 19th century liberal theorists argued that
the state should not regulate the market; that
politics and markets operated according to different
principles; and that political economy should be
replaced by two separate disciplines,
Political science and
Economics. Around 1870
neoclassical economists such as
Alfred Marshall began using the term
economics instead of "political economy."
Notable thinkers have opposed this liberal
tradition:
Karl Marx (who rejected the conceptual
distinction between politics and economics) and
John Maynard Keynes (who rejected the
institutional separation of politics and economics);
their followers often favor "political economy" as a
way of bringing politics and economics back
together. Use of the term underwent something of a
revival during the 1960s when it was used
increasingly by the
libertarian economists of the
Chicago School.
Today, the term political economy is used in
various ways. It is most commonly used to refer to
interdisciplinary studies that draw on economics,
law, and political science in order to understand
how political institutions and the political
environment influence market behavior. Within
political science, the term refers to liberal,
realist, and Marxian theories concerning the
relationship between economic and political power
among states. This is also of concern to students of
economic history and institutional economics;
nevertheless, within economics the term is more
closely associated with
Game theory. "International political economy"
is a branch of economics that is concerned with
international trade and finance, and state policies
that affect international trade such as monetary and
fiscal policy. Others, especially anthropologists,
sociologists, and geographers, use "political
economy" to refer to neo-Marxian approaches to
development and underdevelopment set forth by
Andre Gundar Frank[?] and
Immanuel Wallerstein[?].
