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Political Economy - My Notes

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Political Economy - My Notes

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immyimmaculate296
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© © All Rights Reserved
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Introduction to

Political Economy
(DVS 1106)
Dorcus Achen
FIS
What is Political Economy?
• Political economy is the study of how societies organize the
production and distribution of goods and services.
• It combines elements of economics, political science, and sociology to
understand the relationship between politics and economics.
Methodological Approach to the
Study of Society
Methodological Approach to the
Study of Society
• Economic Models and Theories
• Comparative Analysis
• Quantitative and Qualitative Methods
• Interdisciplinary Approaches
• Policy Evaluation
The historical development
of political economy
Ancient Foundations of Political
Economy

1. Classical Greece
• Thinkers like Plato and Aristotle examined economic and political issues.
• Aristotle's "Politics" discussed various forms of government and their economic
implications.
• Based their philosophy on natural law
2. Mercantilism
Popular between the 16th-18th century
Critical role of the state in economic regulation
Political economy emerged as a distinct field of study in the mid-18th
century, largely as a reaction to mercantilism

Characteristics of mercantilism:
Bullionism
Protectionism
Colonial expansion
State intervention
P.E emerged as a distinct field in the mid 18th century

Proponents:
Adam Smith (1723-1790)
David Hume (1711-1776)
François Quesnay (1694–1774
Systematic rather than piecemeal approach

Used a secular approach in explaining distribution of wealth and power

Criticized mercantilism- individualistic approach rather than government

The ‘invisible hand”


Comparative Advantage:
• 19th Century • Pivotal role in Undermining British
Mercantilism
• David Ricardo (1772–1823)

• Produce and Export Efficiently

• Import Efficiently Made Goods

• Utilize the Advantages of Free Trade


Utilitarianism:
• Jeremy Bentham (1748–1832), James Mill (1773–1836), and Mill’s son
John Stuart Mill (1806–73)

• Utilitarianism is a theory of morality that advocates actions that foster


happiness and oppose actions that cause unhappiness.

• Utilitarianism promotes "the greatest amount of good for the greatest


number of people.“

• When used in a sociopolitical construct, utilitarian ethics aims for the


betterment of society as a whole.
Critic of Adam smith:
• Adam Smith looked at economics from an individual perspective.

• Friedrich List, a German American economist, focused on his own


country's economy and contrasted it with Smith's approach, which he
called "cosmopolitical.“
• Karl Marx's Class-Based Analysis
Marxism:
Proponents:
Karl Marx (1818–83)
Friedrich Engels
• Critic of the liberals
• Criticized classism
• Focused on class struggles:
• Rich and poor
• Workers and bosses
Keynesian Theory
• Challenged earlier approaches
• Influenced by the Great Depression
• Challenged the idea of leaving the economy alone.
• He supported government-funded job programs.
• Believed in deficit spending to boost the economy.
• Shifted from supply to demand in economics.
• He suggested government investment during economic downturns.
• Government intervention to manage economic problems.
• Spending in tough times and saving in good times.
• Declined in popularity with the rise of neoliberalism in the 1980s.
Neoclassical Economics:
• Criticized the Keynesian theory
• Privatization
• Emphasis on Market Mechanisms
• Monetary Policy
• Laissez-Faire Philosophy
• Trade Policy
• Supply-Side Economics
• Efficiency and Growth
• Deregulation
Criticisms of Neoclassical theory

• .Over simplifying assumptions

• Normative Bias

• Assumptions of Rationality

• Equilibrium Theory

• Incomplete Teaching
Why study political economy
• Political economy focuses on how power and resources are
distributed and contested in different contexts, and the
implications for development outcomes.
• It gets beneath the formal structures to reveal the underlying
interests, incentives and institutions that enable or frustrate
change. Such insights are important if we are to advance
challenging agendas around governance, economic growth and
service delivery
• Political economy analysis is central to the formulation of sound
country plans and sector programmes
• Political economy analysis can help to improve development
effectiveness by identifying how and where for instance donors
should focus efforts to promote positive change

11/16/2024 16
Why study political economy contd…

• Political economy analysis is particularly useful for development


practitioners since it helps us to understand what drives political
behaviour, how this shapes particular policies and programmes, who
are the main “winners” and “losers”, and what the implications are for
development strategies and programmes
• We study political economy for career reasons as political economists,
political economy analysts, researchers, academicians, leaders e.t.c.

11/16/2024 17
Why study political economy contd…
• It helps us with understanding of the interests and incentives
facing different groups in society (and particularly political
elites), and how these generate particular policy outcomes
that may encourage or hinder development.
• It also helps us understand the role that formal institutions
(e.g. rule of law, elections) and informal social, political and
cultural norms play in shaping human interaction and political
and economic competition.
• It further helps us understand the impact of values and ideas,
including political ideologies, religion and cultural beliefs, on
political behaviour and public policy.

11/16/2024 18
Why study political economy contd…
• Political economy analysis can also be used to better
understand the impact of various external drivers (e.g. trade,
corruption, climate change, the media) on domestic
governance and political processes. This includes recognizing
for instance the role that donors play as political actors, as well
as providers of aid
• political economy analysis can help to improve our
understanding of the political obstacles and opportunities for
growth
• Political economy analysis at the sector level can be
particularly useful in helping to explain why reforms in areas
such as education, health and roads have stalled; what
incentives and constraints influence politicians, civil servants
and other reformers in these sectors; and how donors might
engage to facilitate policy change.
11/16/2024 19

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