Political Economy

POLITICAL ECONOMY is concerned with the relationship between democratic governments and capitalism. Classical liberal economists, beginning in 1776 with the publication of Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, argued that government should leave the economic system alone and allow it to seek its own equilibrium.

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John Maynard Keynes (right) meets with Harry White of the U.S. Treasury at the inaugural International Monetary Fund meeting.

This theory, which became known as laissez-faire, was adopted in both Europe and America. The Industrial Revolution proved an ideal testing ground, and laissez-faire flourished in the United States until the 1930s when the Great Depression called for drastic economic measures.

John Maynard Keynes's publication of The General Theory of Money, Interest, and Employment ...