Political Economy

Political economy is the study of how societies and communities within them provision themselves. Its terrain is the set of different arrangements that societies and communities use for material production and sustenance. It shares concern with economics for how production and consumption are carried out, but political economy generally calls greater attention to how goods and services are distributed.

The term political economy was used synonymously with economics in the nineteenth century and early in the twentieth century. Today, it denotes a broader and often more historical approach to much of the same subject matter considered by economics. Because political economy considers how a society (or a community within it) produces, distributes, and makes use of its products and also its systems for production, it often examines the positions and roles of subordinate social groups defined by attributes such as class, race, gender, and national origin. It asks who owns and controls the businesses, who gets to buy the products, who pays the taxes, and who gets the subsidies. In contrast, economics focuses on individual households and firms, consumers and producers, and aggregations of them. Where economists often create theory with the abstract assumption that markets operate independently of public regulation or even of any coordinating activity by the state, political economists place collective action at the center of their analysis, examining the interests and actions of informal groups, formal associations of various kinds, and governments. Economists typically construct models in which firms and households move freely through unconstrained markets, so as to examine their behavior in an ideal market structure. The models are generally highly formalized and make use of complex mathematics. Political economists typically construct less formal models that may be more complex but require less quantitative manipulation.

A community's economic activities are embedded differently in regional, national, and global economic systems. Few communities are isolated economic units; their members are usually linked to other producers and consumers through processes of governance, trade in goods and services, and shared consumption of public goods. In today's world, most communities function within some version of a capitalist economic system. This context places emphasis on wage labor, private ownership of the means of production, and the use of markets for allocation and distribution of investment funds and consumer goods, but it also allows tremendous variation globally in how communities fulfill their members' material needs. Although as late as the mid-1970s most political economists examined alternatives to capitalism, today many are concerned with alternatives within capitalism, examining in particular the contrasts between the neoliberal, market-oriented arrangements most often advocated by political conservatives and the interventionist, redistributive social democracy advocated by political liberals or those further on the left.