Lecture 1. Foundations of Political Economy
Why this Course?
- What we know about economics generally, from education
- Economics as a perspective is alone and inadequate
- Introduce a different and indispensable way of seeing
- Foundations of political economy are social (and political)
- Key concepts, explanatory approaches, skills
- Able to think about the economy in a fuller
In this course:
Economics in this course is not that it is a waste of time. On the contrary, the field of economics
provides important ideas and skills, and that it needs to be complemented by the other
perspective of this course that presents the economic and economic aspects of social life in a
different way.
Intended Learning Outcomes:
1. Differentiate notions of economy, economies, and economics
2. Summarize foundational assumptions of political economy
3. Explain key elements of economies (Answer spread out over document and below)
- Think of: ‘Economy’ not an abstraction but a central feature of life
- Political economy enhances our understandings
Outline
1. Questioning the notion of economy and study of economics
2. Exploring the nature and purpose of economies
3. Introducing foundations of political economy
Economics is:
> Ha Joon Chang:
- The discipline of economics presents itself to be able to provide “the answer to life, the
universe, and everything”
- “(A) subject that has spectacularly failed in what most non-economists think is its main
job, that is, explaining the economy”
- He wrote popular books such as ‘The Undercover Economist’, ‘The Logic of Life’,
‘Freakonomics’, ‘The Economic Naturalist’ (see Images below)
,Some Understandings of ‘Economic’ and Economics
- The study what’s ‘economic’/economical
- To study the economics of something is to explore the efficient use of resources
with alternate uses and trade-offs
- The study of rational choice
- Economics is associated with a specific theory of human behavior and human
motivations
- Such as the idea that human beings try to maximize their subject
preferences and that they are self-interested
- Another held assumption within economics is the idea that principles of
economics are universally applicable
- That is that humans can understand principles of economics (such as
people responding to incentives) across a whole range of various
‘economic’ and ‘non-economic’ issues
- The study of the economy
- But what is an economy?
- How does one define ‘the economy’?
1. What is Economy?
Economies and Economic Aspects of Social Life
An Economy is: A complex of the activities involving:
● Production (work) (involving factors of production: land, labor, capital)
● Distribution (circulation, allocation)
● Exchange and
● Consumption of:
Goods and services (example: stuff, things of use)
= Thus, an economy is a complex of human activities that involve production, distribution,
exchange, and consumption of goods and services.
What occurs in an Economy? / What is an Economy for?
● Material provision of subsistence needs (economy helps us to feed, clothe, house
ourselves)
● Creation of profit, wealth
● Production of goods, services
● Social betterment (economy helps to improve the livelihoods of the people)
Economies are Configurations of:
(Who and What is involved in Economics?)
, ● Actors: people, firms, organizations
● Institutions: the rules of the game, shaping the economy
● Organizational techniques: social relations, social organization (example: how are
businesses organized)
● Technologies and Innovations: what are the tools that are used to transform the
economy and social life
● Interests: who benefits? (who benefits from organizing an economy in a particular way?)
↓ These elements affect: ↓
- Production, accumulation of value
- Allocation, distribution of value
- Welfare, inequality outcomes
- Implications for environment
- Relation to politics
Different Forms of Economy and How they Vary
Forms of Economy:
- Hunter/Gatherer economies
- Communal economies
- Slaveholder economies
- Feudal economies
- Market economies or capitalist economies
- Socialist economies
Dimensions of Variation:
- Divisions of labor, ownership among groups
- Property rights: social relations, class relations
- Mechanisms of economic coordination
- Cooperation, competition
- Power relations (who rules?)
- Ultimate aims (creation of profit? the enslavement of people? promotion of social
justice? etc.)
- There are different ways of organizing economies (look at Forms of Economy),
which are characterized by distinctive features (look at Dimensions of
variations).
- In a slaveholder economy, the division of labor is among slaves and
slaveholders. There is a question about ownership and property rights.
- Mechanisms of economic coordination in a socialist economy, it was the
communist party who controlled the state-planning omission that
directed economic resources. / In a market economy, the idea is that the
market should play the primary leading role in the allocation of
resources, as well as the state/government.
- A communal economy tends to be more characterized by cooperation,
while a market economy would be more characterized by competition.
Bernstein’s Four Questions (for economies)
1. Who owns what?
- Look at the property rights, their origins, and attributes
, 2. Who does what?
- What is the division of labor, division of labor in society
3. Who gets what?
- What about the income/rent that is generated in an economy, who profits, who
loses, zero sum
4. What do they do with it?
- How is the consumption (redistribution)
Questions about Economies
- Where do (the different forms from) economies come from?
- Are some kinds of economies ‘natural’?
- What variety of economy is desired and why?
2. What is Political Economy?
The Value and Limitations of Economic Perspectives
- Neoclassical economics as the prevailing perspective of economics
- Has been enormously influential in shaping the way we think about economies and the
world
- It has useful insights, example: people respond to incentives
- Economics as a discipline also has flaws and limitations
- Such as the tendency for economics to provide a perspective that is unrealistic
because it is abstracted from politics and social context.
- Obsession with mythical representation of the market
- A key starting point from political economy that tries to get away from the
problematic assumptions of economics is reflected in the work of Ha-Joon
Chang and John Quiggin (see Images below) and is reflected in the
‘Fundamental assumption of inseparability’ (see below)
From Economics to Social-Political Economy
- Something wrong with economics, useful but deficient
- An alternative, more or less complementary perspective
- Attention to politics, power relations, social context
- Pluralist method, transdisciplinary approach
Political Economy versus the Disciplines
- Once upon a time, there was something called philosophy
- Thereafter it was called ‘political economy’
- Then the disciplinary revolution occurred (people started to study the world as it
corresponded to certain academic departments (example: ‘the dismal science’)
- Political economy offers different, essential insights
Why this Course?
- What we know about economics generally, from education
- Economics as a perspective is alone and inadequate
- Introduce a different and indispensable way of seeing
- Foundations of political economy are social (and political)
- Key concepts, explanatory approaches, skills
- Able to think about the economy in a fuller
In this course:
Economics in this course is not that it is a waste of time. On the contrary, the field of economics
provides important ideas and skills, and that it needs to be complemented by the other
perspective of this course that presents the economic and economic aspects of social life in a
different way.
Intended Learning Outcomes:
1. Differentiate notions of economy, economies, and economics
2. Summarize foundational assumptions of political economy
3. Explain key elements of economies (Answer spread out over document and below)
- Think of: ‘Economy’ not an abstraction but a central feature of life
- Political economy enhances our understandings
Outline
1. Questioning the notion of economy and study of economics
2. Exploring the nature and purpose of economies
3. Introducing foundations of political economy
Economics is:
> Ha Joon Chang:
- The discipline of economics presents itself to be able to provide “the answer to life, the
universe, and everything”
- “(A) subject that has spectacularly failed in what most non-economists think is its main
job, that is, explaining the economy”
- He wrote popular books such as ‘The Undercover Economist’, ‘The Logic of Life’,
‘Freakonomics’, ‘The Economic Naturalist’ (see Images below)
,Some Understandings of ‘Economic’ and Economics
- The study what’s ‘economic’/economical
- To study the economics of something is to explore the efficient use of resources
with alternate uses and trade-offs
- The study of rational choice
- Economics is associated with a specific theory of human behavior and human
motivations
- Such as the idea that human beings try to maximize their subject
preferences and that they are self-interested
- Another held assumption within economics is the idea that principles of
economics are universally applicable
- That is that humans can understand principles of economics (such as
people responding to incentives) across a whole range of various
‘economic’ and ‘non-economic’ issues
- The study of the economy
- But what is an economy?
- How does one define ‘the economy’?
1. What is Economy?
Economies and Economic Aspects of Social Life
An Economy is: A complex of the activities involving:
● Production (work) (involving factors of production: land, labor, capital)
● Distribution (circulation, allocation)
● Exchange and
● Consumption of:
Goods and services (example: stuff, things of use)
= Thus, an economy is a complex of human activities that involve production, distribution,
exchange, and consumption of goods and services.
What occurs in an Economy? / What is an Economy for?
● Material provision of subsistence needs (economy helps us to feed, clothe, house
ourselves)
● Creation of profit, wealth
● Production of goods, services
● Social betterment (economy helps to improve the livelihoods of the people)
Economies are Configurations of:
(Who and What is involved in Economics?)
, ● Actors: people, firms, organizations
● Institutions: the rules of the game, shaping the economy
● Organizational techniques: social relations, social organization (example: how are
businesses organized)
● Technologies and Innovations: what are the tools that are used to transform the
economy and social life
● Interests: who benefits? (who benefits from organizing an economy in a particular way?)
↓ These elements affect: ↓
- Production, accumulation of value
- Allocation, distribution of value
- Welfare, inequality outcomes
- Implications for environment
- Relation to politics
Different Forms of Economy and How they Vary
Forms of Economy:
- Hunter/Gatherer economies
- Communal economies
- Slaveholder economies
- Feudal economies
- Market economies or capitalist economies
- Socialist economies
Dimensions of Variation:
- Divisions of labor, ownership among groups
- Property rights: social relations, class relations
- Mechanisms of economic coordination
- Cooperation, competition
- Power relations (who rules?)
- Ultimate aims (creation of profit? the enslavement of people? promotion of social
justice? etc.)
- There are different ways of organizing economies (look at Forms of Economy),
which are characterized by distinctive features (look at Dimensions of
variations).
- In a slaveholder economy, the division of labor is among slaves and
slaveholders. There is a question about ownership and property rights.
- Mechanisms of economic coordination in a socialist economy, it was the
communist party who controlled the state-planning omission that
directed economic resources. / In a market economy, the idea is that the
market should play the primary leading role in the allocation of
resources, as well as the state/government.
- A communal economy tends to be more characterized by cooperation,
while a market economy would be more characterized by competition.
Bernstein’s Four Questions (for economies)
1. Who owns what?
- Look at the property rights, their origins, and attributes
, 2. Who does what?
- What is the division of labor, division of labor in society
3. Who gets what?
- What about the income/rent that is generated in an economy, who profits, who
loses, zero sum
4. What do they do with it?
- How is the consumption (redistribution)
Questions about Economies
- Where do (the different forms from) economies come from?
- Are some kinds of economies ‘natural’?
- What variety of economy is desired and why?
2. What is Political Economy?
The Value and Limitations of Economic Perspectives
- Neoclassical economics as the prevailing perspective of economics
- Has been enormously influential in shaping the way we think about economies and the
world
- It has useful insights, example: people respond to incentives
- Economics as a discipline also has flaws and limitations
- Such as the tendency for economics to provide a perspective that is unrealistic
because it is abstracted from politics and social context.
- Obsession with mythical representation of the market
- A key starting point from political economy that tries to get away from the
problematic assumptions of economics is reflected in the work of Ha-Joon
Chang and John Quiggin (see Images below) and is reflected in the
‘Fundamental assumption of inseparability’ (see below)
From Economics to Social-Political Economy
- Something wrong with economics, useful but deficient
- An alternative, more or less complementary perspective
- Attention to politics, power relations, social context
- Pluralist method, transdisciplinary approach
Political Economy versus the Disciplines
- Once upon a time, there was something called philosophy
- Thereafter it was called ‘political economy’
- Then the disciplinary revolution occurred (people started to study the world as it
corresponded to certain academic departments (example: ‘the dismal science’)
- Political economy offers different, essential insights
