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Political Economy Lecture Notes
Course Structure (cumulative)
Part I - The basic components of political economy
Part II - Developments in global capitalism
Part III - Real-world economics in times of crisis.
Sep. 7th - Lecture #1
The presence of fundamental normative assumptions within economics allows for the
construction of differing perspectives to analyze and study markets.
Corporations and firms no longer have localized dealings due to globalization and can choose
where to have their corporate offices based on their preferences (regulation, taxation…).
→ States, corporations, and other market actors collide based on opposing interests.
Politics underlie economic choices, highlighting preferences and normative assumptions.
Political economy studies:
1. Fundamental interconnection between states and markets.
2. Understands economic politics as a means for states to achieve their objectives.
3. Considers current and future political-economic relations and battles from a historic
perspective.
Main question → How to organize society for the best outcomes?
Political economy I - Classic thinkers on the state market
Studies that emerged ≈ 250 years ago focus on the social reality of society leading to
fundamental questions on human behavior (integrated within economics not yet a separate
discipline):
→ Given these patterns of behavior, how should society be organized to create wealth
and prosperity?
→ TWE should the socio-economic order be determined coordination by markets or
states?
, 2
Political economy II - Political science of economic policy fields/domains
Governance of economic institutions, political decision-making, and regulation of economic
policies.
Eg. pension, climate change, migration…
Political economy III - Political phenomena considered from an economics perspective
Economics:
- The way society is organized to provide for its needs (oikos = family, large estate or
village + nomos = law).
- Branch of knowledge concerned with the production, consumption, and transfer of
wealth.
- Branch of the science of a statesman or legislator with the objective of providing a
plentiful revenue or subsistence for the people (Adam Smith).
- Combining the assumptions of maximizing behavior, stable preferences, and market
equilibrium is used relentlessly and unflinchingly (Gary Becker).
Economics is a domain and a perspective and approach to study social interaction (eg.
demand/supply, competition, rational behavior…).
* Studies interaction between actors
Market actors in competition for people’s votes. Voter as the consumer. Trade negotiations as
a tool for optimizing outcomes based on actor’s preferences.
Political economy IV - Markets and business considered from a political science perspective
Reinterpretation of markets and their actors (corporate conduct) within the domain of the
discipline of politics → eg. corporate governance, lobbying practices influence law-making
and policies.
(mostly) Private regulation determines what wealth is.
Project of European unification closely tied to business interests. Large corporations utilize
resources to shape new ideas and policies.
Offshore financial centers / Tax havens
Low taxation, lenient regulation & secrecy.
Tax avoidance vs tax optimization.
, 3
Firms use complex ownership structures.
Countries/jurisdictions facilitate corporations → competition on tax rates.
Sep. 8th - Lecture #2, Capitalism & Classical thinkers in Political Economy
Capitalism → a concept that describes the dominant political-economic activities and
relations in a social scientific manner (since 1700s post-feudal transformation in Great
Britain).
*model of an ideal type*
Minimal features of capitalism:
• Private property
• labor market (commodification)
• capital market (created by utilizing surplus)
• land market
• goods and services
• rules and regulations (governance institutions) for the protection of property rights through
contracts • focus on growth and expansion.
Historic vs ideal type
Slavery, serfdom, and no wages.
Feudalism, position based on social background which determines economic function rather
than the labor market (social stratification).
+ Contemporary examples of non-capitalist economic systems:
Isolated communities based on subsistence organizations.
Centrally planned economies.
4 Debates on capitalism
1. What is capitalism?
Consensus - markets & institutions that facilitate them and focus on growth & expansion.
Contested elements - need for shared norms and values, ideology and politics in public
institutions of economic governance.
, 4
2. Capitalism or capitalisms?
• Historically - merchant capitalism (trade focus), industrial capitalism (industry focus),
financial capitalism.
• Geographically / cultural - western Europe vs North America vs Asia…
• Different institutional setups, goals, strategies- liberal market (individual) vs coordinated
market economies (top-down).
→ Does globalization mean a convergence to one dominant variety of capitalism?
3. Capitalism - love or hate it?
The general increase in standards of living globally, increase in productivity through
specialization…
BUT it creates sustainability problems, inequality of economic outcomes, exploitation of
workers.
+ Political debate about the degree of accumulation of capital should be allowed.
4. What will capitalism bring for the future?
Classical political economy
Emerged in 1700s as a branch of knowledge along with the market economy itself during the
dominance of the organizing principle of mercantilism:
- Stimulate export to gain wealth w/ unequal or unfavorable trade (eg. East indies,
Baltic trade…)
- Promote government regulation of a nation’s economy with high tariffs
(protectionism) and state-sponsored businesses or monopolies.
*key elements of capitalism- free trade (no tariffs) & division of labor through coordination
of market forces with some protections.
Adam Smtih, 1723-1790
From Scotland, studied in Edinbrugh and Oxford. Wrote Wealth of Nations in London.
→ Proponent of free trade and division of labor.
→ Believed individual personal interests contribute to the collective good.
→ Criticaster of the power of big business and pessimistic on the moral consequences of
markets.
Political Economy Lecture Notes
Course Structure (cumulative)
Part I - The basic components of political economy
Part II - Developments in global capitalism
Part III - Real-world economics in times of crisis.
Sep. 7th - Lecture #1
The presence of fundamental normative assumptions within economics allows for the
construction of differing perspectives to analyze and study markets.
Corporations and firms no longer have localized dealings due to globalization and can choose
where to have their corporate offices based on their preferences (regulation, taxation…).
→ States, corporations, and other market actors collide based on opposing interests.
Politics underlie economic choices, highlighting preferences and normative assumptions.
Political economy studies:
1. Fundamental interconnection between states and markets.
2. Understands economic politics as a means for states to achieve their objectives.
3. Considers current and future political-economic relations and battles from a historic
perspective.
Main question → How to organize society for the best outcomes?
Political economy I - Classic thinkers on the state market
Studies that emerged ≈ 250 years ago focus on the social reality of society leading to
fundamental questions on human behavior (integrated within economics not yet a separate
discipline):
→ Given these patterns of behavior, how should society be organized to create wealth
and prosperity?
→ TWE should the socio-economic order be determined coordination by markets or
states?
, 2
Political economy II - Political science of economic policy fields/domains
Governance of economic institutions, political decision-making, and regulation of economic
policies.
Eg. pension, climate change, migration…
Political economy III - Political phenomena considered from an economics perspective
Economics:
- The way society is organized to provide for its needs (oikos = family, large estate or
village + nomos = law).
- Branch of knowledge concerned with the production, consumption, and transfer of
wealth.
- Branch of the science of a statesman or legislator with the objective of providing a
plentiful revenue or subsistence for the people (Adam Smith).
- Combining the assumptions of maximizing behavior, stable preferences, and market
equilibrium is used relentlessly and unflinchingly (Gary Becker).
Economics is a domain and a perspective and approach to study social interaction (eg.
demand/supply, competition, rational behavior…).
* Studies interaction between actors
Market actors in competition for people’s votes. Voter as the consumer. Trade negotiations as
a tool for optimizing outcomes based on actor’s preferences.
Political economy IV - Markets and business considered from a political science perspective
Reinterpretation of markets and their actors (corporate conduct) within the domain of the
discipline of politics → eg. corporate governance, lobbying practices influence law-making
and policies.
(mostly) Private regulation determines what wealth is.
Project of European unification closely tied to business interests. Large corporations utilize
resources to shape new ideas and policies.
Offshore financial centers / Tax havens
Low taxation, lenient regulation & secrecy.
Tax avoidance vs tax optimization.
, 3
Firms use complex ownership structures.
Countries/jurisdictions facilitate corporations → competition on tax rates.
Sep. 8th - Lecture #2, Capitalism & Classical thinkers in Political Economy
Capitalism → a concept that describes the dominant political-economic activities and
relations in a social scientific manner (since 1700s post-feudal transformation in Great
Britain).
*model of an ideal type*
Minimal features of capitalism:
• Private property
• labor market (commodification)
• capital market (created by utilizing surplus)
• land market
• goods and services
• rules and regulations (governance institutions) for the protection of property rights through
contracts • focus on growth and expansion.
Historic vs ideal type
Slavery, serfdom, and no wages.
Feudalism, position based on social background which determines economic function rather
than the labor market (social stratification).
+ Contemporary examples of non-capitalist economic systems:
Isolated communities based on subsistence organizations.
Centrally planned economies.
4 Debates on capitalism
1. What is capitalism?
Consensus - markets & institutions that facilitate them and focus on growth & expansion.
Contested elements - need for shared norms and values, ideology and politics in public
institutions of economic governance.
, 4
2. Capitalism or capitalisms?
• Historically - merchant capitalism (trade focus), industrial capitalism (industry focus),
financial capitalism.
• Geographically / cultural - western Europe vs North America vs Asia…
• Different institutional setups, goals, strategies- liberal market (individual) vs coordinated
market economies (top-down).
→ Does globalization mean a convergence to one dominant variety of capitalism?
3. Capitalism - love or hate it?
The general increase in standards of living globally, increase in productivity through
specialization…
BUT it creates sustainability problems, inequality of economic outcomes, exploitation of
workers.
+ Political debate about the degree of accumulation of capital should be allowed.
4. What will capitalism bring for the future?
Classical political economy
Emerged in 1700s as a branch of knowledge along with the market economy itself during the
dominance of the organizing principle of mercantilism:
- Stimulate export to gain wealth w/ unequal or unfavorable trade (eg. East indies,
Baltic trade…)
- Promote government regulation of a nation’s economy with high tariffs
(protectionism) and state-sponsored businesses or monopolies.
*key elements of capitalism- free trade (no tariffs) & division of labor through coordination
of market forces with some protections.
Adam Smtih, 1723-1790
From Scotland, studied in Edinbrugh and Oxford. Wrote Wealth of Nations in London.
→ Proponent of free trade and division of labor.
→ Believed individual personal interests contribute to the collective good.
→ Criticaster of the power of big business and pessimistic on the moral consequences of
markets.
