THEORIES OF POLITICAL ECONOMY

Ivan James F. Tuazon

Joshua Joaquin
BSC 2F
POLITICAL ECONOMY
Political economy, branch of social science that
studies the relationships between individuals and
society and between markets and the state, using a
diverse set of tools and methods drawn largely from
economics, political science, and sociology.
The term political economy is
derived from the Greek polis,
meaning “city” or “state,”
and oikonomos,
Economics and Political Economy

The relationship between political economy and the

contemporary discipline of economics is particularly
interesting, in part because both disciplines claim to be the
descendants of the ideas of Smith, Hume, and John Stuart
Mill. Whereas political economy, which was rooted in moral
philosophy, was from the beginning very much a normative
field of study, economics sought to become objective and
value-free.
Indeed, under the influence of Marshall, economists endeavoured
to make their discipline like the 17th-century physics of Sir Isaac
Newton (1642–1727): formal, precise, and elegant and the
foundation of a broader intellectual enterprise. With the
publication in 1947 of Foundations of Economic Analysis by
Paul Samuelson, who brought complex mathematical tools to the
study of economics, the bifurcation of political economy and
economics was complete. Mainstream political economy had
evolved into economic science, leaving its broader concerns far
behind.
International Political Economy
International political economy studies problems that arise from
or are affected by the interaction of international politics,
international economics, and different social systems (e.g.,
capitalism and socialism) and societal groups (e.g., farmers at
the local level, different ethnic groups in a country, immigrants
in a region such as the European Union, and the poor who exist
transnationally in all countries).
◦ It explores a set of related questions (“problematique”) that
arise from issues such as international trade, international
finance, relations between wealthier and poorer countries, the
role of multinational corporations, and the problems of
hegemony (the dominance, either physical or cultural, of one
country over part or all of the world), along with the
consequences of economic globalization
◦ International economics is concerned with the effects upon
economic activity from international differences in
productive resources and consumer preferences and the
international institutions that affect them. It seeks to
explain the patterns and consequences of transactions and
interactions between the inhabitants of different countries,
including trade, investment and transaction
National Economy
◦ The national economy includes financial resources
and management. It encompasses the value of all
goods and services manufactured within a nation.
TYPES OF POLITICAL
ECONOMY
Socialist Economics Theory
◦ Socialist economics comprises the economic theories, practices and norms of hypothetical and existing
socialist economic systems.[1] A socialist economic system is characterized by social ownership and
operation of the means of production[2][3][4][5][6][7] that may take the form of autonomous
cooperatives or direct public ownership wherein production is carried out directly for use rather than for
profit.[8][9][10][11] Socialist systems that utilize markets for allocating capital goods and factors of
production among economic units are designated market socialism. When planning is utilized, the
economic system is designated as a socialist planned economy. Non-market forms of socialism usually
include a system of accounting based on calculation-in-kind to value resources and goods
Market Socialism
◦ is a type of economic system involving the public, cooperative, or social ownership of the 
means of production in the framework of a market economy, or one that contains a mix of worker-
owned, nationalized, and privately owned enterprises. [1] Market socialism differs from non-market 
socialism in that the market mechanism is utilized for the allocation of capital goods and the means of
production.[2][3][4] Depending on the specific model of market socialism, profits generated by socially
owned firms (i.e., net revenue not reinvested into expanding the firm) may variously be used to directly
remunerate employees, accrue to society at large as the source of public finance, or be distributed
amongst the population in a social dividend.
Mixed Economy
 is variously defined as an economic system blending elements of a market economy with elements of a 
planned economy, markets with state interventionism, or private enterprise with public enterprise.
 Common to all mixed economies is a combination of free-market principles and principles of socialism. [5]
 While there is no single definition of a mixed economy, one definition is about a mixture of markets with
state interventionism, referring specifically to a capitalist market economy with strong regulatory oversight
and extensive interventions into markets.
Free Market
◦ In economics, a free market is a system in which the prices for goods and services are self-regulated by
buyers and sellers negotiating in an open market. In a free market, the laws and forces of 
supply and demand are free from any intervention by a government or other authority, and from all forms
of economic privilege, monopolies and artificial scarcities.
Laissez-faire
◦  is an economic system in which transactions between private groups of people are free or almost free
from any form of economic interventionism such as regulation and subsidies. As a system of
thought, laissez-faire rests on the following axioms: "the individual is the basic unit in society, i.e. the
standard of measurement in social calculus; the individual has a natural right to freedom; and the
physical order of nature is a harmonious and self-regulating system.
Welfare capitalism
◦ is most often associated with the models of capitalism found in Central Mainland and Northern Europe,
such as the Nordic model, social market economy and Rhine capitalism. In some cases welfare
capitalism exists within a mixed economy, but welfare states can and do exist independently of policies
common to mixed economies such as state interventionism and extensive regulation.
Economic Democracy
◦  is a socioeconomic philosophy that proposes to shift decision-making power from corporate managers
 and corporate shareholders to a larger group of public stakeholders that includes workers, customers,
suppliers, neighbours and the broader public. No single definition or approach encompasses economic
democracy, but most proponents claim that modern property relations externalize costs, subordinate the
general well-being to private profit and deny the polity a democratic voice in economic policy decisions.
[1]
 In addition to these moral concerns, economic democracy makes practical claims, such as that it can
compensate for capitalism's inherent effective demand gap
Capitalism vs. Socialism

◦ The terms capitalism and socialism are both used to describe economic and political systems. On a
theoretical level, both of these terms also describe specific schools of economic thought. One of the most
fundamental differences between the systems of capitalism and socialism lies in the scope of government
intervention within an economy.

◦ The capitalist economic model relies on free market conditions for the creation of wealth. The production
of goods and services is based on supply and demand in the general market. This economic structure is
referred to as a market economy.

◦ In a socialist economic model, the production of goods and services is either partially or fully regulated
by the government. This is referred to as central planning, and the economic structure that is created is
known as a planned economy or a command economy.
Thank you for taking time on our
presentation