Political economy
Political economy is an interdisciplinary field that explores the interplay between economics and political science. It argues that understanding societal dynamics requires examining how these two disciplines influence each other. This field encompasses various economic systems, including market, command, and mixed economies. In market economies, prices are determined by supply and demand, while command economies rely on centralized government control to set economic goals and manage resources. Mixed economies attempt to combine elements of both systems, balancing government regulation with market freedom to promote efficiency and address weaknesses.
Political economy also considers the role of government in shaping economic outcomes, with governments affecting markets through regulation and control over significant resources. Additionally, the study addresses how international relations are influenced by economic factors, as seen in historical examples like the oil embargo by OPEC during the 1970s. By integrating these perspectives, political economy provides a comprehensive framework for analyzing the complex interactions between government actions and economic performance on both domestic and global scales.
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Political economy
Political economy is the study of economics in tandem with the study of political science. When viewed separately, each offers a limited perspective on society. However, when studied together, experts get a more complete worldview. Different types of economies interact with styles of government in unique ways, each having a different domestic and international impact.
Market economies are regulated by governments. While they often result in more accurate pricing and higher productivity, they are difficult for a government to control. Command economies are completely controlled by the government. This allows the government to set mandatory economic goals and use whatever resources are necessary to meet them. However, this often results in a less efficient, less adaptable economy than a market economy. Mixed economies take elements from both market economies and command economies, and involve nations in which the government controls part of the economy.
Background
Political economics combines the study of economics and political science. Economics refers to the study of economies. An economy is an organized system of activity consisting of consumption, production, exchange, and distribution. Together, this system decides how finite resources will be divided among a population. Consumption refers to the purchasing and usage of goods. Production refers to the creation of goods. Exchange refers to the trading of goods. Finally, distribution refers to how those goods are divided.
Many types of economies are used by different nations around the world. The market economy is one of the most common types of economies. In a market economy, the law of supply and demand governs the pricing of goods. According to the law of supply and demand, if supply is higher than demand, prices fall. However, if demand is higher than supply, prices rise. Supply refers to any good worth trading. This could be natural resources, services, labor, or other forms of capital. Demand refers to the desire of consumers, governments, and businesses.
Market economies often evolve out of traditional economies. Traditional economies are guided by tradition, history, and customs. They depend on fishing, hunting, gathering, or agriculture. Traditional economies are most common in developing nations and can be found throughout Africa, the Middle East, and Asia.
Command economies involve a central government that makes all important economic decisions. They do not follow the laws of supply and demand to set prices and ignore any historic traditions that would regulate a traditional economy. Command economies are most common in countries with extremely powerful governments, such as Russia, North Korea, and Iran.
Overview
Political economy is the study of how the fields of economics and political science influence each other. Up until the 1970s, political scientists and economists studied their fields exclusively. However, many modern students of political economy argue that the study of either field independently is inherently incomplete, and that an informed geopolitical worldview can only be obtained by the combined study of political science and economics.
Political science refers to the study of politics. Politics is the system for governing interpersonal relationships on every societal level. Many forms of political government have existed throughout history. Each can be defined by the three fundamental aspects of politics: power, problem solving, and legitimacy.
Power can be split into four categories: domination, coercion, manipulation, and creative power. Domination refers to a government's ability to force its will onto individuals. In most cases, this refers to military and police forces. Coercion refers to the ability to impose its will through nonviolent means. This often involves measuring a nation's economic power. Manipulation refers to a government's ability to get its way without imposing its will. This often involves the nation's media. Finally, creative power refers to artistic or intellectual power.
Problem solving is a way to measure a government's adaptability. It refers to how the government, as well as individuals within the government, handle challenges and dilemmas. Legitimacy refers to measuring a government by whether or not it falls within the values of its people.
In market economies, the government is often the sole body capable of creating and enforcing regulations for the market. In this manner, the government's choices will have a strong impact on the economy. Too much regulation can stifle a market economy. However, too little regulation leads to excessive unethical behavior, which can be harmful to consumers.
In command economies, the government owns a significant portion of major businesses, banks, and natural resources. This gives the government an immense amount of control over the economy. Additionally, the success or failure of the economy in a command economy has an extreme impact on the government.
Governments in command economies often institute central economic plans. These plans set a deadline for certain societal goals and enact government policies throughout the economy in order to achieve those goals. The government then allocates and distributes all resources necessary for the plan.
Some societies choose to implement a mixed economy. Mixed economies include features from market economies, traditional economies, and command economies. This is most commonly instituted by the government controlling some of the nation's businesses while allowing the market to control others. However, in other cases, it involves the government funding traditional pursuits, such as hunting and fishing. When working well, mixed economies can be some of the most efficient economies. The government can ensure that weak parts of the economy are given aid, while strong parts are allowed to flourish on their own merit. However, if implemented badly, mixed economies can cause major economic crashes.
After the rise of the Organization of the Petroleum Exporting Countries (OPEC), an alliance of oil-producing nations in the Middle East, even experts in international relations began to study political economy. It became increasingly apparent that international politics and economics were inseparably tied together. World governments needed to carefully consider their actions in light of economic and military consequences. An oil embargo imposed by OPEC in the 1970s showed the world that nations without a powerful military presence could still strike at other nations, enforcing their will through the world economy.
Bibliography
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