Principles of Political Economy

The various principles of Political Economy is nowadays considered an important tool for understanding the basic issues concerning ‘International Relations’. It is a sophisticated version of Political Science, which takes into account all types of relations between countries, on the political sphere. For all practical purposes, political economy principles are greatly intertwined with those of ‘Social Philosophy’.[br]

The various principles of Political Economy is nowadays considered an important tool for understanding the basic issues concerning ‘International Relations’. It is a sophisticated version of Political Science, which takes into account all types of relations between countries, on the political sphere. For all practical purposes, political economy principles are greatly intertwined with those of ‘Social Philosophy’.[br]

Political economy can be defined as an interdisciplinary branch of study that combines branches of economics, politics and law to understand how political institutions, its environment and capitalism influence each other. It is generally understood to be a study of the economic and political relations among the different countries using economics, politics and different other related branches of study.

The term “political economy” was initially used to mean the study of production, the acts of buying and selling and their relationships to customs, law and the government. Later on, it got changed to mean the study of the economies of polities or ‘ nation states’ as they were referred to, then. Subsequently, in the 19th century, it replaced the term “economics” which had by this time deviated from its origin of being a study of political and economic relations between nation states. Political Economy in its new form became an axiomatic and mathematical study of the economy as a whole.[br]

The principles of political economy underwent massive changes during the days of John Locke, Adam Smith and Karl Marx who adhered to the concept of the “Labor Theory of Value” . They viewed labor as the source of wealth as distinct from the concept of the Physiocrats, to whom agriculture was the one and only source of wealth. The concept of rent, capital and profit from agricultural products now changed and was linked to improved technologies and increase in the productivity of labour. Some of the well versed treatises and discourses on the principles of “Political Economy” which have been popular among general readers and world legislators include:

• Adam Smith- An Inquiry into Nature and Causes of the Wealth of Nations (1776)

• David Ricardo-On the Principles of Political Economy and Taxation (1817)

• John Stuart Mill- Principles of Political Economy with some of their Applications to Social Philosophy (1848)

The book “On the Principles of Political Economy and Taxation” by David Ricardo is perhaps the most conclusive work relevant to the doctrine of modern political economics, since it effectively deals with the concepts of free trade and comparative advantage. Ricardo was of the view that rent derived from land grows with the increase in population. Within the sphere of political science, political economy covers modern, liberal and realist Marxist theories with “institutionalist” and “constructivist” approaches to political science.

The present version of the subject of political economy is International Political Economy or IPE which deals with topics related to international trade and finance, state policies such as monetary and fiscal policy affecting international trade between two countries. Theories of Rational Choice and Game Theory are also used to understand international policy issues which are sometimes difficult to comprehend using standard economic techniques.

The scope of the principles of political economy or of understanding the economic and political relations between nation states or different countries is getting wider by the day. Besides conforming to the rules of international trade set forth by international organizations such as the GATT (General Agreement on Tariffs and Trade) which is now the World Trade Organization or WTO, burning international issues such as immigration and environmental degradation can be tackled jointly by different nations. The world is getting smaller and more interconnected with the march of globalization, and unless global issues such as climate change and global warming are handled efficiently by applying the principles of political economy, human civilization may soon disappear from the face of this wonderful world.