Political Economy: Classical and Modern Perspectives

This essay provides a comprehensive overview of political economy, examining its historical development, core concepts, and contemporary relevance. It begins by defining political economy and its relationship to economics, law, and government. The essay then delves into the two main sections: classical and modern political economy, highlighting the contributions of key figures like Adam Smith and John Maynard Keynes. It explores how different economic theories, such as capitalism, socialism, and communism, function in practice and how they influence the distribution of resources. Furthermore, the essay discusses the role of political economy in shaping economic policies, including fiscal and monetary policies, and addresses the challenges of unemployment and economic recession. The essay concludes by emphasizing the interdisciplinary nature of political economy and its importance in understanding the complex interplay between political organizations, economic systems, and international relations, supported by references to academic sources.

Running head: POLITICS AND POLCY FRAMEWORK
POLTICS AND POLICY FRAMWORKS
Name of the Student
Name of the University
Author Note

1POLITICS AND POLICY FRAMEWORK
Question 19
Political economy is a type of study for production as well as trade. It has some relation
to the law, custom, and government. It is entirely related to the distribution of the national
income as well as wealth. It is initiated with the help of some moral philosophy. In the eighteenth
century, it is used to explore the administrative states. The study of this subject helps to know
how some of the economic theories such as capitalism, socialism and communism work in real
life. Any adopted economic theory is directed to the distribution of the final amount of the
available resources in such a manner that it is beneficial for a large number of individual persons.
It is a very common term that is currently used in the subject called Economics. Various groups
in the economy believe in their own theory on how an economy should be developed. The
political economy is a very complicated area that covers a wide range of political interests. It
helps the economists to provide some suggestion regarding the general economic policies or
some predefined proposals created by many politicians of a country. There are two main sections
of the political economy1. These are classical political economy and modern political economy.
Classical political economy is totally based on the works of the philosophers such as Adam
Smith, Karl Marx and many others. Modern Political Economy was totally based on the works
performed by the modern philosophers2. The study of the political economy is totally related to
the game theory because it includes various groups competing for achieving some finite
resources. It also relates with the capability of the economy for achieving the required outcome.
1 Andong, Sandrine, and Symphorien Ongolo. "From global forest governance to domestic politics: The European
forest policy reforms in Cameroon." Forest Policy and Economics 111 (2020): 102036.
2 Bache, Ian. Evidence, Policy and Wellbeing. Palgrave Macmillan, 2020.

2POLITICS AND POLICY FRAMEWORK
Political economy is totally related to the three factors. These are- Interdisciplinary study, New
Political economy, and international political economy. From an interdisciplinary point of view,
the political economy is focused on sociology, economics, and political science3. It is used to
identify how political organisations, affect the environments and economic systems. It includes
some economic models of the political procedures, international political economy and resource
allocation in various economic systems. The new area of economics is related to the economic
policies that must be further described. Global political economy performs analysis regarding the
relationship between economics as well as international relations4. It uses ideas for sociology,
economics, and political science.
Adam Smith’s approach for the political economy is based on the principle of “Laise
Faire”. It highlights that the state should not implement any kind of restriction on the freedom of
the person. His theory of economics is based on the pillars of the savings, segregation between
the labours and a large extent towards the market. He also provided the Natural Law in political
economics. In this particular case, he adopted the philosophy for free as well as for independent
action. If every member is not able to pursue his economic activity then he will enhance the
outcome for the best of his ability. It helps to enhance the wealth of the society. John Maynard
Keynes provided two different approaches: monetary policy and fiscal policy. In the case of
fiscal policy, he highlighted that government expenditure and lower tax rates for stimulating the
demand. He also mentioned that it helped to pull the economy from the state of depression.
3 Dadgar, Yadollah. "Economics and Politics: editorial note." International Journal of Economics and Politics 1, no.
1 (2020): 1-9.
4 Maags, Christina. "Long‐Term Care Insurance Adoption in East Asia: Politics, Ideas, and Institutions." Politics &
Policy (2020).

3POLITICS AND POLICY FRAMEWORK
Adam Smith, in his book, “The Wealth of Nations”, explained regarding the free markets,
gross domestic products, and assembly line production methods5. These are treated as the basic
theory of economics. John Meynard Keynes highlighted various reasons regarding
unemployment. In his book named “The General Theory of Employment, Interest, and Money”,
Keynes became highlighted as the strategies for full employment as well as government
intervention. He thought that these were the only way to prevent an economic recession.
The most appropriate role in the economy is the strategy for providing solutions for
unemployment. In “The General Theory of Employment, Interest, and Money”, John Meynard
Keynes highlighted a solution for economic recession with the help of the policies stipulated by
the government for full employment6. In this book, he suggested that a decrease in the wage rates
would not affect unemployment. He also highlighted that the approach to decrease the rate of
unemployment was by increasing government spending on that particular purpose. Many
governments are looking for ways to enhance funding regarding the reduction of unemployment.
Many governments have accepted the view of John Meynard Keynes.
5 Potterton, Amanda U., D. Brent Edwards Jr, Ee-Seul Yoon, and Jeanne M. Powers. "Sociological contributions to
school choice policy and politics around the globe: Introduction to the 2020 PEA Yearbook." Educational Policy 34,
no. 1 (2020): 3-20.
6 Stratford, Robert, and Arjen E. Wals. "In search of healthy policy ecologies for education in relation to
sustainability: Beyond evidence-based policy and post-truth politics." Policy Futures in Education (2020):
1478210320906656.

4POLITICS AND POLICY FRAMEWORK
References
Andong, Sandrine, and Symphorien Ongolo. "From global forest governance to domestic
politics: The European forest policy reforms in Cameroon." Forest Policy and Economics 111
(2020): 102036.
Bache, Ian. Evidence, Policy and Wellbeing. Palgrave Macmillan, 2020.
Dadgar, Yadollah. "Economics and Politics: editorial note." International Journal of Economics
and Politics 1, no. 1 (2020): 1-9.
Maags, Christina. "Long‐Term Care Insurance Adoption in East Asia: Politics, Ideas, and
Institutions." Politics & Policy (2020).
Potterton, Amanda U., D. Brent Edwards Jr, Ee-Seul Yoon, and Jeanne M. Powers. "Sociological
contributions to school choice policy and politics around the globe: Introduction to the 2020 PEA
Yearbook." Educational Policy 34, no. 1 (2020): 3-20.
Stratford, Robert, and Arjen E. Wals. "In search of healthy policy ecologies for education in
relation to sustainability: Beyond evidence-based policy and post-truth politics." Policy Futures
in Education (2020): 1478210320906656.