Theories of Political Economy

Catalog description

Theories of political economy studies the intersection of the state (politics) and markets (economy) to explain policy outcomes (student loans, sin taxes, agricultural subsidies, trade rules, etc.) as well overall economic development of nations. Economists assume a world of rational individuals pursuing their self-interest through markets - i.e., Adam Smith's "invisible hand" - while political scientists assume a world of rational actors seeking to maximize their political power. Combined, political economy presents a world in which political actors are influenced, guided and constrained by markets, budget constraints, and resource scarcity while economic markets reflect political power relationships surrounding property rights, contract enforcement, regulations, and tax rules. Drawing the line between state/public and market/private is a political process yet one with clear economic consequences. Take the example of healthcare. Two possibilities exist - private (market-based) or public (state-based) - and the choice boils down to a political process (i.e., executive, legislative and judicial branches plus interest groups) occurring in a context influenced by market constraints (i.e., costs, budget constraints, scarcity, taxes, and insurance).