# Political Economy

Political Economists are concerned with the allocation of scarce resources in a world of infinite wants and needs. To allocate these resources, politics are used within a state to provide for the people. Political economy is the study of the relationships between individuals and society, and more specifically, the relationships between citizens and states.
Political economy is a study of philosophy and ideology that studies the evolution of political and economic ideas. Political economy is a mixture of politics, economics, sociology, philosophy, and history, which all bring together evidence to the study of how humans exist within societies. Political economists study political ideology, economic structure, human interaction, human nature, and theories in philosophical thought. It is a study that studies not only the mechanics of a particular structure, but also the reasoning behind why various people with different beliefs consider a particular structure best.
The study of political economics can be split into two different sections, one which is Classical Political Economy and the other which is Modern Political Economy. The classical branch studies range from the conservative philosophers such as Machiavelli to liberals such as Adam Smith to the critiquers of liberalism such as Marx. The modern branch studies range from social liberals such as Keynes to modern political economists whose works deal with a multitude of issues including foreign trade and globalization.

## Table of Contents

    Chapters:
      * Political Economy/General
      * Political Economy/Classical Political Economy
      * Political Economy/Modern Political Economy
* Note: The structure of the topics covered in this book is inspired by the lectures of Alan Karras and Dariush Zahedi, both professors at University of California, Berkeley.

## How To Use This Book

The book is split into three sections; General, Classical Political Economy, and Modern Political Economy. The General chapter covers both classical and modern political economics and is a general reference guide for those who want a brief overview of the study of political economics. The two other chapters go into more detail of the material covered in the General chapter. They focus on pre-Enlightenment philosophy to Marx, and Keynes onward, respectively. Make sure you understand the three general ideologies of political economics before studying further. Always review the theories on this page to better understand the arguments of each one. It can be cumbersome to study many detailed arguments and facts without a short, coherent summary of the most important points. Therefore, learn the fundamental basics of the three theories of political economy first, and then try to understand how the theorists try to justify these views by assumptions, arguments, or facts.
There may be some terms that you are unfamiliar with. In that case, go to Wikipedia and learn the terms first, because this book uses them in a technical manner. You might have a casual understanding of some of the terms, but it is important that you study them carefully so you can differentiate between subtle arguments.
Right under many section headings are links to articles in Wikipedia. You are expected to study the article along with the section that follows. This will help you study better because the sections are written with the assumption that you have understood to some degree the facts in Wikipedia. The sections are generally arguments of theorists and you need background information from Wikipedia so you can understand the facts and assumptions in the rationalizations of these theories. In other words, the study of political economy requires basic knowledge of world history. The links take you to the short articles of the history topic in question which give you context to understand the origins of different theories of political economy.
Those of you who have a fair understanding of the three main political economic ideologies may strengthen your knowledge by contributing to the book. Do not hesitate to contact other editors to help you, and if you like, you can add the theories of various philosophers that are not currently covered in the book. One way of making sure you understand the material is by being able to explain it coherently to those who have not studied the material before.
Try to learn something from this book, and if nothing else, have fun reading it.

## Theory

Modern political economists categorize theories under three general ideologies:
* Liberalism: Wealth comes from ingenuity, labor and exchange. It is the result of the use of land and other natural resources, along with capital in the form of durable goods and labor.
** Everyone can benefit from economics. Economics is not a zero sum game, but one that continually progresses with rising standards.
** Individuals are unimportant, but the good of the community at large is the criterion for decision-making.
** Individuals are generally virtuous even when given a fair amount of political and economic liberties.
** Everyone can win, when the conditions are fair and favorable.
** The accumulation of private property is good for society.
** Equality of opportunity is important, inequality of possessions is less so.
** The state supports the structure of civil society.
** Therefore, the state should let individuals have freedom with the licence of not causing harm to others.
* Marxism: Wealth comes from manual labor and exchange, not ingenuity and all individuals should benefit from economics. Inequality is inherently bad. Economics is regarded to be a zero sum game.
** Profit in capitalism comes from surplus labor extracted from the worker. The worker must be producing more than he is paid by his employer, thus the surplus of his labor is stolen from him.
** The private ownership of the means of production and wage labor will inherently breed inequality and leave some in society with immense wealth and many mired in poverty. The means of production should thus be collectively controlled.
** Inequality is bad.
** The modern capitalist state contradicts the needs of the majority of civil society and favors an elite.
** Therefore, the state, or some other worker-controlled vehicle should mediate the distribution of wealth until the state is no longer needed.
* Economic Nationalism: Wealth comes from the use of power, and the use of power facilitates the accumulation of wealth. Individuals should work to benefit the wealth and power of the state. Economics is considered a zero sum game.
** The state is important.
** Individuals are generally not virtuous. Instead, they are ignorant and confused, and cannot form a cohesive society without a strong state.
** Not everyone can win.
** The state's accumulation of public property is better for the society than the individual accumulation of private property is.
** Inequality is a reality and sometimes important and necessary.
** The state controls, permeates, and becomes one with the civil society.
** Therefore, everything should be done to benefit the state.
* Note: A zero sum game is a term for the idea that when one individual gains wealth, another individual must lose that same amount. In other words, there is a fixed amount of wealth that circulates in the world, and wealth cannot be created or destroyed, but can move.
The contents of this book covers these topics in greater detail, and you will learn how and why political economists have come up with different solutions to the question of how to distribute wealth and power among individuals and states.[ew]

## A Word About Theories

Social science theories are just what they are: theories. The philosophers who came up with these theories believe in them based on a set of assumptions they derived from their observations, and they reached conclusions based on these assumptions. However, as the reality of the world is open to interpretation, each theory describes the world in its own unique way. No theories are wrong if they are supportable by facts and observations. These theories are just ways that thinkers have used to describe the world around them. Remember that you do not have to agree with a particular theory, but you must be able to understand all theories in order to make a conclusion about the world in which you live.
The best way to understand a particular ideology is to think as a philosopher would think. How would believers of a particular theory present a solution to a particular problem? Thinkers in different schools of thought come up with different answers because of the differences in their assumptions. Make sure you understand how different theorists think.
Most importantly, understand that these theories are constantly being altered, borrowed from, and in some cases, discredited completely. Theories are not rules to the world but rather ways to look at the world. A person can look at the world in different perspectives and can combine different assumptions of theories to describe it. No matter how different theories can be, they can almost always be combined because they are almost never mutually exclusive.
All of this makes the theories appear unimportant to the real world of political economics, but this is not true. However, there is a problem with theories that makes people treat them this way. Either they deal with a fraction of the full macroeconomy, in which case the assumption that all other aspects do not change is unacceptable.
This alternative is to use a full theory that simulates the behavior of the complete macroeconomy as a system. The results of this are usually so complicated that it is difficult to properly understand what is going on and where the forecast is leading. Never-the-less, such analysis should be able to tell governments what particular policies would do and to assist them in making the best decisions from the viewpoint of the community at large.
The answer to this is to start with a fully comprehensive yet simplified theory which deals with only the most basic yet significant parts of the system. This subject is not one where much research has been done although the writer below has in fact achieved a useful result. To see this kindly communicate with David Chester, chesterdh@hotmail.com