Why Do We Need Political Economy

Thomas Piketty’s Capital in the Twenty-First Century, a book that made startling predictions about increasing inequality of income around the globe and the propensity for an ever-increasing gap between rich and poor, was published in 2013, and it stunned the entire world. One amongst Piketty’s core premises that mainstream theory does not offer adequate instruments for identifying and resolving these significant issues might have been overlooked in the midst of all the hype.

According to the argument, the main flaw in financial evaluation is that it assumes a genuine separation between the economy and politics. This is in opposition to Piketty’s favoured toolset, neoclassical economics, that makes the assumption that economy and politics are inherently intertwined and that understanding the interaction between governments and commodities is essential to having a well-rounded knowledge of the globe.

Political economy in the early days

Piketty’s argument is actually quite old and still not new at all. Adam Smith as well as many other economists who came before him thought they were researching issues of political economy. When Wealth of Nations was produced in the 1790s, political economy was much more frequently studied by academics than product cost determination. This trend continued till the late 1900s. The presumption that economies and politics are separate is largely an early twentieth century phenomena; by the early 20th century, economists had clearly surpassed politics and economics, becoming the standard.

Piketty might well be leading the charge, but he’s not the only one making the case for a revitalised politics and economics discipline. Political economy has gradually gained in prominence as an area of research in the late twentieth and early twentieth millennia, whereas economics has comparably fizzled. The comparative collapse of finance can be attributed to a variety of factors, notably cognitive isolation and a dearth of explanatory accuracy. The premise of market economics, or the notion that a network of decentralised and unrestrained economic interactions creates its own equilibrium, still occupies main stage in its research, however, and this is likely the institution’s most major weakness.

Conclusion

Even if the unrestricted free market as imagined by thinkers like Friedrich Hayek and Milton Friedman is elegant in its simplicity, it depends too heavily on ambition and dogma and not sufficiently on factual statement as a foundation for meaningful policy study. Karl Polanyi and other political economists have even ventured to the extent of reflect poorly on the mere reality of a market economy, contending that it is difficult to detect and likely only occurs in theory. No matter whether free markets are actually present, the presumption that they do might not be an excellent place to begin for issue health research, especially when considering that the significant policy concerns of the current are not entirely free market-based.