Whither political economy? theories, facts and issues

Political Economy has undergone a process of dramatic change over the years. This process, which spans over more than two centuries, has helped to define the boundaries of the field’s domain, organize its subject matter and establish an identity for modern political economy. At the risk of trivializing, it might be useful to summarize some of the steps along the process that has characterized the evolution of the meaning of the term political economy. Starting from the late 1700s, when the work of Adam Smith and David Ricardo played a fundamental role in establishing economics as an autonomous discipline, political economy and economics were for a long time synonymous. Economics started to organize itself into fields at the beginning of the 20th century. However, while political economy clearly did not fit all of the subject matter of some of the fields, it did not define a separate field. In fact, it was not until the 1950s that the term political economy started to have a different, more precise meaning, separate from the generic notion that politics and government policy are intimately interrelated. The change of emphasis emerges quite clearly from Buchanan and Tullock (1962) and Downs (1957). At the same time, Arrow (1951) marked the birth of social choice theory, which provided vital impetus for the development of analytical tools to study the (economic and political) outcomes of political processes.