Political economy of economic theory

Abstract

Political Economy involves both the material conditions for the life of the polity and the political conditions for the governance of the economy. This chapter considers economic theory as a means to investigate this dual character of political economy. This is done by distinguishing between two fundamental approaches in economic theory: the exchange-based approach (Hicks’ catallactics) and the production-based approach (Hicks’ plutology). It is argued that catallactics and plutology highlight alternative economic arrangements for the provision of material needs within the polity and different political conditions for those economic arrangements to be feasible and implemented. The chapter outlines the foundations of a political economy approach to economic theory and charts lines of further research in the field.