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Political economy refers to a branch of the social sciences that analyzes how socio-economic activities are regulated in different institutional contexts, underlining the reciprocal influences among economic, social, and political factors. Over recent decades, this field of research has witnessed a remarkable revival, especially in economics, political science, and sociology. The origin of the term, however, is strictly connected to the birth of economics. Its first use is usually made to go back to the French economist Montchretien who, in the Traicte de l’oeconomie politique (1615), made reference to it as ”the science of the acquisition of wealth”: a ”political science” connected to public economy and state finances. This approach was in part modified by the classic economists, who affirmed the scientific autonomy of the new discipline with respect to politics. The denomination was nevertheless maintained. It was with the ”marginalist revolution”, at the end of the nineteenth century, that the term economics became increasingly used to indicate economic science in general. The advent of the neo-classical economics – with its focalization on the study of markets – also implied an increasing disciplinary specialization among the social sciences. The ”recent rediscovery” of political economy signals an inversion in this tendency, and is characterized by two main aspects: a new attention – often in a comparative perspective – to the study of institutions, and a greater interdisciplinary activity. That said the use of the same denomination masks the existence of various analytical perspectives.

Economics

An important stimulus to political economy has come from new institutional economics, a theoretical perspective that reintroduces institutions into economic analyses. Unlike the old institutionalism, the new version does not introduce itself as an alternative to mainstream (neoclassical) economics. Nevertheless – thanks to the support of economic history – it widens the analytic perspective toward a comparative reflection on the different modes of organizing economic activities at both a macro and a micro level. This new approach consists of two distinct yet complementary currents. The first concentrates, above all, on the institutional environment of economies, whereas the second -developed by transaction cost economics – studies the governance of contractual relations between productive units.

In economics, other trends that favor interdisciplinary dialogue are also evident. First, there is a revival of old economic institutionalism, and the development of evolutionary and regulation approaches, which underline the role of institutions and of various coordination mechanisms in economic and technological change. There is a second current that, taking up Alfred Marshall’s original formulations on industrial districts, concentrates on the spatial dimension of economic activities. Finally, at the boundary with political science, there is the growth of a political economics theory which combines institutions, policy choices and strategic interaction among rational individuals.

Political Science

In political science, the spread of political economy – mainly in the USA – has assumed the form of an extension of the economic paradigm to the study of political phenomena. The assumptions of methodological (neoclassical) individualism -with its corollaries of rational and maximizing behaviors – were developed in the formulations of game theory, rational choice, and public choice, giving birth to a variegated ”economic approach to politics.” Even though its diffusion has taken place primarily since the second half of the 1970s, the initiating models were developed in the 1950s and 1960s. However, in the second half of the 1980s, as a result of contamination with the neo-institutionalist current, there was a partial revision of this approach. Since then, while still maintaining many of the previous assumptions, the new political economy has placed greater emphasis upon institutions, decisional procedures, and the empirical verification of theoretical models.

Sociology

In sociology a different orientation of political economy began to spread in the second half of the 1970s. The paradigm of rational choice gained little ground, especially in Europe. Instead, attention was directed toward the sociocultural, political and institutional factors influencing the instability of advanced economies. For example, a fruitful convergence of economic sociology and political studies developed, which focused on two different models of interests representation in the capitalist countries: neocorporatism and pluralism.

Beginning in the early 1980s, the sociological approach has dealt with post-Fordism models of production, the varieties of capitalism in advanced societies, and the different paths followed by the less developed countries. The first current analyzed the crisis experienced by many large, vertically integrated firms and the emergence of a new productive paradigm – denominated ”flexible specialization” – based on network forms of organization concerned with the quality and diversification of products. The second current studied the variety of capitalist systems, connecting micro and macro level reflections on industrial readjustment and regulation models. In this way, two ideal types of contemporary capitalism have been identified: the Rhine model, or the coordinated market economies, and the Anglo-Saxon model of liberal market economies. Finally, with regard to sociology of modernization, the extraordinary growth in the Asian economies has stimulated a strong revival of comparative analysis focusing on the complex interrelations between the state and the economy in the development process.

Bibliography:

Alt, J. E. & Alesina, A. (1996) Political economy: an overview. In: Goodin, R. E. & Klingemann, H. D. (eds.), A New Handbook of Political Science. Oxford University Press, Oxford, pp. 645—74.
Monroe, K. R. (ed.) (1991) The Economic Approach to Politics: A Critical Reassessment of the Theory of Rational Action. HarperCollins, New York.
Peersson, T. & Tabellini, G. (2000) Political Economics: Explaining Economic Policy. MIT Press, Cambridge, MA.
Trigilia, C. (2002) Economic Sociology: State, Market, and Society in Modern Capitalism. Blackwell, Oxford.