Ancient Western Philosophy
Lịch sử Triết học Tây phương cổ đại (translation)
David Wolfsdorf, Temple University
History of Western Philosophy: Modern
— Lịch sử triết học Tây phương hiện đại
Syliane Malinowski-Charles, Temple University
Lịch sử tư tưởng triết học Việt Nam
History of Vietnamese Philosophical Thought (translation)
Nguyễn Hùng Hậu, Hồ Chí Minh National Political Academy
Vietnamese Philosophy from Nôm Manuscripts
— Triết học Việt Nam qua văn bản Nôm
Ngô Thanh Nhàn, Temple University
Metaphysics and Epistemology
— Siêu hình học và nhận thức luận
Western Ethics and Political Philosophy
— Đạo đức và triết học chính trị Tây phương
Shelley Wilcox, San Francisco State University
Một vài nét về lịch sử tư tưởng triết học đạo đức của Việt Nam
— A Historical Sketch of the Vietnamese Ethical Thought
Nguyễn Thế Kiệt, Hồ Chí Minh National Political Academy
Triết học chính trị thời kỳ xây dựng quốc gia phong kiến Việt Nam độc lập tự chủ
Political Philosophy in the Period of Building an Independent and Self-determined Vietnamese Feudalist Nation (translation)
Gs.Ts.Trần Phúc Thăng, Hồ Chí Minh National Political Academy
Gender and the Public Sphere: A genealogy from the West
— Giới và Cõi công: Một phả hệ từ phương Tây
Mary Hawkesworth, Rutgers University
Political Economy: A Brief Overview
Kinh tế chính trị học tổng quan
Peter Manicas, University of Hawai'I at Mānoa
The Philosophy of Language and Thought
Triết lý của ngôn ngữ và tư tưởng
Gerald Vision, Temple University
— Mỹ học
Free Will and Determinism
— Tự ý và quyết định luận
Clyde Dunton-Gallagher, Temple University
The Mind-Body Problem
Vấn đề tinh thần–thể xác
Clyde Dunton-Gallagher, Temple University
— Chủ nghĩa tương đối
Patrick Denehy, Temple University
Tư tưởng nhân nghĩa Việt Nam
— Vietnamese Concepts of 仁義 Humanity and Justice
Dr. Nguyễn Minh Hoàn, Hồ Chí Minh National Political Administrative Academy
Chủ nghĩa yêu nước Việt Nam
— The Concept of Vietnamese Patriotism
Prof. Dr. Trần Phúc Thăng, Hồ Chí Minh National Political Administrative Academy
Đạo làm người
— The Dao Theory of Being Human in Vietnam
Dr. Trần Đăng Sinh & Dr. Lê Văn Đoán. Hanoi National University of Education
Hỗn dung tam giáo ở Việt Nam
— The Unity of Buddhism, Taoism, and Confucianism in Vietnam
Prof. Dr. Nguyễn Thị Nga, Hồ Chí Minh National Political Administrative Academy
Tư duy nội quán (Vipassanā) của Phật giáo và vai trò của nó trong tư duy của người Việt
—Buddhist deep vision (Vipassanā) and its role in the Vietnamese thinking
Prof. Dr. Hoàng Thị Thơ, Director of Eastern Philosophy Study, Institute of Philosophy, Vietnam Academy of Social Sciences
Ý thức cộng đồng Việt Nam
— The Vietnamese Concept of Community Consciousness
Prof. Dr. Trần Văn Phòng, Hồ Chí Minh National Political Administrative Academy
Tinh thần đoàn kết của người Việt Nam
— The Spirit of Vietnamese Solidarity
Phạm Anh Hùng, Hồ Chí Minh National Political Administrative Academy
Chủ quyền quốc gia
— The Concept of National Sovereignty in Vietnam
Prof. Dr. Trần Thanh, Hồ Chí Minh National Political Administrative Academy
Khảo cứu triết lý về nhân dân trong lịch sử tư tưởng Việt Nam
—The Concept of People in the history of Vietnamese philosophical thoughts
Dr. Trương Quốc Chính, Administrative Academy & Dr. Nguyễn Thuý Vân, University of Social Science and Humanities
Hướng đến một khái niệm khoa học về xã hội dân sự
Toward a more scientific Vietnamese concept of Civil Society
Assoc. Prof., Dr. Trần Hữu Quang, Sociology, Center for Information, Institute for Sustainable Development in Southern Vietnam (Academy of Social Sciences)
 Center for Vietnamese Philosophy > Handbook on Philosophy Last update: 2007-10-14 
English-Vietnamese Handbook on Philosophy & Political Economy
Center for Vietnamese Philosophy, Culture & Society Temple University

Political Economy: A Brief Overview

Peter Manicas
University of Hawai'I at Mānoa

There is no consensus as regards the use of the term, "political economy." First, is there a difference between "political economy" and "economics?" For many people, at least, "political economy" is merely the old name for what, since Alfred Marshall (1890), is called "economics." For others, "political economy" differs from "economics" only in so far as it pays attention to politics. This is the position of what is sometimes termed "the new political economics," but despite the name, it retains the neo-classical assumptions of "economics."[1] But for others, "political economy" represents a dramatically different paradigm. The problem may be simply put: Does inquiry into economic processes require concrete history, politics and sociology or can one develop significant explanatory theories regarding economic outcomes, for example, prices, by developing abstract models which pay little or no attention to the political and social? Mainstream "economic" theory, following on the dominant strand of "neo-classical" political economy, offers that such abstraction is precisely what makes economics a science. The alternative denies this, and holds that explanation requires seeing that because economies are embedded in institutional histories and real world societies, attention must be paid to the politics and sociology of these economies. The Marxist tradition is certainly the most prominent strand here, but one can also include work inspired by Max Weber, including what is now often termed "historical" or "economic sociology," and work by "institutionalists," who offer strong criticisms of neo-classical political economy.[2] Finally, we can include work by the so-called Austrian School (following Hayek and Mises) recent work by post Keynsians, feminists, "Green political economists," and other so-called "heterodox" approaches.[3] It will be convenient to divide our review into two main parts, examining the main features of the mainstream view of the matter, then turning to what Marxists and others still identify as "political economy."

"Classical" and "Neo-Classical" Political Economy

Despite a series of putative "revolutions" which greatly changed the character of economic analysis, mainstream economics is a discipline that for over two centuries has maintained what Schumpeter termed a "vision" of the economic process. This vision is well captured by Adam Smith's powerful metaphor of the "invisible hand." Assuming what is sometimes termed "methodological individualism," market outcomes could be explained as the joint product of the actions of self interested and more or less atomized persons interacting in society through the medium of markets. The stunning feature of this interaction is that in a perfectly competitive economy, all this behavior adds up to order. Indeed, it adds up to an efficient allocation of resources and perhaps also, to a just distribution of these.

"Classical theory" from Smith to J.S. Mill, gave way to "neo-classical" theory, constituting what is usually termed "the marginalist revolution." W.S. Jevons, Carl Menger and Leon Walras each quite independently arrived at the main ideas, the heart of what today is called "micro-economics." While the idea was implicit in the metaphor of the invisible hand, Walras, along with Pareto and then Pigou, specifically introduced into this body of theory the idea of general equilibrium. This is a condition in which the prices and quantities of all products and factors that would be bought, given pure competition, is completely determined. This is also a powerful idea. What might seem to be a very messy process or, worse, a very messy set of processes turns out to be a fully understandable and rigorously theorized and generalized market process.

The main outlines of this theory may be sketched. Each person, as "entrepreneur," worker or consumer, seeks to maximize his or her interests ("utility"), which requires that they make rational decisions about their choices. As consumer, this requires that we can order our preferences amongst all possible alternatives and that we can assess the "marginal utility"—the incremental amount of "satisfaction" we get of each additional unit consumed. Thus, between beer and milk, if I am to maximize my utility, I determine the relative tradeoff between quantities of the two items. For example, how much beer will I choose to sacrifice to obtain each additional quantity of milk. For combinations of different quantities of milk and beer that generate equal levels of utilities, the "rational actor" is "indifferent." Furthermore, "marginal utility" diminishes in the sense that there is a decreasing satisfaction with each addition in the quantity of the commodity, everything else being held constant. Finally, it assumes that choices are made pairwise, that we have full knowledge of the economic environment and that we act "freely" in making our choices. By aggregating each individual's demand schedule, we then develop a "demand curve" for any commodity. It shows how much will be purchased at varying prices given different levels of supply. These are, of course, very strong and highly dubious assumptions.

A "supply curve" can then also be constructed which uses the same principles: producers are "rational," each additional cost adds a decreasing additional amount of output produced, including the costs of adding additional units of labor, which, as above is subject to diminishing marginal returns, again, holding other factors constant. The "supply curve" then reflects how much producers are willing to provide at varying prices. Perfect competition is assumed.[4] The intersection of the demand and supply curves generate the market price of the commodity or factor. If all the conditions of price competition are satisfied, as it is assumed they will, this will be an equilibrium. The market "clears": everything "produced" is "consumed" and at the price and quantity which is most efficient from the point of view of both consumers and producers. There is also a general equilibrium since all markets, including financial and labor markets, are interdependent. For example, in determining the labor cost of production, prospective employees have information on all the jobs currently available and the nature of these jobs, the employers know what workers are needed, they can assess their skills and aptitudes, and since the labor market is competitive, they will hire only the workers that are needed at wages equivalent to their marginal product, that is, their incremental contribution to output. There should be no unemployment since wages across the economy will adjust until the last worker is hired. But following Keynes (1937), mainstream theory accepts that an economy can reach equilibrium with some amount of unemployment. For Keynesians, this is a consequence of insufficient saving and investment. This can be addressed by means of monetary and fiscal policy.

It directly follows that anything which interferes with the operation of a "free-market" is to be rejected. Government is to have a very limited role, primarily in policing contracts and in providing infracture not generated by private markets, for example, roads and national defense. Policy thus requires "privatization"—putting the economy entirely in the hands of private enterprise, union-busting, and "liberalization"—the removal of government "interference" in all markets. Thus, also the attack on regulatory agencies and policies aimed at protection of the environment. This is what is currently termed "Neo-Liberalism." To be sure, since the government sets the rules for all exchanges, it is impossible for government not be implicated: While it is seldom noticed, a "free market," is essentially a market where the rules favor capitalists—to the disadvantage of workers, the environment and much else besides.

The theoretical basis for Neo-Liberalism makes it a powerful ideology. The idea that explaining outcomes required a focus on individuals was sound, even if important problems arise if one is critical about what is attributed to the actors and what is left out, whether, for example, they are rational in the sense of the theory, whether they have the requisite information and capacities, whether markets are ever "competitive" in the appropriate sense, whether there are huge differences in capacities between a small "mom and pop" store and a giant corporation—both indiscriminately termed "firms"—whether choices are made pairwise and are "free," [5] whether theory can ignore processes that may enter into the very constitution of the markets being theorized. Here plainly, not only is the particular form of the legal infrastructure critical, but so too are host of sociologically pertinent differences, including, most critically, the location of power in society. The strength of these problems is to throw doubt on the entire enterprise of mainstream economics.[6]

Neo-liberalism has another ideological advantage: With the development of mathematical economics (Samuelson (1947), economics now has all the look of what people presume physics to be. It has, accordingly, nearly unquestioned authority.[7]

It is easy to show (but we forego argument here) that there are fatal problems. First, there is the question whether mainstream theory is, in fact, anything like well-established theories of physical science? These theories explain by providing causal mechanisms, not deductions from premisses. Second, and much more obviously, if one is seeking explanations, the fact that most of the assumptions of the model are acknowledged to be false cannot be dismissed. Thus, for example, the Bohr model of the atom gives us an understanding of chemical outcomes just because we have good reason to believe that real world atoms are properly represented by the model and have the causal properties that theory attributes to them.

The classic response to the problem of the reality of the model in economics was made by Milton Friedman in 1953. Taking an unequivocal position in an ongoing debate in the philosophy of science, he argued: ". . . theory is to be judged by the predictive power for the class of phenomena which it is intended to 'explain'" (1968: 512). As he says:

. . . the relevant question to ask about the "assumptions" of a theory is not whether they are descriptively "realistic," for they never are, but whether they are sufficiently good approximations for the purpose at hand. And this question can be answered only by seeing whether the theory works, which means whether or not it yields sufficiently accurate predictions (517).
Predictive power does give a theory usefulness but can a theory whose assumptions are not "descriptively 'realistic'" explain? Friedman is here assuming an account of explanation, sometimes termed "instrumentalist" such that explanation and prediction are symmetrical, that the capacity to predict gives also the capacity to explain—and conversely. The idea is widely taken for granted by economists. Indeed, it is critical to the assumption that one needs a mathematical model if one is doing real science. Still, a moment's thought suggests that prediction and explanation are not symmetrical, that we are very often able to explain some outcome when it could not have been predicted, and that to explain, the model must be at least an approximation of reality. A good correlation, for example, gives one good predictive capacities, but much more it needed if we are to have an explanation. Of course, mainstream theory also fails Friedman's criterion of prediction!! [8] Indeed, Wassily Leontief, a former President of the American Economics Association well represents the problem of mathematical economics (and econometrics):
Page after page of professional economic journals are filled with mathematical formulas leading the reader from sets of more or less plausible but entirely arbitrary assumptions to precisely stated but irrelevant theoretical conclusions . . . Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data without being able to advance, in any perceptible way, a systematic understanding of the structures and the operations of a real economic system (Leontief 1982: 104).

Marxist Political Economy, Its Variants and Non-Marxist Alternatives

Marx certainly drew on the classical tradition of political economy, but Marx was clear from the beginning that he had no interest in explaining prices and that indeed, almost all of what was interesting to him had been left unexplained. His task was to understand capitalism, a particular historical form of political economy:

Thus we have now to grasp the real connection between this whole system of alienation—private property, acquisitiveness, the separation of labor, capital and land, exchange and competition, value and the devaluation of man, monopoly and competition—and the system of money ("Alienated Labor," in Bender, 1972: 70).
That is, Marx wanted to uncover what "bourgeois" theory either obscures or takes for granted, to reveal the conditions of capitalist reproduction, including the role of money in fetishizing commodities, the mystification of class and exploitation, the "contradictions" of capitalism and, accordingly, the problems that it sets for actors: state actors, capitalists and workers. The key idea is seeing that laborers are paid wages, but that in production, they add to the value of the product produced. This "surplus value" is the source of profit, the driving motivation of capitalists. In Capital, Marx abstracted from the capitalist society which he assumed was most fully developed, but as he saw, if all capitalisms share in critical defining features, capitalist societies can differ immensely, exactly because they have different institutional histories. Compare here, e.g., India and Japan, or Guatamala and Sweden. Indeed, to understand the role of his theory of capitalism, we need to locate it in the larger context of what has come to be called "historical materialism." The key text here is in the German Ideology written with Frederick Engels: They write: <
The premises from we begin are not arbitrary one, not dogmas, but real premises from which abstraction can only be made in the imagination. They are the real individuals, their activity and the material conditions under which they live, both those which they find already existing and those produced by their activity. These premises can be viewed in a purely empirical way.

The first premise of all human history is, of course, the existence of living human individuals. Thus, the first fact to be established is the physical organization of these individuals and their consequent relations to the rest of nature (in Bender, 164).

"The first fact," of course, is what is usually termed "the mode of production." But two problems may be posed. First, Marx asserts that this is the first fact, not the only fact, and second, what is to be excluded in defining this "first fact"? There are two versions of this. In the "orthodox" (2nd International version) the mode of production is the "base" and all else is the "superstructure." Moreover, the mode of production is effectively the only fact since it "explains" the superstructure. For this version of historical materialism, then we have an "economic determinism" in which political economy explains everything! On the other version, defining the mode of production requires taking into account the social relations of production. But these in turn require an examination of legal institutions and indeed, forms of consciousness. This means that in reality, "political economy" and "culture" are not separable. Marx and Engels write: "language, like consciousness, only arises from the need and necessity of relationships with other men . . . The animal has no "relations" with anything . . . Its relation to others does not exist as a relation. Consciousness is thus from the very beginning a social product and will remain so as long as men exist."

The idea that consciousness is social has enormous consequences. It undermines the "universalist" psychological assumptions regarding actors in mainstream theory and in currently fashionable "rational choice theory." It also requires us to have an understanding of the beliefs of the members of a society and then to ask whether the reproduction of the practices of their society, including of course, its mode or production, involves false belief—including, for example, the set of beliefs which constitute the ideology of neo-liberalism. This inquiry must be concrete and empirical. As Marx and Engels write:

The fact is, therefore, that definite individuals who are productively active in a definite way enter into these definite social and political relations. Empirical observation must in each separate instance bring out empirically, and without any mystification and speculation, the connection of the social and political structure with production (in Bender, 170).
That is, Marx not only rejects the efforts of "bourgeois" political economy for an approach which is examines the presuppositions of capitalist reproduction, but he insists also that a grasp of the nature of the political economy is essential (but not sufficient!) if one is to understand anything: unemployment, immigration, imperialism, class oppression, the destruction of nature—one can easily go on.[9] That is, while the mode production does not determine outcomes, it is, for Marx, the fundamental enabling and constraining feature of all outcomes. For example, there are always political choices available to state actors, but while these will vary as a function of the specific character of the polity, they are not likely to be inconsistent with their understanding of the needs of capital. So, for example, at given time and place, labor legislation may be the "solution," at another, imperialism.

The work of Weber can here be included. In the leading essay of the journal he founded, he raises the question of "socio-economic" interpretations. He begins with what looks very like Marx's "first fact" and goes on to distinguish "economic events (and institutions), "economically relevant" phenomena, and "economically conditioned" phenomena" and offers that as with Marx and Roscher (an historical economist), the journal is concerned with all three. Indeed, "the economic interpretation of history is one of the most important aims of [the] journal"(Weber, 1949).

Weber did not, however, approve of the "one-sided" ("monistic," "reductionist") manner of many "materialist" employments of political economics. Indeed, as Marx would agree, all single factor approaches, including "culture" as singular cause, are mistaken. But it is not clear in Weber, as it is in Marx, whether the mode of production has causal priority in explaining outcomes. This is an important theoretical issue for political economy and distinguishes variants of current vibrant Marxist and non-Marxist political economy, including feminist and various heterodox views.

The problem is beautifully illustrated in important debate between Nancy Frazer and Iris Marion Young regarding Marxist political economy and feminism. Briefly, Frazer argues that in our "post-socialist" world, justice requires both recognition and redistribution. She notes that "in the real world, of course, culture and political economy are always imbricated with one another" (Fraser, 1995: 70). Nevertheless, since they have "different logics," she wants an analysis which analytically distinguishes them. For her, these different "logics" pose "a dilemma" such that achieving recognition may undermine achieving justice and conversely. She offers what she takes to be a solution. By contrast, Young finds that the cure is worse than the disease. She asserts that "rather than oppose political economy to culture," "it is theoretically and politically more productive to pluralize categories and understand them as differently related to different groups and issues." On her view of the matter, Fraser's "dichotomy . . . leads her to misrepresent feminist, anti-racist and gay liberation movements as calling for recognition as an end itself, when they are better understood as conceiving cultural recognition as a means to economic and political justice" (Young, 1997: 148). Since both agree that in the real world, culture and political economy are always inseparable, the question of how best to theorize this becomes, properly, the central issue.

Finally, we must mention the work of the so-called "Austrian" political economists, who, following the work of Ludwig von Mises and Frederick von Hayek, offer a powerful critique of general equilibrium theory which, like Marx's, takes an approach which is historical and concrete. These writers argue, convincingly, that in order to defend central planning, Marxist writers must, paradoxically, assume the fatally flawed mainstream theory; so they reject socialism. But they do not show that there are no plausible forms of market socialism consistent with an understanding of Marx's political economy. It may be useful here to set the problem.

Following Mises (1936), Boettke (1998: 134) summarizes the anti-socialist argument:

  1. Without private property in the means of production, there will be no market for the means of production;
  2. Without a market for a means of production, there will be no monetary prices established for the means of production;
  3. Without monetary prices, reflecting relative scarcity of capital goods, economic decision makers will be unable to rationally calculate the alternative use of capital goods.

For standard versions of market socialism, 2 and 3. are "solved" by appeal to general equilibrium theory. But as the Austrians insist, this assumes what needs to be established in the ongoing process of competition.[10] As Hayek observed, equilibrium theory "starts from the assumption of a 'given' supply of scarce goods. But which goods are scarce goods, or which things are goods, and how and how scarce or valuable they are—these are precisely the things which competition has to discover" (Hayek, 1978: 181).

But why is private property in the means of production necessary? The answer would seem to be straightforward: In capitalism, there are many owners of the means of production, each is interested in profit and they relate only in terms of markets. As buyers and sellers of capital, they make judgments about the use to which capital is put. These transactions establish exchange rates expressed as monetary prices. But, as Hayek well appreciates, markets vary immensely in their nature and character depending on a host of factors. Accordingly, as he rightly remarked:

There is no reason to assume that the historically given legal institutions are necessarily the most "natural" in any sense. The recognition of the principle of private property does not by any means necessarily imply that the particular delimitation of the contents of this right is determined by the existing laws are the most appropriate. The question as to which is the most appropriate permanent framework which will secure the smoothest and most efficient working of competition is of the greatest importance and none which it must be admitted has been badly neglected by economists (1935: 22).
This neglect has not been total, if nearly so. A much ignored but powerful Marxist response to this challenge has been provided by Elson's (1988) "Market Socialism or Socialism of the Market." Elson takes very seriously Marx's analysis of fetishism of commodities and argues that it can be addressed, fundamentally by making all exchanges transparent. Indeed, the dominance of the mainstream understanding of capitalist markets joined with failures of centrally planned economies has powerfully constricted alternative visions of a better society. Only an adequate political economy can remedy this, a particular urgency for our time.
  1. There is a journal, The New Political Economy (London: Routledge), which aims "to create a forum for work which combines the breadth of vision which characterised the classical political economy of the nineteenth century with the analytical advances of twentieth century social science." The "analytic advances" are primarily the tools and theories of modern mainstream economics. The "new political economy" also includes much work informed by mainstream theory on the political economy of international relations.
  2. One thinks of the work of Thorstein Veblen, John R. Commons and John Kenneth Galbraith. See Dobbin, 2004 for a useful anthology, among many, of recent writing by economic sociologists.
  3. See The Review of Radical Political Economics (Sage) which "publishes articles on radical political economic theory and applied analysis from a wide variety of theoretical traditions, including but not limited to Marxist, institutionalist, post-Keynesian, and feminist." See also various journals of so-called "heterodox economics." (old link at For Green Economics, see Recent "Austrian" work may be found in Review of Austrian Economics (Kluwer Academic Publishing).
  4. That is, there is neither monopoly nor oligopoly, there is free entry and exit, perfect knowledge, and commodities are homogeneous.
  5. These choices are surely voluntary, a key feature of markets in contrast to central planning, but whether they are "free" depends on one what one means, Even if the choices are all terrible, in the absence of threat of violence, one's choice is voluntary. But if freedom is the capacity to do what one wants to do, it is very unequally distributed. The poor man is free to sleep under the bridge but, lacking plane fare, he is not free to vacation in Honolulu. There are considerable ideological advantages in confusing "voluntary" and "free." See Manicas, A Realist Philosophy of Social Science (Cambridge: Cambridge University Press, 2006, Chapter 6.
  6. For some exceptional doubt offered by the discipline's most leading lights, see the AEA Presidential Addresses of Wassily Leontief (1971) James Tobin (1972), and Robert Solow (1980). Similar themes have been expressed by other notable insiders, e.g., Lester Thurow, (1983) and (Lord) Thomas Balough (1982), A.O. Hirshman (1985) and Amartya K. Sen (1977). For a variety of critical analyses, see in addition to work cited in note 1, the Progressive Economics Forum (old link at and Post-Autistics Economics Review: For criticism of neo-liberalism by an insider, see Stiglitz, 2002.
  7. The mathematics, which assumes linearity and convexity, is easily fitted to the neo-classical model of perfect competition, even if it means ignoring features of the world which did not fit the mathematics. See my "Endogenous Growth Theory: The Most Recent 'Revolution' in Economics," Post-Autistics Economic Review, Vol. 4 (5 March 2007).
  8. For a full fledged account of the problem of explanation, see my A Realist Philosophy of Social Science, Chapter 1.
  9. There are many, many examples addressing a wide variety of issues. A sample might include Willis (1981), Lerner (1987), Chakrabarty (1989), Braverman (1998), Harvey (1990), Gowan (1999), Cumings (2005), Davis (2006).
  10. "Competition" is not the idealized picture of neo-classical theory (note, but is essentially the ordinary sense in which actors seek to outperform other actors.

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