Saturday, July 27, 2013

Economics vs Political Economy

Google Books has an interesting feature that allows to search words or combinations of them in its huge database. Below the use of Political Economy and Economics from 1776 to 2008 (last possible year in the database).
Note that there is no surprise. Political Economy dominated up to the Marginalist Revolution, with a lag for Economics to take over. Note the spike in Economics around 1890, which probably reflects references to Marshall's Principles of Economics, which marks the begging of the transition. Since the 2000s, there has been a decline in Economics, and mild increase in Political Economy. But I wouldn't be very optimistic about it. Political Economy now comes in a marginalist flavor too.


  1. Could it be for the fact that political economy now comes in a marginalist flavor that institutionalist economist K. William Kapp argued, in paraphrased form, that "in the current context, political economy and economics are no exception to the manifestation that social inquiry tends to justify and rationalize the status quo"?

  2. Now that you mention political economy, economics and Marshall, let me ask you something: to what extent would you consider Keynes or Kalecki as real departures from marginalism?

    At one hand, Jevons, Menger and Walras (or Marshall, if I am not mistaken) conceived of microeconomics as THE economics. For them, there was no such a thing as a macro-economics. That was part of their marginalist project.

    Keynes and Kalecki, however, did see a separate role for macroeconomics. So, in this sense they do represent a departure, although a partial one.

    At the other hand, that I know of, neither Kalecki nor Keynes ever distanced themselves from the marginalist analysis based on marginal utilities and "marginal products", which gives its name to the whole Marginal Revolution, after all. From this rather important point of view, they seem to be just "minor marginalists", to paraphrase Samuelson (as Samuelson himself, btw).

    For another example: Kalecki (much more so than Keynes) understood the role of politics in economic life. That is something the original marginalists ignored completely, while their modern followers only see from the point of view of market imperfections: the Keynesians as a means to ameliorate the negative effects of said imperfections; the more mainstream economists in order to condemn outright, as the main cause of said imperfections.

    And Keynes, as perhaps could be expected given his upbringing, still saw a pivotal role for the "entrepreneur" (which we have already discussed). This is just another way to reiterate the idea that individuals' whims (or subjectivity) have primacy over the material conditions of life. As we've discussed, for Keynes only rentiers' incomes were unearned: the "animal spirits" of the true "entrepreneurs", plus the alleged scarcity of capital, justified their profits.

    So, what do you think? Should one consider K & K as real departures, or rather as Kuhnian adjustments to the marginalist paradigm?

    1. Hi Magpie. Some of these issues were discussed here in previous posts. Keynes never quite got rid of marginalism. His use of the Marginal Efficiency of Capital (MEK) is evidence of that. But he wanted to, and was clear that the natural rate of interest should be abandoned (not possible with the MEK). But effective demand is a departure with the type of Say's Law implicit in marginalism. Kalecki, coming from Marx, doesn't have those problems. Keynes was part of the political discussions that actually forged policy. I don't think he was naive about the role of politics, power, and class, in economics.

  3. On the topic of economics and political economy I used to give my students the entry by Giorgo Lunghini in Kurz and Salvadori's Elgar Companion to Classical Economics. There is a link here

  4. Ah yes, I remember that article. I miss your class.


Godley-Tobin Lecture - Friday 1st March11:30am - 12:45pm

Please note the change in date and venue. Bob Rowthorn's Godley-Tobin Lecture. titled “Keynesian Economics: Back from the Dead?”  It...