This chapter is concerned with the history of
attempts of theorists to conceptualize the relationship between the world of public power and decision-making, politics, and the world of production and distribution, economics. (p. 10)
Political Economy and Economics
Prior to the 18th century, economics and politics were seen as distinct arenas of activity. But
the idea that economic processes could yield their own laws, generate their own imperatives, or provide the basis for a separate intellectual discipline was foreign to prevailing ethoical and explanatory traditions. (p. 11)
Economics was a means of managing resources (of a household or a state) to achieve certain ends.
Adam Smith and his successors saw the beneficiaries of this management as the individuals within a state, rather than the state itself (how the mercantilists saw things). But they still held that there was a compatibility of interests between the state and its individuals.
If there was no likelihood of conflict between individual and collective interest, then aggregating individual evaluations was a mere technical question.
Of course, this mere "technical question" figures prominently in welfare economics.
So, liberal political economy accounted for the reality and importance of collective phenomena, but opposed public intervention in economic processes. As neoclassical economics developed, practitioners saw economics as a specialized, positive, science that avoided value judgements, public advocacy, and non-economic factors. (Some would claim that it isn't as positive as it claims, that the value judgements are hidden in the underlying assumptions about utility and the actions of rational, utility-maximizing actors. I should look this up in my ethics notes.)
Eventually, they dropped the political and just called it economics.
Political Systems and Political Science
The development of a liberal political science -- the view that politics and economics were separate and self-contained -- occurred much later than in the case of economics: not until after WWII. Although the prior orthodoxy, emphasizing the study of institutional structure and constitutional law, rested on an implicit assumption of systemic separation.
Political science was torn between two disciplines: an applied discipline committed to political reform, and one which sought to emulate the natural sciences and emphasize observation and measurement.
Critiques of Unidisciplinary Science
There were many criticisms of both economics and political science. There were changes in the non-academic world that undermined the assumptions of both disciplines.
The most important was the increasing intervention by government in the economies of industrialized countries and the legitimacy given such intervention by Keynes.
Three perceived failures of neoclassical economics:
1. Emphasizing the rational, maximizing individual and assuming perfect competition leaves it unable to account for a world in which economic life is dominated by large firms that could manipulate markets and influence consumers' perception of needs.
2. It had little to contribute to debates about "public goods," the level and character of which are influenced by nonmarket or noneconomic factors.
3. It had little to offer in evaluating the purest of political economies -- those in socialist countries.
Another world change that undermined disciplinary assumptions was the growing belief that the industrialized world had a responsibility to foster economic growth in poorer tropical countries.
Academics and Third World politicians agreed that Third World poverty should be eliminated and that government had a role in doing so. Economic theories that had no role for government were popular in those circles.
The interaction between social science and government in these activities stirred up examination and criticism of Western social science.
Three categories of criticism:
Moral Critique
The view that economics and political science stressed positive analysis and avoided value judgements; that practioners had "betrayed the original reforming mission of political economy." (p. 18)
Gunnar Myrdal suggested "that the value-freedom of economics is deceptive, that 'basic concepts are frequently charged with normative implications." (p. 19)
Political Critique
Some critics argued that economics had also ignored the existence of power. That by assuming perfect competition in world were everyone is equal and has perfect information, they ignore factors like power, nonpecuniary motives, group behavior, etc.
Explanatory Critique
An expansion of the political critique, but broader and somewhat particular to those concerned about development.
This critique claimed that economics made assumptions about consumer preferences without considering how preferences are developed in a society, the distribution of power and its role in society, interaction between classes, conflicts, contradictions, and structural changes.
Economics particularly recevied these criticisms in relation to its role in Third World development. Economics was thought to ignore the noneconomic factors that make the Third World different.
The "Irrelevance" of Political Science
Political science suffered much the same criticism: it was too concentrated on positive science and rested on normative assumptions that supported the US status quo. In its analysis of the Third World, political science was accused of being ethnocentric and biased toward liberal democratic values and institutions.
Political science, its critics said, didn't "identify itself with the struggle against inequality and oppression." (p. 26)
Economics: Defending the Parameter
Economsts didn't take the criticism lying down. Thier response took three forms: reassert the validity of their traditional assumptions and methodology, graft certain noneconomic variables onto otherwise unchanged economic models, and propose wider application of economics methods.
The third proposal, public choice, is dealt with in the next chapter. The other two, in this chapter.
The Integrity of Economics
Economist defended their science by pointing to its cumulative intellectual achievements as proof of its validity. They pointed out that it had been built up progressively over centuries, with a progression of distinguished thinkers building on those who had gone before.
Political science, on the other hand, hadn't developed that way and was captive to its own sterotypes, notably that citizens control the state.
Development Economics: Coerced Cooperation
Development economics held to the faith that science could establish a "general welfare function" -- a jargonized term for the old Benthamite notion of the greatest good for the greatest number. Government was there to realize this general welfare function; but politics stood in the way. The question -- the essentially technical question -- was how to overcome such obstacles, and it was the job of noneconomists to help dispose of those obstacles. (p. 29)
In other words, eonomist were apolitical; they would come up with the solutions -- others were to figure out how to actually implement them politically.
Interdisciplinary work, according to some, would involve bringing in noneconomists to aid in implementation. There was no need for economists to change their conception of the problem.
"Positive" Versus "Political" Economics
Another alternative was to develop a politically oriented economics. This notion was fought by "more conservative defenders of economics." They insisted that economics should concern itself with "is" not "ought."
To argue that values underlay economics, James Buchanan protested, was to remove "all scientific content from the discipline and [reduce] discussion to a babel of voices making noise." (p. 32)
On the other hand:
Lionel Robbins acknowledged that the logical basis of welfare economics was flawed, that it was impossible to arrive at a scientific definition of the general good from an examination of individual preferences. But governments had to make judgements about such matters, and values were inescapably involved in such judgements. (p. 33)
Robbins suggested dividing the field into political economy (value judgements) and economic science (positive economics).
"Liberal" Versus "Welfare" Economics
He discusses the
deep philosophical division here between fundamental [classical] liberals, such as Buchanan, and the social welfare utilitiarians. Both claim to be true to the scientific inheritance of economics, and indded both are. Ther division arises ... from the ambiguity of classical economics (noted earlier) about the possibility of deriving a "social welfare function" from individual preferences. One interpretation points toward a political economy that treats government itself as a rational actor trying to realize that function (perhaps through planning and with the help of rational-choice "theorists"). The other points toward the maximizing of individual choice, free-market economics, and minimal government. (p. 35)
Staniland, M. (1985). The fall and rise of political economy. in What is Political Economy?: A Study of Social Theory and Underdevelopment. New Haven, CT: Yale University Press.