Economics, Political Economy and the History of Economics

The basic issues involved in current debates about economics, policy and politics arose in "political economy," which was the origin of what subsequently became modern economics. The "marginal revolution" inspired by Menger, Jevons and Walras began in the late 19th century and set the stage for the neoclassical economics of the 20th century. Economics was divorced from classical political economy, taking economics away from social theory and in the direction of formalization and econometrics. Political economy was revived by Keynes.

But what was hotly debated initially was no longer discussed in economics as a major focus. Rather, to the degree that economics is oriented to policy, one view or other was simply presumed as an unstated presumption and methodological choice.

A lot can be learned by studying the history of ethics, social and political philosophy, and early economic thought because those who initially considered their integration into political economy generally targeted the basic issues that would be debated and refined subsequently, especially with respect to policy.

Classical economics began in 18th century England with Adam Smith and David Ricardo, and in the late 17th century in France with the Physiocrats, who advocated for laissez-faire, property rights and the importance of capital, even though they emphasized land in the still chiefly agricultural economy of the time. The world was becoming mechanized and industrialized, with agriculture waning in significance relative to industrial production and innovation. Urbanization was the trend and the factory was replacing the field as the predominant workplace.

The fundamental issues of political economy arose out this milieu in the 19th century through the work of, e.g., Bastiat, Proudhon, J. S. Mill, Burke, and Marx. Today, the same views can be found coming into opposition with each other dialectically in Libertarian-Austrianism harkening back to Bastiat, left libertarianism traceable to Proudhon, modern liberalism as an elaboration of Mill, conservatism stemming from Burke, Marxism following Marx, and Marxianism building on and adapting his thought. Neoliberalism as a political view based on laissez-faire stems from the Physiocrats in France and in England from the Manchester Liberals and The Economist, which was founded in 1843 to promote laissez-faire economic liberalism.

These influence would shape subsequent debate over economic policy and social and political institutions. The same issues are in play now that were in play then, only the context has changed. However, similar problems remain and have increased due to increasing complexity.

These influences manifest as different worldviews based on different value systems. Those who initially propounded the different views recognized that political economy is fundamentally normative. Later, economists striving to make economics a science pretended it wasn't simply by presuming the norms as hidden assumptions.

The different worldviews based on these values systems determine the economic infrastructure of society differently, and they result in different social, political and economic outcomes. These differences can be observed in real time by looking at different nations as outcomes of their national policy choices.

The Founding Fathers of the United States were acquainted with the debates in political economy in Europe. They subscribed to the view that property rights are subservient to human rights and civil rights. A written constitution established the social contract through a fundamental law of the land as an overarching rule for lawmaking and application of government power. The U. S. Constitution instituted government intervention with checks and balances on power and established the a temporal constraint on political power by requiring representatives to stand for election periodically. The Constitution was chiefly concerned with establishing the rules for governing. A Bill of Rights was appended guaranteeing basic human and civil rights.

These same issues are being debated hotly today, and ignorance of the history of the debate clouds recognition of what the fundamental issues are. The fundamental issues are based on different views of human nature and human beings in society. The approaches are based on philosophical differences involving ideology, therefore norms, since norms and criteria are the rules that establish the framework of a worldview and the key ideas and institutions of a society.

Debate ends when the fundamentals are arrived at through debate of the issues. Then resolution in a liberal democracy falls to political choice determined by the results of elections. Then the question becomes one of free elections, enfranchisement, voter persuasion, and political influence through privilege, as well as insuring good government free influence and corruption, a society free of political privilege, with an economy that can deliver prosperity to the nation.