LECTURE ONE: POLITICAL ECONOMY UNDERSTANDING THE CONCEPT OF POLITICAL ECONOMY Adam Smith, David Ricardo, and John Stuart Mill are widely regarded as the originators of modern economics. But they called themselves political economists, and Mill's Principles of Political Economy was the fundamental text of the discipline from its publication in 1848 until now. Political economy is a branch of the social sciences that studies the relationships between individuals, governments, and public policy. It examines how the realm of politics impacts the economy and how the economy impacts politics. Political economy is about how politics affects the economy, and the economy affects politics (see box). Governments try to pump up the economy before elections, so that so-called political business cycles create ebbs and flows of economic activity around elections. By thesame token, economic conditions have a powerful impact on elections Understanding the political economy" means analyzing how political factors, like government policies and power dynamics, interact with economic factors, like markets and resource allocation, to shape the overall economic landscape of a society, essentially looking at how politics influences the economy and vice versa; it involves studying the interplay between political actors, institutions, and economic forces to understand the underlying reasons behind economic decisions and outcomes within a society. Political economy, in a nutshell, is the study of the intertwined relationship between politics and economics. It delves into how political systems and institutions shape economic systems, and vice versa. It focuses on production and distribution as to how are goods and services produced and distributed within an economy. What role do institutions like property rights andmarkets play in this process? It also deals with economic growth and development over time and focuses on what factors contribute to economic prosperity, and what are the challenges to achieving it. Political economy studies the international trade system and addresses on How do countries interact economically with each other. What are the benefits and challenges of globalization? It also buckles down to the role of the state and government in its economic system. Unlike traditional economics, political economy doesn't operate in a vacuum. It draws insights from a range of disciplines like political science, sociology, history, anthropology, and even philosophy. For example, how do governments intervene in the economy through regulations, taxes, and spending? How do these interventions impact different groups and societal well-being? While markets play a significant role,political economy acknowledges their limitations and explores alternative economic systems and models, includingsocialist, feminist, and ecological perspectives. Over the past 50 years, political economy has become increasingly prominent in both economics and political science, in three ways: It analyzes how political forces affect the economy. Voters and interest groups have a powerful impact on virtually every possible economic policy. Political economists strive to identify the relevant groups and their interests, and how political institutions affect their impact on policy. It assesses how the economy affects politics. Macroeconomic trends can boost or ruin an incumbent's chances. At the more microeconomic level, features of the economic organization or activities of firms or industries can have an impact on the nature and direction of their political activity. It uses the tools of economics to study politics. Politicians can be thought of as analogous tofirms, with voters as consumers, or governments as monopoly providers of goods and services to constituent customers. Scholars model political- economic interactions in order to develop a more theoretically rigorous understanding of the underlying features driving politics. All three methods have profoundly affected both scholars and policymakers. And political economy has a lot to offer both to analysts of how societies work and to those who would like to change society. Political change Socio-Economic change Political-Economy