Portal:Politics/Selected article/2007, week 5

Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. It developed in the 18th century as the study of the economies of states (also known as polities, hence the word "political" in "political economy"). In contradistinction to the theory of the Physiocrats, in which land was seen as the source of all wealth, some political economists proposed the labour theory of value (first introduced by John Locke, developed by Adam Smith and later Karl Marx), according to which labour is the real source of value. Many political economists also attracted attention to the accelerating development of technology, whose role in economic and social relationships grew ever more important.

In late 19th century, the term "political economy" was generally superseded by the term economics, which was used by those seeking to place the study of economy on a mathematical and axiomatic basis, rather than studying the structural relationships within production and consumption. (See marginalism, Alfred Marshall)

In the present, political economy refers to a variety of different, but related, approaches to studying economic and political behavior, which range from combining economics with other fields, to using different fundamental assumptions which challenge those of orthodox economics.