The Disintegration of Political Economy
Myrthe van der Staay (526414)
Erasmus University College
Foundations of Political Economy
24-02-2021







1) some classical political economists studied the economy separately from society and state affairs, presaging the later separation of the field of (classical) political economy into economics and political science. Elaborating on their arguments, do you agree that the economy should be studied abstracted of political, societal and historical context? Why or why not?


In answering this question I will dive into the thought of the classical political economic thinkers Adam Smith and John Stuart Mill. Although they arrived at very different conclusions regarding political economy, their respective analyses were all driven by a fascination for the market system and its seemingly scientific laws. After analyzing their motivations for studying the market as a separate entity I will shortly touch upon the consequences of the divide they suggested and counter their argument through Karl Polyani. Finally, I will give my opinion on the separation of political economy.

Adam Smith
Adam Smith, although a political economist in nature, is often dubbed as the founding father of classical economics. This is thanks to his analysis of the mechanisms of the market system as a phenomenon independent of politics, society or historical context. In his magnum opus, The Wealth of Nations (1776), Smith sets out to explore what defines the wealth of a nation, and how it is possible for a society constituted of self-interested individuals to remain intact (Heilbroner, 1999). To Smith, the answers to both of these questions lie in the market system: a system that goes beyond the traditional market of exchanging goods but instead constitutes a mechanism for sustaining and perpetuating an entire society (Heilbroner).
In his observation of the market, Smith incurred that man’s natural disposition of self-interest actually results in an outcome that is most profitable for the common-interest (Heilbroner, 1999). This is possible because all exchanges in the market are on a voluntary basis, and thus are always beneficial for both parties. The check on this process, that elevates it from self-gain to communal gain, is competition. Through competition self-interested individuals have a check on their hunger for profit and will have to obey to the “laws of the market” in order to gain what they seek. From this a self-regulating market is born that as if guided by an “invisible hand” tends prices and quantities to be in accordance with the supply and demand of society (Heilbroner). Moreover, this market is dynamic and constantly advances itself through increasing division of labour, resulting in more efficient production and thus wealth.
For Smith, the driving motor behind this entire process lies in human nature. The division of labour - from which all the benefits arise - is not something that man invented but rather a natural consequence of man’s self-interested nature (Smith, 1776). Hence, it is also a phenomenon that can, and according to Smith should, be studied independently of politics and society - the market works best when it follows its natural path and should thus not be interrupted by government policies.

John Stuart Mill
John Stuart Mill separated politics and economics through differentiating between the science and art of political economy. On the one hand political economy can be studied based on Ricardian scientific principles, while on the other hand political economy can be regarded as an art that needs to be mastered by applied utilitarianism (Riley, 1998). For Mill the science of political economy is concerned with the production of wealth, and is based on irrefutable scientific facts on how economic relations function. It is a field of study void of morals or value judgement. Mill points out however, that the distribution of wealth is not subject to any economic laws and should therefore be a concern of the art of political economy (Heilbroner, 1999).
The art of political economy takes the scientific principles as a starting point but consequently places them in a social context in which they can be made into concrete rules to promote general welfare based on moral utilitarian principles (Riley, 1998). Recognizing that competition is not enough to realize fair distribution in our uneven playing field, Mill proposed that the government should interfere to redistribute wealth to provide man with the 5 components of general welfare: security, equality, individuality, subsistence and abundance. The art of political economy is concerned with solving these issues as well as elevating the economic man to a more wholesome human that concerns itself with what Aristotle would call the good life (Riley).

Analysis
Although both thinker’s situated their thought in a historical context and often related back to society, their insistence on considering the studies separately has prefigured a total disintegration of the field. It can be stated that the split became complete with the rise of the thought of the marginalist school that came to dominate in the 1870s. Strapping politics completely from economics, the marginalists leave us with the homo economicus: a self-interested and classless individual operating in a society without history nor structure (Milonakis & Fine, 2008). Although clearly a fictional character the homo economicus has established himself as the protagonist in our conception of human nature, economics and society.
When Smith wrote The Wealth of Nations he observed the emergence of what we now call the industrial revolution. The tremendous change he witnessed in the English cities and the corresponding division of labour inspired him to ascribe this as an inevitable consequence of our own human nature. Karl Polyani however argues that we are constantly misreading the industrial revolution as we are tempted to only look at this historical event through a liberal economic lens (Polanyi, 1944). Taking into account societal factors, such as class differences, urban-rural differences and politics, a more complex and unnatural picture of this “revolution” comes into focus. Rather, the installment of the market economy was a slow and painful process of politically driven land enclosures, displacements of people, and the involuntary exchange of man’s sole left commodity of labour for a bare and tough existence (Polanyi). Polanyi essentially ties the advancement of economic processes in with political, cultural and social circumstances. To me this is essential to understand the world we live and to be able to evaluate economic policies. The split of the field of political economy has made economic thought into an export product that can and actively is being implemented in any given society. History however has proven to us that this universalization of economic theories has not only received much resistance, but also simply does not work as it does in the textbooks.
In conclusion, I personally think that in the separation of economic and political theory a lot of nuance is lost. Rather than studying reality, economics is all too often a performance in which assumptions of the functioning of markets are forcefully projected onto society. I believe that in the future, and the challenges that are posed to us a more intersectional approach - also beyond politics and economics - is quintessential.










References
Heilbroner, R. (1999)The Worldly Philosophers. The Lives, Times and Ideas of the Great Economic Thinkers. Penguin Books.
Milonakis, D. & Fine, B. (2008) "Marginalism and the Metodensreit". In From Political Economy to Economics.
Smith, A. (1776) An Inquiry into the Nature and Causes of the Wealth of Nations.
Polanyi, K. (1944). The Great Transformation.
Riley, J. (1998) “Mill’s Political Economy”. Chapter 8 in The Cambridge Companion to Mill (ed. John Skorupski), Cambridge University Press.