Political economy
Lecture 1
An introduction
Jan Fałkowski
Faculty of Economic Sciences, University of Warsaw
February-June 2010
Outline
• Basic information about the course
• General overview
– Salient questions
– Some historical background
– Political economy nowadays
2
Basic information about the course
• Jan Fałkowski
• [email protected]
• Office hours: fridays 13:30-14:30, room 401
• Written examination
• You have to recieve positive mark for tutorials
– Dr Katarzyna Metelska-Szaniawska,
[email protected]
– Fridays, 11:30-13:05, room 104
General overview –
aims of the course
• In general:
• Provide a broad introduction to current research in political
economy
• More specifically:
• Try to highlight
– the impact of politics on economic processes and outcomes,
– and the reciprocal influence of economic conditions on political
life
• Overview of the syllabus
General overview –
salient questions
• Why do we observe such a variation in economic policies
around the world/over time?
• Why and how institutional reform can be undertaken?
• What if we adopt the view that state has its own objective
function/represent the interests of some groups in the society
(landlords, workers, etc.)?
• What if we accept the notion that constitutions & democratic
rules are themselves equilibrium outcomes?
General overview –
historical background
• Precursor: Antoine de Montchretien 1615, Traite de
l’economie politique
• Starting from late XVIIth century (Adam Smith, David
Ricardo) political economy synonymous with
economics
• Closely related to philosophy
• Still influential in the beginning of XXth century
– Fathers of neoclassical economics still writing books with
‘political economy’ in the title and teaching political
economy (Menger, Marschall, Jevons, Pareto)
General overview –
historical background
• Economics organising itself into fields in early
XXth century
– Political economy defined a separate field in 1950s
– Anthony Downs (1957) „An Economic Theory of Democracy”
– Kenneth Arrow (1951) „Social Choice and Individual Values”
– Discussion of comparative economic systems
(1930s and 1940s)
• O. Lange, F. A. von Hayek, J. Schumpeter
– The Marxist project of social analysis
• ask your parents to name the most difficult/boring
subject during their studies…
General overview –
political economy nowadays
• What is political economy now?
– Interesting mixture
• things that have too much politics to be economics, too much
history to be politics, too much sociology to be history, and too
much economics to be sociology
– One of the most exciting and most lively field in economics
(observe the future nobel prize winners in economics)
General overview –
political economy nowadays
• In general:
– Complementing the focus of welfare economics
(optimal policies) with institution design and
policy implementation
– Strong microfoundations
– Interdisciplinary approach
– Number of assumptions from neoclassical
economics rejected (fully rational agent, perfect
information, etc.)
– Importantly drawing from „insitutional approach”
General overview –
political economy nowadays, theory
• Three separate pillars (Persson & Tabellini)
– theory of macroeconomic policy
• rationality, micro-foundations, but naive politics
– public choice
• agency, constitutions, interest groups, but naive methods
– rational choice (political science)
• collective choice procedures, but naive approach to policy
• Gradual improvements on theoretical front:
combining best of three approaches
General overview –
political economy nowadays, empirics
• Early work suffered from two problems (P&T)
– tests of theory not very precise
– lack of institutional detail
• Gradual improvements on empirical front
– more solid theoretical foundations
– better data
– concern with identifying causal effects: microeconometrics
– appreciation of findings in empirical political science
General overview –
main actors
• Voters
– Why do they vote/abstain? How do they vote?
• Politicians
– Who chooses to become politicians? What motivation do
they have to run for office?
• Parties
– What is political market structure? What policy platforms
do they offer? Who do they appeal to?
• Governments
– How is it formed? What actions it undertakes?
General overview –
main research fields
• Actions of governments as consequences of
political forces enabling acquiring and
maintaining power
• General equilibrium theory of political
economy
– All political variables endogenous, being outcomes
of decisions of individuals
• political vars. – legislature, politicians (candidates),
interest groups, governments, policies, constitutions
General overview –
tutorials
• Broad overview of the political economy
literature
• Discussing number of issues related to
development economics, macroeconomics,
welfare economics, public economics,
international economics
Thank you for your attention &
see you next week