Political economy

Political economy is the study of how political institutions and economic systems interact — how power shapes markets and how markets reshape power. It rejects the disciplinary separation that treats economics as the study of efficient allocation and politics as the study of who gets what, recognizing instead that every market is embedded in a political structure and every political system has distributional consequences that can be analyzed economically. The field spans political science and economics, drawing on both to analyze phenomena that neither discipline adequately addresses alone: regulatory capture, the political determinants of growth, and the rent-seeking behavior that transforms state power into private wealth.

The classical political economists — Smith, Marx, Mill — understood that markets are not natural phenomena but politically constructed institutions. Contemporary political economy has recovered this insight, analyzing how institutional design determines who captures the gains from trade and who bears the costs of adjustment. The most politically consequential question in any economy is not whether it is efficient but who it is efficient for.