Prelude to Political Economy: A Study of the Social and Political Foundations of Economics

Prelude to Political Economy: A Study of the Social and Political Foundations of Economics

Prelude to Political Economy: A Study of the Social and Political Foundations of Economics

Prelude to Political Economy: A Study of the Social and Political Foundations of Economics

Synopsis

It is essential to view economics as embedded in politics and society. Prelude to Political Economy is a study of this embeddedness; it argues for an inclusive approach to institutions and the state.

Excerpt

This book is a critique of economics as social science. The need for such a critique stems not from the failure of economics but from its success, which has meant that the method of economics has spilled beyond its boundaries to many other social sciences. It is the anchor of the rapidly growing and varied concerns of the subject of law and economics; one sees its influence on the new institutionalism in sociology and anthropology; and, above all, it provides the foundations for the new positive political economy. This has led contemporary economists to ask questions that go well beyond traditional economics. These queries have resulted in plenty of answers; and, bolstered by this profusion, the literature has moved on rapidly.

The critique I am attempting in this book is unusual because it uses much of the same techniques that contemporary economics and positive political economy use. I rely on game theory, and more importantly, on game-theoretic reasoning. However, I do not share the confidence with which modern economists and political scientists have rushed to explain the rise and fall of nations, why one nation runs into a financial crisis and another not, why one economy remains stagnant and another takes off, why democracies appear when they do and do not when they do not. Seeing agreement among the practitioners, it is easy for the lay reader to believe that these answers must be right. But we must not forget that a group of people, all praising one another for their understanding of some phenomenon, can create a “cult effect, ” where knowledge is replaced by a shared illusion.

Contrary to the impression that the above paragraphs may create, this is an optimistic book. It is written in the belief that there is a large volume of knowledge that is within our grasp. And progress through this can enable us to craft better policy and, through that, a better society. What the book tries to do is to caution us that perhaps we are trying to move too fast, being too glib with our elegant tools of analysis. We have to be content with taking shorter steps as we advance to these larger questions concerning society and polity. And the hard part of this is not the mathematics, but the logic and reasoning over matters of conceptual intricacy. It must be recognized that markets and the economy are embedded in society, politics and the law; and an immense amount of research has to go into understanding the nature of this embedding before we can emerge with reliable answers. This is a large research agenda; and the present book is an attempt

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