THE TERM "POLITICAL ECONOMY" seems to have entered modern discourse for the first time in 1611 in a treatise on government by L. de Mayerne-Turquet (Groenewegen 1987, pp. 904-906). Four years later a fellow "Consultant Administrator," Antoyne de Montchretien, Sieur de Watteville (c.1575-1621), published his Traicte de I'oeconomie politique ( 1889), which though "a mediocre performance and completely lacking in originality" (Schumpeter 1954, p. 168), marks the beginning of an intellectual enterprise that has continued--with some large ups and downs--to this day. The object of that enterprise is to generalize Aristotle's [omicron][iota][kappa][omicron][nu][omicron][mu][iota][kappa][eta] ("economics") to the level of the [pi][omicron][lambda][iota][tau][epsilon][iota][alpha] ("commonwealth" or "state"). For in Aristotle's Politics (1967, pp. 31-32) "economics" is to be construed as "the art of household management" where "household" means a more or less self-sufficient, manorial estate. Hence at the outset "political economy" was an attempt to extend the art of estate management to the needs and resources of a modern nation state, of which France was in the 1600s the foremost example.
It was in this way that Sir James Steuart employed the term in his Inquiry into the Principles of Political (Economy ( 1966). Although Adam Smith rejected the enterprise as futile and harmful, he accepted the usage, but introduced an important analytical distinction between two senses of "political economy." In the normative sense understood by Smith's predecessors and contemporaries (i.e., prescriptions for running France like a manorial fief) the term signifies some "system" of public policy designed to "increase the riches and power" of a country ( 1976, paras. I.xi.n.1; II.5.31; IV.1.3). But in the positive sense that is now orthodox though often contested, "what is properly called Political OEconomy" is "a branch of the science of a statesman or legislator": namely "an inquiry," which is in principle disinterested and open-ended, into "the nature and causes of the wealth of nations" (IV.intro; IV.ix.38; emphasis added).
In this article I shall be concerned with the positive sense of "political economy": that is, as a body of theory that purports to explain economic phenomena. For whatever else has changed, one element of continuity that runs from the political economy of Montchretien and before to that of Joseph Stiglitz and beyond is its inescapable dependence upon theory of some kind.
Another element of continuity is the two-way street that runs between economic theory and political thought and action. In one direction, the "private interests and prejudices of particular orders of men"--not to mention the social and economic circumstances of their time and place--have given occasion to very different theories of political oeconomy," In the other, "[t]hese theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states" (Smith  1976, p. 11).
A complete intellectual history of the relation between economic and political ideas would look carefully in both directions: to the "context" of the conversation, as well as to the "text" of its recorded exchanges (Skinner 1969). However, I have argued elsewhere that a merely "internalist" attention to "text" can be justified for some purposes (Waterman 1998a, pp. 303-304, 312-313). In this article, therefore, I shall look in one direction only. I shall adopt a rigorously internalist approach, averting my eyes from wars, slumps, classes and cultures, and keeping them fixed on the logic of the ongoing economic-theory conversation. My purpose in so doing is to propose the following strong thesis for debate: The " 'new'political economies" of the present day differ sharply in their ideological implications from those of 50 years ago. …