Political economy also helps us understand the transformations,both positive and negative that have been brought about by globolisation process .
Political economy also points out the existence of class in a society,those who own the resources and means of production and how those resources are distributed in a society according to everyone’s level of income.
Key concepts in political economy
There are two main concepts,these are wealth and production
In understanding political economy,wealth comes in where countries have to resist inmports and boost exports inorder to maximize their wealth.A country should also offer protectionism to its infant industries and micro businesses
It should also support internal production and consumption to maximize their wealth because a lot of imports makes a country poor moreso the developing countries.
Opening of borders and free trade and investments should also be considered by a country that needs to maximize its gains.
Specialization boosts a countrys production,according to Adam smith huge efficiencies can be gainedby breaking down duties into small tasks ,each placed in the hands of a specialized individuals.This leaves a country with surplus that they can exchange with others or use to invest in different profit oriented projects or even invest in labor saving machinery to increase production Specialization also leads to acquisition of new skills .
A country is divided into different classes of people,the haves and the haves not the haves own resources and m,eans of production,and determine how resources are distributed in a society ,the haves not provide labor at a minimal wage to the haves.maximisation of exports amd minimization of imports also boosts a coutrys production.
Classical political economy
classical political economy is a school of thought in economics that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam Smith, David Ricardo,Thomas Robert Malthus and John Stuart Mill. These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange (famously captured by Adam Smith’s metaphor of the invisible hand)
Smith introduced the principle of a labour theory of value and a theory of distribution. Ricardo expanded upon both ideas in Principles of Political Economy and Taxation (1817). In his labour theory of value, Ricardo emphasized that the value i.e., price of goods produced and sold under competitive conditions tends to be proportionate to the labour costs incurred in producing them. Ricardo fully recognized, however, that over short periods price depends on supply and demand This notion became central to classical economics, as did Ricardo’s theory of distribution, which divided national product between three social classes: wages for labourers, profits for owners of capital, and rents for landlords. Taking the limited growth potential of any national economy as a given, Ricardo concluded that a particular social class could gain a larger share of the total product only at the expense of another.