Reflection paper on economics
The purpose of this reflection paper is to explain the role that economic systems and organization play roles in the study of the subject. Notably, economic systems and organizations are critical in the study of the subject. It will define and explain different economic systems and organizations by following the history of the subject. More importantly, the paper will discuss the political economy and the changes it is bringing to the study of economics at the national and international levels. It further explains the concern of political economy such as the economic and political process in a country, the distribution of power and wealth in a country and within different groups. At the same time, it will discuss the structures that create, sustain, and
Economic systems and economic organizations play a vital role in the study of economics? Please define and explain the importance of the different economic systems and economic organizations explained in the lecture and use examples to illustrate your points. Economics is a social science that studies economic activities such as product distribution, consumption, and the management of goods and services. These activities take place in purely free markets (capitalist), mixed economies (mix), or wholly planned economies (socialist). In mixed economies, some nations are capitalists with aspects of socialism and vice versa. Some of their characteristics include protection of labor and consumer rights, maintain aspects of central planning, and develop a system where the private and public sectors co-exist. On the other hand, centrally planned economies seek to control the accumulation of wealth in the hands of a few citizens that are common in capitalist societies. It aims to ensure that all members of a community have access to resources and wealth in an equal manner. However, the successes of these states in redistributing the wealth of a nation is not apparent, especially after countries such as China abandoned it and accepted market reforms in a socialist environment.
In central planning systems, the national government makes critical decisions on the economy. The national government decides the products the markets will produce and how to distribute them in the economy. Under a free-market economy, individuals respond to the needs of the market by understanding the needs (demands) of the people and supplying these needs (supply). Therefore, such a system does not operate under government direction. However, it relies on economic policies that the government gives especially fiscal and monetary policies. Fiscal policies address issues of taxation and the processes of government budgeting. They discuss the systems that the government uses to raise revenue to expend in a financial year. Additionally, monetary policies address the supply of money and control of interest rates, functions that are performed by central banks. The plans are critical in controlling inflation and promoting economic growth in a country.
- Political economy has been defined as the relationship between the market and the state. Please illustrate the importance of the political economy and how it relates to questions of inequality, such as the rise of patrimonial capitalism?
Proponents of the political-economic thought argue that the economy and politics are inseparable. It also insists that classical economics do not address the problems of capitalism, such as income inequality in the world. The idea is concerned with the economic, social, cultural, and economic-political interactions taking place in a nation. The principal shortcoming of classical economic analysis is that it separates the economy and the politics of a country that does not represent reality. Political economy favors a broader view about the economics of a nation apart from being a pure markets issue. It encourages a comprehensive understanding of the economy to include its social and political implications. The system encourages learners to appreciate the historical processes that have led to the modern economy as well as respect the structural and institutions that have shaped the current system. It seeks to establish who benefits from economics and the political existing in a country. The subject is interested in studying the state as the critical locus of power. In most cases, government policies shape markets, competition, and the protection of workers in the labor market.
In all capitalist societies, the economic activities in a country generate the resources that sustain political activities. For example, businesses generate the finances that fund the registration of voters who participate in elections to vote for political leaders. Public finances collected from taxes also pay the judiciary that meets to determine court cases arising from contract disputes. Moreover, although the policy formulation and implementation may cause some economic activities to prosper, the success may propel the advocates of the projects to political police. The achievements may also encourage a constituency to demand the continuation of the policy, and they can achieve the results by lobbying their elected representatives. Therefore, it is difficult to separate political forces from the economy and vice versa.
Unfortunately, the distribution of economic benefits in a society is one of the aspects of the issues that pure financial analysts ignore. Political economy places this issue at the center, and it is interested in understanding the gains and losses that essential stakeholders get from the implementation of economic policies. The changes provide clues on the groups and individuals that benefit from systems and the ones that may join a coalition to ensure that it is sustained in the long-term.
Political economy uses economic tools to study political phenomena. The political economy analysis assumes that political agents are rational while at the same time being self-seeking. Economists examine intelligent individual’s use of resources such as labor, capital, and land, among others at their disposal to maximize benefits to some stakeholders. For example, businesses use their wealth to maximize profitability or incomes. They achieve these objectives by participating in markets and the production of goods and services. It also examines how individuals maximize their utility by engaging in political processes in their communities and nations.
The subject of political economy is not new. Even the founding fathers of economics such as Adam Smith held that they were studying questions about political economy and addressing them in his book, the Wealth of Nations. Political economists are divided into classical and modern political economy. Classical political economists discuss the works of Adam Smith, Machiavelli, and Karl Marx while modern ones refer to the practices of Friedrich Hayek, Milton Freidman, and John Maynard Keynes.
The study of political economy is an interdisciplinary issue. It focuses on economics, sociology, and political science to understand how economic systems, the environment, and political institutions influence and affect each other. Modern political economy considers economic policies as suggestions or actions that are subject to further discussion. The approach focuses on societal wants and needs of the citizens. It also discusses the interests of the state and the markets. Moreover, the international aspect of the concept explains the relationship between economics and international relations. It focuses on understanding how states and global institutions use the globalization of the economies to shape political systems that support the plan.
The political economy assets that markets are social institutions that require the government to function. For example, the business community needs properly working courts to solve disputes that arise from contractual arrangements. At the same time, capitalist democracies depend on businesses to thrive. As a result, the private sector is essential in policymaking because governments need them to finance their operations. In most cases, political leaders develop public policies through the lenses of private enterprise because they need each other to survive.
Patrimonial capitalism is the culture of the economic elite that mostly attains their fortunes through inheritance and entrepreneurship or innovation.
During the 19th century, Karl Marx challenged the economic structure of the era because of the inequality that existed in society. Capitalism is continually generating unsustainable disparities that undermine the meritocratic values advanced by democratic societies.
Knowledge and skill diffusion is central to a reduction in inequality both within and between countries. The dissemination of knowledge depends on educational policies, access to training and the acquisition of appropriate skills and associated institutions.
Political economists are interested in knowing the stakeholders who abound to loss or gain from the implementation of specific policies. It is critical to know the stakeholders to understand how to engage them in the development of the systems and how to ensure that they gain from the process and minimize the negative consequences. Many interests inform the formation of policies in a country. Individuals in government may promote their economic interests and issues that perpetuate their chances of retaining power in a state. People who are not in government are more concerned with the impact of economic policies that a regime implements. Thus, political economics encourages society to advance ideas that can benefit the vast majority in the population other than serving self-interests. Such changes can change the world.