I was introduced to your blog just this morning (May 12). While browsing I happened to read your post about Political Economy and I think this is what I want to pursue in college (I am a freshman of Class of 2018).
But I need to know better before I make any important decision, so could you explain what exactly Political Economy is, and how it is different from Liberal Economy and the “economy” that is being taught in college (and if possible, differences between these two sub-fields).
Concerning my major, I am oscillating between Economics and Political Science. That is partly because of career-related interests (what job to take if I took Pol Sci – according to my mother), and partly because I’m still uncertain which field suits me better. In some way, I seem interested in political issues but only those that directly affect economical well-being of the country’s population, like (for Vietnam) interest groups and what communism/capitalism has to do with anything, but not much in diplomatic issues like the war in Middle East or public policies like Obamacare.
Thanks to this reader’s question, it’s time for a very belated addendum to our Why Political Economics? series (here and here). Four years have gone by since the last instalment — and gone, too, are a lot of ideals and misunderstandings that I held as a second-year-in-college. So, here is a less wrong answer to Why Political Economics? from a second-year-in-PhD-studies.
I. The three types of Political Economy
Given its broad and deep lineage, the only appropriate definition of Political Economy is perhaps the study of how politics and economic decision-making intertwine. There have been three main traditions in the field.
First is mercantilism, which espouses the idea that statesmen should use economic policy to enhance their nations’ power. Mercantilism thrived in 16th-18th Europe, when the international system was thoroughly anarchic and populated with equally powerful countries. No one is ever sure about anyone else (Game of Thrones style), leading to frequent wars and ultimately the idea that economic policy is subservient to the survival of the states. While this mode of thinking has gone out of vogue a long time ago, we still see its remnants today in nationalist discourse under name of “protectionism.”
Second is the liberal economics that dominates economic thinking today. Its famous origin traces back to Adam Smith’s Wealth of Nations, which was a direct response to the prevailing mercantilist thoughts of his time. While common sensical today, Adam Smith was a radical to propose that free trade benefits all countries (thanks to comparative advantage), and that free market benefits everyone (thanks to free price being an effective way to transmit information about what’s needed and available in the economy). These ideas are still the bedrock of modern economics, yet at the same time the practices of today’s economists are nothing like Adam Smith. (We’ll revisit below).
Third is Marxist economics, which is in turn a critique of the capitalist economy that has been ushered in since Adam Smith’s ideas. Marx critiqued numerous aspects of a capitalist economy. One is the paradoxical crisis of production, when there are enough goods for everyone yet the workers are too destitute to buy them. Another is the alienation of labor, when individual man is but an inconsequential cog in the production line and thus unable to derive creative satisfaction from labor. Contrary to the mercantilist, for Marx, politics is subservient to economic powers: the ruling economic class promotes certain kinds of political and religious ideology in order to prolong its hegemony.
On the ruin of the Soviet Union, liberal economics raised its triumphant flag and became synonymous with Economics. Yet political economy as studied and practiced today is very unlike Adam Smith’s, and we will see how.
II. The ONE type of Political Economy (if you ask U.S. academics)
Over the 20th century economics has evolved several times in order to grapple with the gap between economic theory and reality.
Once staunch believers in free market, economists started to notice numerous market failures from causes such as natural monopoly (i.e. due to economy of scale) and informational asymmetry (i.e. sellers may have private information about the good that buyers don’t, in which case they can’t agree on a price). The existence of market failure seems to argue for government intervention. For example, the government may put in place anti-trust law or product quality regulations.
But yet again, economists noticed that governments fail, too. We view men as self-interested, maximizing actors in the economic realm — there is no reason why they would be altruistic and benevolent in the political arena. This is in fact and old idea, and as James Madison put it: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” Thus, a new area of study sprung up to take the economic assumptions (rational, self-maximizing agent) and methods (dominantly game theory) to investigate political behaviors. It is called Public Choice, and is what Political Economy means today.
III. So, should you study Political Economy / Political Science?
After learning a lot more about Political Economy, I am fortunate enough not to find out that I was wrong 4 years ago. I stood by the claim that, yes, it is foolish to study economic development (or any economic policy-making) without considering politics. The most that economics can give us is a description of various trade-offs, whereas which side of those trade-offs do nations end up choosing is fundamentally a political question.
Having said that, I do feel disappointed with my study of Political Economy, mainly because I came to it with very high expectation (you could see the exuding optimism in the previous instalments in the series.) I thought that if only I could get a PhD in Political Economy I would be able to finally know what countries like Vietnam would need to develop, what I could do to “change lives” and “make the world a better place.”
But development is hard. Many smart people have worked on it for years without a solution. And yet that’s not even the discouraging part. What’s more disheartening about social science is that we are not sure if we are getting any closer to the solution at all. That is because:
- Without the ability to do experiment (i.e. to re-run history) in order to hold all other factors constant, it is nigh-impossible to decisively conclude what factor is causing what.
- Yes, there is a surge in Randomized Control Trials in development economics but 1) due to real-world limitations there are certain things we cannot randomize (e.g. political system), and 2) a successful program may fail when scaled-up (basically political actors interfered when the program became a big pot of money).
- Social sciences study humans, and unlike atoms humans have intentions and wills that change. When something is proven in physics, it stays proven. There is no such law in economics and political science.
Of course, despite all these dead-ends the development industry continues to chug along anyway with a new way to change lives every few years. Like fashion, these development ideas come and go in circle with no clear sense of progress. Not only have we been ineffective, some would argue that developmental aid is downright harmful in some cases.
All in all, I think that Political Economy embodies the fundamentally correct insight that we need politics to understand development. However, let us not be mistaken (as I was) that we are anywhere close to achieving that understanding yet.
IV. So, should you major in Economics / Political Science?
Fascinatingly, even if you want to study Political Economy, it is not clear that you should major in Economics or Political Science.
It is important that you think about jobs. My college career was colored by my disdain for material things and my fascination with intellectual pursuit (as you can see from my old, college-era blog entries.) Looking back, I have to admit that I got the balance slightly wrong. Sure, big ideas are exhilarating, but I am not sure any amount of that can offset the months of stress unemployment will bring. (I applied for graduate school and was spared the entire ordeal, but I have seen way too many struggles.) Since most people would advise you to “try new things” and “expand your horizon,” I hope to bring back some perspective and urge you to think about where you want to be after 4 years of college. (Listen to this NPR broadcast about the economic return of different majors.)
The best way to prepare for that moment in 4 years is to learn skills, not facts. In this day and age, when everything can be looked up there is very little value in knowing a lot of facts about an area. In contrast, to learn technical skills you have to study sequentially (e.g. you need arithmetic before algebra before calculus), and the only time to do that well is in school.
(Note that even though I will be mainly talking about how to best prepare yourself as a worker, that is not the only goal of education. Minor in something that best prepare you as a human being and a citizen. In terms of social sciences / humanities, (for me) that means taking Intro to Econs, Microeconomics, Macroeconomics, a class on comparative political system, moral philosophy, and arts.)
Back to the main topic: depending on what job you want to get, below are your options.
First, if you want to get a private-sector job, a BA in political science is sort of worthless, and a BA in economics is only slightly less so (unless you go to a top research school OR work on frontier research with professors). The reason is that undergraduate political science training is heavily about facts and teach you little employable skills. Economics BA is slightly better since you will get to learn econometrics, but everything else you have to learn (e.g. microeconomic and macroeconomic theories) is of little value on the job market.
Having said that, employers do hire more Economics major, but not for the economic knowledge. Instead, the Econs label is simple a signal of quantitative skills. I thus recommend you to go straight to the quantitative skills (e.g. Econometrics, Statistics) and bypass all the economic theories that you will never use.
Second, if you want to work in the development sector, understand that it is a crowded field with low pay that typically requires post-graduate degrees. It is crowded with low pay for a reason, of course: many people are more than happy to make that sacrifice in order to do meaningful work. The best way to prepare is still to major in something quantitative (i.e. Statistics, Economics), but also take more of other electives, e.g. Political Science / Economics of Development / History, and get some development-related internships.
Third, even if you want to pursue a PhD in Political Economy, you should not major in BA Political Science. Not only are the readings in BA Political Science very outdated, the BA also does not prepare you for the increasingly quantitative and formal methods in PhD Political Science. So major in Statistics, maybe Computer Science, take multiple electives in Micro / Macroeconomics, study the area of Poli Sci that you are interested in,* and take some History classes for a reality check against the theoretical models in Econs and Poli Sci. Write a research paper in one of these electives in order to prove your interest in Political Economy and get good letters of recommendations. (You can read my entry on how to apply to PhD here.)
(* Political Science has 4 sub-fields: comparative politics (comparing systems across countries), American politics, International Relations, and Political Theory (i.e. political philosophy). If you are only interested in development, i.e. comparative politics, then it’s another reason not to major in Poli Sci so that you can bypass all the other stuffs.)
That was a lot to cover. These are the things I wish I had known four years ago, but no one was around to tell me. More troublesome is the fact that I still don’t see anyone telling college freshmen straight-talk about their career like this. Being straight talk, each paragraph of this entry can be controversial and should be more thoroughly argued in a blog post of its own. If there is any advice that does not seem clear of reasonable, I’d be happy to clarify.