This document outlines four major theoretical perspectives in political economy: classical liberalism, modern liberalism, conservatism, and radicalism. It discusses the key ideas and thinkers associated with each perspective. Classical liberalism focuses on individual choice and free markets. Modern liberalism shares this focus but also supports government intervention to ensure basic welfare. Conservatism views society as organic with hierarchical roles and supports tradition. Radicalism prioritizes collective interests over individual interests and an expansive government role. The document provides examples of influential thinkers from each perspective.

1. Theories of Political Economy
CHAPTER 3

2. Theoretical Perspectives of Political
Economy
The previous topic has already highlighted several theoretical perspectives. Some
of these theories continue to be influential, some survive in an alternate form and
some combine with allied approaches to form a new theoretical synthesis.
four major theoretical perspectives in contemporary discourse:
◦ Classical Liberalism
◦ Modern Liberalism
◦ Conservatism
◦ Radicalism

3. Classical Liberalism
Classical political economy, neoclassical economics, monetarism and other less
well-known but important schools of thought.
supply-side economics, transaction cost economics and public choice theory, can
all be said to be within the broad camp of classical liberalism.
Classical liberalism is a perspective that places priority on individual choice and
action.

4. Classical Liberal Thoughts
Human nature under the classical liberal perspective is assumed to be self
interested and rational. Rationality here means that the individual is fully capable
of rational thought, which would guide his behavior in satisfying his needs,
desires or interests.
The best economy, accordingly, is based on voluntary and free exchange
between autonomous individuals, while the government that governs the least is
the best form of government.
Classical liberalism believes in equality of opportunity more than equality of
result.

5. Liberal Thinkers of Liberalism
Friedrich Hayek (1899-1992) devoted much of his intellectual career in defense
of laissez-faire capitalism and free market against challenges from other
theoretical perspectives.
Hayek had no confidence in human reasoning. According to Hayek, human
capacity for rational thought provided the illusion that humans could have all the
correct knowledge for the purpose of rational planning of society.
Rational planning, after all, is the basis for government’s interventionist policies.

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Robert Nozick (1938-2002) The minimal state is one which has only one
legitimate function to safeguard property rights.
Nosik believes that all governmental activities are deemed to be illegitimate; the
only legitimate activity of government is the defense of its citizens from acts of
aggression by others.
Nozick began his theoretical formulation based on the idea of self-ownership.
Self-ownership argues that one person must not be used as means for another
person’s ends.

7. Modern Liberalism
Modern liberalism grew out from classical liberalism and without a doubt shares
classical liberalism’s commitment to individualism and the values of
Enlightenment.
Modern liberals, however, do not elevate individualism to the exclusion of other
values. Modern liberalism sees individualism as perhaps the most important, but
not the only value, to be defended.
The government has a duty to ensure that minimum material wealth exists for
individuals to fully exercise their rights and develop their talents.

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Government interferes in order to free individuals from both negative social
conditions such as extreme poverty or private oppression.
Modern liberalism opposes the use of state power to enforce moral standards of
behavior or to conform to community norms and expectations. It still firmly
believes in the negative rights of the individual.

9. Modern Liberal Thinkers
John Kenneth Galbraith (1908-2006) agreed with Hayek about the benefits
brought by market competition but argued that such a market only exists in
theoretical models and not in reality.
Price competition, which is the self-regulatory mechanism as assumed under the
model of competitive market, no longer works in a monopolistic market.
Under this kind of market, giant business firms are able to control the prices
more or less independently from competitive pressure.

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John Rawls (1921-2002), put forth the theoretical justification for some
redistribution of wealth, through what he called the veil of ignorance.
what kind of political-economic system is to be adopted for the society?
Rawls Says that rich person would prefer a system based on laissez-faire principles,
for self-interest would guide to make a choice that would maximize my own
wellbeing.
Poor person would prefer a system that redistributes wealth from the rich to the
poor, a system of high tax and welfare.

11. Conservatism
Conservatives look to society as an organic whole which justifies community and its
collective interests above individual interests. Individuals do not live as if they are
autonomous beings from each other and the society.
Individuals belong to different social groups that vary in position, power, function
and status. Each group has a unique role to play and to contribute in the society and
these roles are necessarily hierarchically defined.

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The primary role of the government therefore is to protect and uphold the natural
order of society. Institutions of the society that uphold the natural order of the
society, such as the family and established religion, should be provided special
care and support from the government.
Mercantilism and neo-mercantilism tend to be associated with the conservative
views on economic matters. However, modern-day conservatism today is much
more aligned with classical liberals.
Work ethic is the common ground here between conservatives and classical
liberals.

13. Radicalism
Socialism, Marxism, Leninism, anarchism and neo-Marxist theories such as
world system theory and dependency theory, are under the broad umbrella of the
radical perspective.
Under this perspective, people are assumed to be cooperative and caring by
nature. Individuals should, and have the ability to, care for themselves and for the
collective interests of the whole society.
Collective interests of the society therefore should take precedence over
individual self-interests, especially when upholding such self-interests become
detrimental to the overall well-being of society.

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Radicalism does not deny that individual interests exist and should be respected but
such interests should be subordinated to the collective interests and needs of society.
The government plays an expansive role. It wants to ensure each citizen has at least
a good life by providing them free or low-cost access to quality education,
healthcare, shelter, jobs and other assistance.

15. Radical Thinkers
Among the most innovative radical scholars are Paul Baran (1909-1964) and
Paul Sweezy (1910-2004), both of whom associated with the Monthly Review
group in the United States.
One of the key ideas of Baran and Sweezy is the changed character of capitalism
in the 20th century. Like Galbraith, Baran and Sweezy saw 20th-century
capitalism as different from 19th-century capitalism, the capitalism described by
Adam Smith and other classical liberals.
While 19th-century capitalism could be described as a competitive market
system, 20th-century capitalism was the stage of monopoly capitalism, best
exemplified by the rise of the giant corporation.

16. Con..
The arrival of manufacturing and modern machines furthermore significantly
expanded capitalist production. In the process, smaller weaker producers lost out
in competition to stronger and bigger producers, which resulted in only a few
giants left to dominate the markets.
Chronic excess capacity, under consumption, underemployment of labor and
what economists generally call stagnation, have become the general tendency in
monopoly capitalism.

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Competition is not totally eliminated between the giant corporations. However,
rather than competing through price, they now compete through sales promotion.
Giant firms devote large parts of their resources to advertising, marketing, public
relations consultancy, lobbying and continuous and relentless efforts at product
differentiation.
Sales promotion is aimed at increasing effective demand and to encourage a
consumerist culture. It is meant to increase the wants, not the needs, of society and
ultimately, according to Marxist theorists, it is part of the unproductive labor of the
capitalist system.

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The public sector, the government in a capitalist system counters the stagnation
tendency by absorbing parts of the surplus in the form of spending on welfare and
warfare.
Welfare spending is needed to pacify workers, as a bargain for them to accept the
capitalist system and turn away from revolutionary politics.
Warfare spending is required for capitalist states in their search and securing of
overseas markets and resources, and in their control of dependent countries.

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The economic depression of monopoly capitalism therefore is only cured by the
continuous multiplication of huge waste in both private and public sectors of the
economic system.
it is a common thread running through all radical perspectives that capitalist
profit-maximization for the benefits of the property owners should cease to
become the operating principle of an economic system.
it should be replaced by something that promises eradication of poverty, welfare
of all citizens, and greater sharing of economic wealth.