The palgrave handbook of political economy

We are also grateful to the Cambridge Research Seminar in Political Economy at Emmanuel College and the Cambridge Seminar in the History of Economic Analysis at Clare Hall CAMHIST for ho

The Palgrave Handbook

of Political Economy

Edited by

Ivano Cardinale · Roberto Scazzieri

The Palgrave Handbook of Political Economy

Ivano Cardinale · Roberto Scazzieri

Editors

The Palgrave

Handbook of Political

Economy

National Lincei Academy Rome, Italy

and Clare Hall and Gonville and Caius College Cambridge, UK

ISBN 978-1-137-44253-6 ISBN 978-1-137-44254-3 (eBook)

https://doi.org/10.1057/978-1-137-44254-3

Library of Congress Control Number: 2018936587

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Preface

The aim of this Handbook is to outline the field of political economy as the

domain of the interdependencies between the objectives of individuals and groups within the polity and the internally structured constraints, posed by

the material sphere, to the attainment of those objectives This Handbook

transcends the received dichotomy between political economy as an cation of rational choice theory or as the study of the causes of material wel-fare, outlining a broader field of study that encompasses those traditions

appli-The Handbook is divided into three parts appli-The first part (‘Foundations’)

addresses the areas of social life underlying the provision of material needs through social coordination The second part (‘Research Themes’) reassesses the fields of interaction between the economy and the polity on which political economy is built The third part (‘Ways Ahead’) outlines a theory of political economy that brings together means-ends action and the interdependencies underlying the provision of needs

The Handbook aims to provide new categories of analysis, which are

grounded in the traditions of political economy and highlight its standing as

a central component of social science

London, UK

Bologna, Italy Roberto ScazzieriIvano Cardinale

Acknowledgements

We wish to express our gratitude to the institutions that have provided the academic freedom and intellectual environment without which this volume would not have been possible Ivano Cardinale is grateful to Goldsmiths, University of London, and to Emmanuel College, Cambridge; Roberto Scazzieri to the University of Bologna, the National Lincei Academy, Rome, and to Clare Hall and Gonville and Caius College, Cambridge We are also grateful to the Cambridge Research Seminar in Political Economy at Emmanuel College and the Cambridge Seminar in the History of Economic Analysis at Clare Hall (CAMHIST) for hosting meetings that have

contributed to shaping this Handbook.

Finally, and most importantly, we are grateful to the colleagues who have shared our objective to reassess the field of political economy and envision its future directions

Contents

Ivano Cardinale and Roberto Scazzieri

Part I Foundations

Vincent Dubois

Jeremy Adelman and Jessica Mack

Part II Research Themes

Roberto Scazzieri

11 Industrial Structure and Political Outcomes: The Case

Thomas Ferguson, Paul Jorgensen and Jie Chen

Bruno Amable

Patrizio Bianchi and Sandrine Labory

14 Political Economy of Liquidity: The European Economic

Alberto Quadrio-Curzio and Fausta Pellizzari

Michael Landesmann

Part III Ways Ahead

Ivano Cardinale and Roberto Scazzieri

Notes on Contributors

Jeremy Adelman is Henry Charles Lea Professor of History, Princeton University, Princeton and Director of the Global History Laboratory at Princeton University His research has concentrated on economic and social transformation at the world scale, and on the asymmetries between centre and periphery that this process entailed This research programme has taken him to investigate the patterns of agricultural development in Argentina and Canada at the turn of the twentieth century, and the constitutional and legal developments that accompanied the formation of a modern commer-cial republic in Argentina In his later research, he investigated the wider issue of the political economy of State formation in the Iberian Atlantic and the intellectual contribution of Albert Hirschman to the analysis of the triadic relationship between economic development, political constitu-

tionalism, and intellectual modernity He published Frontier Development:

Land, Labour, and Capital on the Wheatlands of Argentina and Canada (1890–1914) (Oxford, Clarendon Press, 1994), Republic of Capital: Buenos Aires and the Legal Transformation of the Atlantic World (Stanford (CA),

Stanford University Press, 1999), Sovereignty and Revolution in the Iberian

Atlantic (Princeton (NJ), Princeton University Press, 2006), The Odyssey of Albert O Hirschman (Princeton (NJ), Princeton University Press, 2013) He

also edited Essays in Argentine Labour History, 1870–1930 (Basingstoke and London, Macmillan, 1992), and The Essential Hirschman, with an introduc-

tion by Jeremy Adelman; afterword by Emma Rothschild and Amartya Sen (Princeton, NJ, and Oxford, Princeton University Press, 2013)

xiv Notes on Contributors

Bruno Amable is Professor of Economics at the University of Geneva, Switzerland He has been Professor of Economics at the University Paris 1 (Panthéon Sorbonne) and Paris School of Economics His research interest

in the political economy of economic policy led him to investigate the role

of patterns of economic governance in triggering innovation and growth

He then outlined alternative types of socio-economic organization cally implemented in capitalist economies, and investigated the effectiveness

histori-of ‘neo-liberal’ economic policies in promoting innovation and ity growth His current research deals with institutional complementarities

productiv-as shown by the comparative analysis of capitalist economies and with the political economy of labour markets and industrial relations He published

many research papers and the books Les Systèmes d’innovation à l’ère de la

globalisation, co-authored with R Barré and R Boyer (Paris, Economica,

1997), The Diversity of Modern Capitalism (Oxford, Oxford University Press, 2003), L’Économie politique du néolibéralisme Le cas de la France et de l’Italie,

co-authored with E Guillaud et S Palombarini (Paris, Editions Rue d’Ulm,

2012), Libéralisation, innovation et croissance Faut-il vraiment les associer?, co-authored with I Ledezma (Paris, Editions Rue d’Ulm, 2015), Structural

Crisis and Institutional Change in Modern Capitalism: French Capitalism in Transition (Oxford, Oxford University Press, 2017).

Patrizio Bianchi is Professor of Industrial Economics at the University

of Ferrara, Italy and Minister for Education and Research in the Romagna Region, Italy He is Economic Advisor for the development of the Guang Dong Province, China His research has dealt with the relationship between market power and the organization of manufacturing production starting with Adam Smith’s distinction between ‘work done’ and ‘work to

Emilia-be done’ In this light, he investigated the global restructuring of the motive industry in the 1980s, the scope for industrial policies after the early 2000s economic crisis, and the new industrial policies of the European Union He also examined the Italian path of economic development since Italian Unification paying attention to the internal asymmetries associated with the integration process His current research deals with the organiza-tional and policy requirements of the digital economy, the relationship between customized mass-production manufacturing regime and data sci-ence, and the political economy of the social transformation induced by the new manufacturing regime His publications include many research papers

auto-and the volumes Divisione del lavoro e ristrutturazione industriale (Bologna,

Il Mulino, 1984), Produzione e potere di mercato Saggi di economia

industri-ale (Bologna, Il Mulino, 1991), Industrial Policies and Economic Integration:

Notes on Contributors xv

Learning from European Experiences (London and New York, Routledge,

1998), Industrial Policy After the Crisis: Seizing the Future, co-authored

with S Labory (Cheltenham, UK and Northampton (MA), Elgar, 2011),

Towards a New Industrial Policy, co-authored with S Labory (Milano,

McGraw Hill Education, 2016), Il cammino e le orme Industria e politica

alle origini dell’Italia contemporanea (Bologna, Il Mulino, 2017), and 4.0: La nuova rivoluzione industriale (Bologna, Il Mulino 2018).

Robert Boyer is Economist at the Institut des Amériques, Vanves, France He is Former Director of Research at the French National Centre for Scientific Research (CNRS) and Professor at the School for Advanced Studies in the Social Sciences (EHESS) His research is primarily con-cerned with the transformation of economic regularities in the long period and investigated the changes in the modes of socio-economic regulation

of capitalist economies across different historical phases and national texts In this connection, he paid special attention to transformations in the institutional mechanism of macroeconomic coordination regulating the relationship between industrial relations (wage contracts), innovation sys-tems, monetary and financial regimes, and the international economy His recent research also investigated the institutional and macro-social foun-

con-dations of the microeconomy He published Accumulation Inflation, Crises,

co-authored with Jacques Mistral (Paris: Presses universitaires de France,

1983), La théorie de la régulation: une analyse critique (Paris, La Découverte, 1986), After Fordism, co-authored with Jean-Pierre Durand (London and Basingstoke, Macmillan, 1997), La théorie de la régulation Les fondamen-

taux (Paris, La Découverte, 2004), Une théorie du capitalisme est-elle ble? (Paris, Odile Jacob, 2004), Les financiers détruiront-ils le capitalisme?

possi-(Paris, Économica, 2011), Économie politique des capitalismes Théorie de la

régulation et des crises (Paris, La Découverte, 2015) He also co-edited (with

J Rogers Hollingsworth) Contemporary Capitalism: The Embeddedness of

Institutions (Cambridge, Cambridge University Press, 1998); with Michel

Freyssenet, Les modèles productifs (Paris, La découverte, 2000); and with Yves Saillard, Regulation Theory: The State of the Art (London, Routledge, 2002).

Ivano Cardinale is Lecturer in Economics at Goldsmiths, University of London, and Life Member of Clare Hall, Cambridge He was previously

a Research Fellow (Mead Fellow in Economics) at Emmanuel College, Cambridge He was the founding principal convener of the Cambridge Seminar in Political Economy at Emmanuel College, Cambridge His research deals with foundational issues at the interface between economics, political economy, and social theory He uses models of structural economic

xvi Notes on Contributors

analysis to question received results of micro and macroeconomics He also uses such models in a political economy setting, to unveil largely unexplored conflicts of interest—and possibilities for cooperation—between actors at different levels of aggregation (such as social groups and industrial sectors) His research in social theory has been devoted to developing a theory of how agency and structure interact within human action These research lines are part of a broader programme—“Structural Political Economy”—which explores how social and economic structures interact with actors’ decisions

in shaping the structure of economic interests, their political tion, and the political economy paths open to societies He is also interested

representa-in the comparative analysis of economic theories, He has published eral research papers, including ‘Structural Liquidity’, co-authored with R Scazzieri (Structural Change and Economic Dynamics, 2016), ‘Exploring Sectoral Conflicts of Interests in the Eurozone: A Structural Political

sev-Economy Approach’, co-authored with M Landesmann (WIIW Essays and

Occasional Papers, 2016) and ‘Beyond Constraining and Enabling: Toward

New Microfoundations for Institutional Theory’ (Academy of Management

Review, 2018) He co-edited (with D Coffman and R Scazzieri) The Political Economy of the Eurozone (Cambridge, Cambridge University Press,

2017)

Jie Chen is University Statistician at the University of Massachusetts, Boston and a co-director of the Research Design and Analysis Core for the UMass Boston/Dana-Farber/Harvard Cancer Center Partnership Program, funded by the National Institute of Health She published extensively on scan statistics, applied probability, and Bayesian spatial models She also served as a statistical consultant on numerous collaborative projects in both the natural and social sciences She received the B.S from Peking University

in 1986 and the Ph.D in statistics from University of Connecticut in 1998

D’Maris Coffman is Professor of Economics and Finance of the Built Environment and Director of The Bartlett School of Construction and Project Management, University College London She has been Mary Bateson Research Fellow in History at Newnham College, Cambridge, then Fellow and Director of Studies in the same College She also was Founding Director of the Centre for Financial History, Newnham College (2008–2014) Her research interests include the history of British public finance, historical fiscal sociology, the political economy of monetary policy, and the origins of modern infrastructure At the core of her work is the exploration

of the relationship between markets and the institutional-political order of society This approach led her to investigate the formation and management

Notes on Contributors xvii

of public debt in seventeenth century Britain, the institutional sites for the rise of financial capitalism, and the relationship between fiscal arrangements and the relative weight of different interest groups in eight-eenth century Britain and France In her current research, she also investi-gates the political economy of infrastructural investment in contemporary

pre-requi-economies She published Excise Taxation and the Origins of Public Debt (Basingstoke, Palgrave Macmillan, 2013), and co-edited The History of

Financial Crises (London; New York: Routledge, 4 volumes) with L Neal, Questioning Credible Commitment: Perspectives on the Rise of Financial Capitalism (Cambridge, Cambridge University Press, 2013) with A Leonard

and L Neal, The Atlantic World (London, Routledge, 2015) with A Leonard and W O’Reilly, and The Political Economy of the Eurozone (Cambridge,

Cambridge University Press, 2017) with I Cardinale and R Scazzieri

Martin Daunton is Emeritus Professor of History, Faculty of History, University of Cambridge Former Master of Trinity Hall, Cambridge, and Former Head of the School of the Humanities and Social Sciences University of Cambridge Past President of the Royal Historical Society (UK) His research interests in the economic and social history of Britain made him to study the social history of mining and housing and the rela-tionship between consumer culture and citizenship in the modern Western experience His subsequent research investigated welfare policy and the pol-itics of taxation in nineteenth and twentieth century Britain, and the con-struction of economic and social knowledge His current work deals with international political economy and the governance of the world economy since the 1930s He is also investigating the relationship between intergen-erational justice and economic development He published, among others,

Progress and Poverty: An Economic and Social History of Britain, 1700–1850

(Oxford, Oxford University Press, 1995), Trusting Leviathan: The Politics of

Taxation in Britain, 1799–1914 (Cambridge, Cambridge University Press,

2001), Just Taxes: The Politics of Taxation in Britain, 1914–1979 (Cambridge, Cambridge University Press, 2002), Wealth and Welfare: An Economic and

Social History of Britain, 1851–1951 (Oxford, Oxford University Press,

2007) He also edited several scholarly collections, such as Worlds of Political

Economy: Knowledge and Power in the Nineteenth and Twentieth Centuries,

co-edited with F Trentmann (Basingstoke, Palgrave Macmillan, 2004),

The Oxford Handbook on the World Trade Organization, co-edited with A

Narlikar and R M Stern (Oxford and New York, 2012), and The Political

Economy of Public Finance: Taxation, State Spending and Debt since the 1970s,

xviii Notes on Contributors

co-edited with M Buggeln and A Nutzenadel (Cambridge, Cambridge University Press, 2017)

Vincent Dubois is Professor of Sociology and Political Science, University

of Strasbourg and Associate Member of the Centre for European Sociology founded by Pierre Bourdieu He has been Florence Gould Member at the Institute for Advanced Study, Princeton His research deals with the the-ory of the State and investigates public policy as a type of action embedded

in a system of relationships This approach has led him to view the policy domain as a field defined by the interdependence between different groups

of stakeholders (such as bureaucracies, professional organisations, and experts), whose mode of interaction influences in a critical way the defini-tion and implementation of policies His research has dealt with the soci-ology and politics of culture, the politics of language, the public policies towards destitution His current work investigates the policies of social pro-

tection His publications include Institutions et politiques culturelles locales:

éléments pour une recherche socio-historique (Paris, Ministère de la culture,

Comité d’histoire, 1996), La politique culturelle: genèse d’une catégorie

d’in-tervention publique (Paris, Belin, 1999), La vie au guichet Relations cratiques et traitement de la misère, 3rd edition (Paris, Economica, 1999), The Bureaucrat and the Poor: Encounters in French Welfare Offices (Farnham,

bureau-Ashgate, 2010), La politique culturelle: genèse d’une catégorie

d’interven-tion publique (Paris, Belin, 2012), The Sociology of Wind Bands Amateur Music Between Cultural Domination and Autonomy, co-authored with

J.-M Méon and E Pierru (Farnham, Surrey, England and Burlington, VT,

Ashgate, 2013), Culture as a Vocation: Sociology of Career Choices in Cultural

Management (London, Routledge, 2015), La vie au guichet, administrer la misère (Paris, Éditions Points, 2015).

Thomas Ferguson is Emeritus Professor of Political Science, University of Massachusetts Boston He is also Director of Research of the Institute for New Economic Thinking and Senior Fellow at the Roosevelt Institute His research deals with the interplay between economic and political interests and is focused on the idea that party competition in the electoral process reflects the differentiation of economic interests within the wealthiest strata

of society At the core of this research programme is the consideration of the cost of elections in mass democracy, which makes political parties to compete for economic support from wealthy sponsors as well as for votes

in elections In his current research, he investigates the relationship between money and politics focusing on the influence of financial sponsorship on the

Notes on Contributors xix

outcomes of US elections His publications include many scholarly papers

and the books Right Turn: The Decline of the Democrats and the Future of

American Politics, co-authored with J Rogers (New York, Hill and Wang,

1986) and Golden Rule: The Investment Theory of Party Competition and

the Logic of Money-driven Political Systems (Chicago, University of Chicago

Press, 1995) He co-edited, with J Rogers, The Hidden Election: Politics and

Economics in the 1980 Presidential Campaign (New York, Pantheon Books,

1981), and The Political Economy: Readings in the Politics and Economics of

American Public Policy (New York, M.E Sharpe, 1984), and, with Louis

Ferleger, Voting in American Elections: The Shaping of the American Political

Universe since 1788, authored by Walter Dean Burnham (Bethesda,

Academica Press, 2010)

Wang Hui is Changjiang Scholar Professor in the Department of Chinese Literature and the Department of History, Tsinghua University, Beijing and Director of the Tsinghua Institute for Advanced Study in the Humanities and Social Sciences, Beijing His research interests in alternative paths of economic, social and intellectual history led him to investigate the Chinese experience from the point of view of world history, economics and politics

By this route, he examined the twinned processes of modernization in lectual and economic history from the Enlightenment to the contemporary age, and explored the intellectual and political ways by which markets and market ideology have exerted a critical influence on social transformation processes both in China and in the West His recent publications include

intel-China’s New Order: Society, Politics, and Economy in Transition (Cambridge,

Mass., Harvard University Press, 2003), The End of the Revolution (London and New York, Verso, 2010), The Politics of Imagining Asia, ed Theodore Huters (Cambridge, Mass., Harvard University Press, 2011), China from

Empire to Nation-State (Cambridge, Mass, Harvard University Press,

2015), The Rise of Modern Chinese Thought (4 volumes, in Chinese, Beijing, SDX Joint Publishing Company, 2004), The Short Twentieth Century: The

Chinese Revolution and the Logic of Politics (in Chinese, Hong Kong, Oxford

University Press, 2015), China’s Twentieth Century (London and New York,

Verso, 2016) He is the winner of “2013 Luca Pacioli Prize”

Paul Jorgensen is Assistant Professor of political science at the University of Texas Rio Grande Valley in Edinburg, Texas His research interests include campaign finance, party politics, lobbying, policy formulation, and politi-cal economy With funding and support from the Edmond J Safra Center for Ethics at Harvard University (2011–2013) and the Institute for New

xx Notes on Contributors

Economic Thinking (2012–2017), Jorgensen is improving campaign finance data collected by the Federal Election Commission, the Internal Revenue Service, and various state-level agencies His research appeared in

the International Journal of Political Economy, the Journal of Law, Medicine

& Ethics, the Journal of Political Marketing, Policy Studies Journal, Political Research Quarterly, and Social Science Quarterly.

Sandrine Labory is Professor of the Analysis of Productive Sectors and

of Industrial Policy and Sustainability at the University of Ferrara, Italy She has been Research Fellow of the Centre for European Policy Studies, Brussels Her research interests in long-term industrial policy, industrial clusters and innovation policy made her to investigate intangible assets and local development, the industrial policy response to economic crisis, and the institutional framework of industrial policies Her publications include

research papers in her field and the books Industrial Policy After the Crisis:

Seizing the Future, co-authored with P Bianchi (Cheltenham, UK and

Northampton (MA), Elgar, 2011) and Towards a New Industrial Policy,

co-authored with P Bianchi (Milano, McGraw Hill Education, 2016)

University, Linz, and Fellow of the National Lincei Academy, Rome; mer Scientific Director of the Vienna Institute for International Economics Studies (WIIW) He received a D.Phil in Economics from the University of Oxford and was Research Officer at the Department of Applied Economics, and Fellow of Jesus College, University of Cambridge His research interests have focused on production theory, the dynamics of production systems, the European economy and European economic integration, international trade and international political economy His current research deals with chang-ing patterns of international trade specialization, the structural dynamics of the European economy, and the political economy of the European Union

for-His publications include, apart from many academic papers, Industrial

Restructuring and Trade Reorientation in Eastern Europe, co-edited with I

Székely (Cambridge, Cambridge University Press, 1995), Production and

Economic Dynamics, co-edited with R Scazzieri (Cambridge, Cambridge

University Press, 1996; paperback edn 2009), Unemployment in Europe,

Proceedings of a Conference held by Confederation of European Economic Associations, Vienna, Austria, co-edited with K Pichelmann (Basingstoke

and London, Macmillan Press; New York, St Martin’s Press, 2000), The

Economics of Structural Change, co-edited with M Landesmann and R

Scazzieri (Cheltenham, UK, Edward Elgar, 2003), Shaping the New Europe:

Economic Policy Challenges of European Union Enlargement, co-edited with

Notes on Contributors xxi

D K Rosati, Houndmills, Basingstoke, Hampshire, and New York, Palgrave

Macmillan, 2004), Mathematical Economics and the Dynamics of Capitalism:

Goodwin’s Legacy Continued, co-edited with P Flaschel (London and New

York, Routledge, 2008)

Jessica Mack is a Ph.D Candidate in the Department of History at Princeton University Her research examines the historical relationships between higher education, the state, and the public sphere Her cur-rent work traces the intellectual and political history of the National Autonomous University of Mexico (UNAM) as it was spatially reconfigured

on a new midcentury campus

Rainer Masera is Professor of Economic Policy and Dean of the Faculty of Economics, Guglielmo Marconi University, former Minister for the Budget and Plan, Italy He received a D.Phil in Economics from the University

of Oxford, where he worked under the supervision of John Hicks He has been Executive Officer of the Bank of International Settlements, Head of Research at the Bank of Italy, Director of Istituto Mobiliare Italiano, and President of the Italian Railways Network His research interests in mone-tary and banking theory and policy made him to investigate the temporal structure of interest rates, European monetary integration, and the relation-ship between liquidity policy and macroeconomic adjustment His current research deals with the macroeconomics of medium-term adjustment and

prudential monetary policies His publications include The Term Structure of

Interest Rates; An Expectations Model Tested on Post-War Italian data (Oxford,

Clarendon Press, 1972), Households’ Saving and the Real Rate of Interest:

The Italian Experience, 1970–1983, (Bank of Italy, Temi di discussione,

1985, with E Lecaldano and G Marotta), An Increasing Role for the ECU:

A Character in Search of a Script (Princeton, N.J., Essays in International Finance, n 167, 1987), Bank Capital Standards: A Critical Review (LSE

Financial Markets Group paper series, 215, 2012) He also edited The Great

Financial Crisis: Economics, Regulation and Risk (Roma, Bancaria, 2009), and

co-edited Europe’s Money: Problems of European Monetary Coordination and

Integration (Oxford, Clarendon Press, 1984, with R Triffin) and Does One Size fit All?: Basel Rules and SME Financing (Bologna, Il Mulino, 2014, with

R Guida)

Craig Muldrew is Professor of History, Faculty of History, University of Cambridge, and Fellow of The Queens’ College, Cambridge His research interests in the early modern formation of the capitalist economy made him

to investigate the relationship between credit and trust in a society heavily

xxii Notes on Contributors

dependent on debt-credit relationships and the role of obligation and worthiness in an expanding commercial society In a parallel line of inquiry,

trust-he examined ttrust-he material living standards of agricultural labourers in ttrust-he early modern English economy His current research further develops the above fields and investigates the transformation of obligation to self-con-trol in early modern British society and the consequences of this process

on the internal structure of communities and the formation of savings In this connection, he is also studying the contribution of Classical Political Economy, and of Adam Smith in particular, to the formation of a cul-tural set-up emphasizing the individual virtues of self-command and pru-dence, and thus meeting the needs of expanding financial relationships His

publications include many research papers and the volumes The Economy

of Obligation: The Culture of Credit and Social Relations in Early Modern England (Basingstoke, Macmillan, 1998) and Food, Energy and The Creation

of Industriousness: Work and Material Culture in Agrarian England, 1550–

1780 (Cambridge, Cambridge University Press, 2011) He also co-edited,

with Angiolina Arrau and M R De Rosa, Debiti e crediti, special issue of the journal Quaderni Storici 137 (2011).

Adrian Pabst is Reader in Politics in the School of Politics and International Relations at the University of Kent, Canterbury and Fellow of the National Institute of Economic and Social Research (NIESR), London

He received his Ph.D from the University of Cambridge and subsequently held a Leverhulme Early Career Fellowship at the University of Nottingham His research interests at the interface of political theory and political econ-omy focus on the relationship between social ties, political arrangements and different kinds of associations His work has addressed the liberal par-adigm of socio-economic relationships and its consequences at the sub-na-tional, national, and international levels He also investigated the theory

of civil society and its implications for political economy while exploring,

in a parallel development, the political economy of constitutional ments His current research deals with the constitutional premises of a polit-ical economy founded on ties embedded in civil society rather than only

settle-on the formal commitments of csettle-ontractual obligatisettle-ons He is planning to further this investigation into a critique of the dominant (exchange-based) model of European integration and into a wider analysis of the prospects

of a Commonwealth of Europe in a world of market-states and kets His publications include many research papers in international jour-

state-mar-nals, including Constitutional Political Economy and International Review of

Economics He is the author of two monographs, Metaphysics: The Creation of

Notes on Contributors xxiii

Hierarchy (Grand Rapids, Michigan, W.B Eerdmans, 2012) and The Politics

of Virtue: Post-liberalism and the Human Future, co-authored with J Milbank

(London, Rowman & Littlefield International, 2016) He also edited The

Crisis of Global Capitalism (Eugene, Oregon, Wipf & Stock, 2011) and Blue Labour: Forging a New Politics (London, I.B Tauris, 2015).

Fausta Pellizzari is Professor of Economics at the Catholic University of Milan Her research interests in the economic theory of natural resources and in related issues of economic dynamics made her to investigate both cri-teria of optimum resource utilization within the rational choice framework and dynamic constraints and/or opportunities within the structural mul-ti-sectoral framework Her current research deals with sustainability, distri-bution and welfare, and with the measurement of economic development in view of environmental objectives and constraints Her publications include

research papers and the volumes La teoria economica delle risorse naturali (Milan, Angeli, 1985), Introduzione all’analisi di sistemi economici multisetto-

riali (Milan, Vita e pensiero, 1987), and Rent, Resources, Technologies,

co-au-thored with A Quadrio Curzio (Berlin, Springer, 1999)

Alberto Quadrio-Curzio is President of the National Lincei Academy, Rome and Emeritus Professor of Political Economy, Catholic University of Milan where he was Dean of the Faculty of Political Sciences He is Member

of the Academia Europaea and of the Board of the International Balzan Prize Foundation and coordinated the G7 Academies 2017 meeting at the Lincei Academy His research interests in the theory of production and economic dynamics, the long-term structural changes of economic systems, and the antagonism-coexistence between producibility and scarcity made him to explore the role of material and immaterial resources in income distribution and the medium- and long-term evolution of multi-sectoral economic sys-tems subject to the constraints and opportunities of resource utilization His current research deals with the institutional framework of structural change, the financial and infrastructural conditions for economic growth, and the political economy of resource utilization His publications include many

research papers and the volumes Rendita e distribuzione in un modello

eco-nomico plurisettoriale (Milan, Giuffré, 1967), Rent, Resources, Technologies,

co-authored with F Pellizzari (Berlin-Heidelberg, Springer-Verlag, 1999),

Sovereign Wealth Funds A Complete Guide to State-owned Investment Funds,

co-authored with V Miceli (Petersfield, UK, Harriman House, 2010), He

edited The Gold Problem: Economic Perspectives, Proceedings of the World

Conference on Gold, held in Rome, 1982 (Oxford, Oxford University Press,

1982), and co-edited Protagonisti del pensiero economico, vols 1–4 (Bologna,

xxiv Notes on Contributors

Il Mulino, 1977–1982, with R Scazzieri), The Agro-Technological System

towards 2000: A European Perspective (Amsterdam, North-Holland, 1988;

with G Antonelli), and Innovation, Resources and Economic Growth (Berlin,

Springer Verlag, 1994, with M Fortis and R Zoboli)

Sophus A Reinert is Associate Professor of Business Administration, Harvard Business School He has been Research Fellow and Affiliated Lecturer in history, Gonville and Caius College, Cambridge He is a Junior Fellow of the American Academy of Political and Social Sciences and has been a Carl Schurz Fellow at the University of Erfurt, Germany and a Fellow of the Einaudi Foundation in Turin, Italy, His research interests

in the twin historical dynamics of the capitalist economy and of cal economy made him to explore the relationship between globalization and national competitiveness in the early modern development of eco-nomic thought He published several research papers, including ‘Lessons

politi-on the Rise and Fall of Great Powers: Cpoliti-onquest, Commerce, and Decline

in Enlightenment Italy’, American Historical Review (2010) and the ume Translating Empire: Emulation and the Origins of Political Economy

vol-(Cambridge, Mass and London, Harvard University Press, 2011) He also

edited Antonio Serra, A Short Treatise on the Wealth and Poverty of Nations

(1613) (London and New York, Anthem Press, 2011), and co-edited,

with P Røge, The Political Economy of Empire in the Early Modern World

(Houndmills, Basingstoke, Palgrave Macmillan, 2013), with R Patalano,

Antonio Serra and the Economics of Good Government (New York, Palgrave

Macmillan, 2016), and with R Fredona, New Perspectives on the History of

Political Economy (New York, NY: Palgrave Macmillan, forthcoming).

Roberto Scazzieri is Professor of Economic Analysis, University of Bologna and Fellow of the National Lincei Academy, Rome He is Life Member of Clare Hall, Cambridge and Senior Member of Gonville and Caius College, Cambridge He was the founding Scientific Director of the Institute of Advanced Study of the University of Bologna His research dealt with the micro-structural features of the production process and led him to out-line a task-process theory of production He subsequently explored the relationship between multi-sectoral approaches to structural dynamics and the dynamics of production structures In a parallel line of investiga-tion, he examined the historical evolution of economic theory in term of shifts between objectivism and subjectivism and the structuring of eco-nomic actions under fundamental uncertainty His current research exam-ines political economy as a sphere of multiple interfaces between objective

Notes on Contributors xxv

structures and political arrangements His publications include Efficienza

produttiva e livelli di attività (Bologna, Il Mulino, 1981), Sui momenti tutivi dell’economia politica, co-authored with A Quadrio-Curzio (Bologna,

costi-Il Mulino, 1985), A Theory of Production Tasks, Processes and Technical

Practices (Oxford, Clarendon Press, 1993) He co-edited, with M Baranzini, Foundations of Economics Structures of Inquiry and Economic Theory (Oxford

and New York, Basil Blackwell, 1986), and The Economic Theory of Structure

and Change (Cambridge, Cambridge University Press, 1990), with M

Landesmann, Production and Economic Dynamics (Cambridge, Cambridge University Press, 1996), with H Hagemann and M Landesmann, The

Economics of Structural Change (Cheltenham, UK, Edward Elgar, 2003),

with A Sen and S Zamagni, Markets, Money and Capital Hicksian

Economics for the Twenty-First Century (Cambridge, Cambridge University

Press, 2008), with H Hagemann, Capital, Time and Transitional Dynamics

(Abingdon, Oxfordshire, Routledge 2009), with S Marzetti Dall’Aste

Brandolini, Fundamental Uncertainty Rationality and Plausible Reasoning

(Basingstoke, Palgrave Macmillan, 2011), with M Baranzini and C

Rotondi, Resources, Production and Structural Dynamics (Cambridge, Cambridge University Press, 2015), with I Cardinale and D Coffman, The

Political Economy of the Eurozone (Cambridge, Cambridge University Press,

2017)

Ajit Sinha is Professor of Economics, Azim Premji University, Bangalore

He received a Ph.D from the State University of New York (Buffalo), where

he worked with Paul Zarembka on Marx’s transformation of labour values into production prices in the light of Piero Sraffa’s theory of prices His sub-sequent research led him to investigate the analytical foundations of classical economic theory, and specifically the role of exchange values In particular,

he examined the relationship between the classical theories of value and growth and called attention to the specific features that the classical theory

of value takes as a means to compare heterogeneous bundles of ties over time He taught at SUNY-Buffalo, United States, York University, Canada, The University of Newcastle, Australia, LBS National Academy

commodi-of Administration, India, Gokhale Institute commodi-of Economics and Politics, Maharashtra, India (of which he was also Director), Collège de France, and Indira Gandhi Institute of Development Research, Mumbai He has been a visiting fellow at the Delhi School of Economics and at Jawarharlal Nehru University, Delhi, and a Visiting Professor at the University of Paris 1

(Sorbonne) He published Theories of Value from Adam Smith to Piero Sraffa,

xxvi Notes on Contributors

Delhi, Routledge, 2010, and A Revolution in Economic Theory: The Economics

of Piero Sraffa, Basel, Springer, 2016.

Viktor J Vanberg is Professor Emeritus, Albert-Ludwigs-University, Freiburg im Breisgau; Senior Research Fellow and Former Director, Walter Eucken Institute, Freiburg im Breisgau Former Professor of Economics, George Mason University, and Editorial Director, Center for Study of Public Choice, George Mason University, 1988–1995 His research interest

in rules and institutions made him to explore the potential of an ualistic approach to social phenomena also drawing on the work of F A Hayek He then directed his attention to the field of constitutional political economy In this field, he collaborated with James Buchanan and explored constitutional choice and its implications for economic policy His current research focuses on competition between constitutions on the national and international level and on the paradigm of rule- based behaviour as an alter-native to the rational choice approach in economics He published, apart

individ-from many research papers, the books Die zwei Soziologien Individualismus

und Kollektivismus in der Sozialtheorie [The Two Sociologies—Individualism

and Collectivism in Social Theory] (Tübingen, J B C Mohr (Paul

Siebeck), 1975), Markt und Organisation—Individualistische Sozialtheorie

und das Problem Korporativen Handelns [Market and Organization—

Individualist Social Theory and the Problem of Corporate Action]

(Tübingen, J B C Mohr (Paul Siebeck) 1982), Rules and Choice in

Economics (London, Routledge, 1994), The Constitution of Markets: Essays

in Political Economy (London, Routledge 2001), edited Freiheit, Wettbewerb und Wirtschaftsordnung Hommage zum 100 Geburtstag von Friedrich A von Hayek (Freiburg i Br, Haufe Verlag, 1999) and co-edited Renewing the Search for a Monetary Constitution: Reforming Government’s Role in the Monetary System (Washington, Cato Institute, 2015).

Fig 1 The last-minute surge of dark money for Trump

in 2016 far exceeded that for Romney in 2012

(Source Computed by Authors from FEC and IRS data) 359

Fig 2 The simultaneous late October fall of Democratic Senate

hopes with Clinton decline (Iowa electronic market prices

for Clinton presidency and for Republican House plus

Democratic Senate) (Source Iowa market data,

Fig 3 Money and votes in 2016 congressional elections

(Regression, spatial latent instrumental variable model)

(Source Data from FEC and IRS, Authors calculations) 415

Fig 4 Total money flow into Trump campaign; Romney 2012

used for comparison (Source Computed by Authors

from FEC and IRS data) 416

Fig 1 The financial systems—national and global: main

components (financial systems as complex, integrated

networks) (Source Masera 2016a) 497

Fig 2 Complex systems: example of regime shift

(Source Helbing 2010) 498

xxviii List of Figures

Fig 3 Power laws and heavy-tail distributions (Source Helbing 2010) 498

Fig 4 A complex system (network) representation

of macro-prudential and other economic policies

in the Euro area (Source Masera 2015a) 501

Fig 5 EU Banking Union: a holistic network approach

(Source Masera 2014) 503

Fig 6 Total factor productivity (Source Praet 2015) 507

Fig 7 Real domestic demand (Source Praet 2015) 507

Fig 8 Bank loans to private sector (Source Praet 2015) 508

Fig 9 Monetary base and broad money (Source Constâncio 2015) 508

Fig 10 Ratios of broad money and credit to the monetary base

(Source Constâncio 2015) 509

Fig 11 Real GDP and CPI inflation (Source Constâncio 2015) 509

Fig 12 The five Presidents’ four interdependent unions to transform

the Euro area into a ‘Genuine Economic and Monetary

Union’* (Source Masera 2015b) (*“All four Unions depend

on each other Therefore they must develop in parallel

and all euro area Member States must participate in all Unions

for the euro area to gradually evolve towards a genuine

Economic and Monetary Union… After many years

of crisis, governments and institutions must demonstrate

to citizens and markets that euro area will do more than

just survive ” (Juncker et al 2015, p 5)) 511

Fig 1 The interweaving of political and economic spheres

launches an endless dynamic process 557

Fig 2 The primacy of the national compromise between capital

Fig 5 Coherence principles of socioeconomic regimes 567

Fig 6 Links between organizational complementarity,

organizational/institutional isomorphism,

and institutional complementarity 571

Fig 7 Chinese capitalism: a series of local state corporatism 577

Fig 8 Chinese growth regime: a competition-led growth 578

Fig 9 An interdependent world, complementarity development

modes, and growth regimes 585

Fig 10 How endo-metabolism and hybridization generate various

brands of capitalism 587

List of Figures xxix

Fig 11 The interaction of processes belonging to different logics:

why macroeconomic evolutions are so difficult to capture 589

Fig 12 The creation of the Euro: The congruence between

polity, economy, and economics 593

Fig 1 Sectoral-social structural analysis in the classical economists 713

Fig 2 Pasinetti’s decomposition into backwardly linked vertically

integrated sectors 725

Fig 3 Quadrio-Curzio’s decomposition into forwardly

linked vertically integrated subsystems 731

Fig 4 Goodwin’s decomposition into eigensectors

with distinct dynamic modes 733

Fig 5 Extended Structural Political Economy (SPE)

Approach—diamond of systemic relationships 742

List of Tables

Table 1 Union membership decline 2008–2016: Three non-southern

bat-tleground states that Clinton narrowly lost all rank

at or near top—States in italics (Source Calculated

from data in Hirsch and Macpherson 2017) 358

Table 2 2016 Presidential candidates breakdown of contributions

by size, grouped by “Firms.” Includes super PACs,

independent expenditures, and other forms of big money

(As % of total contributions, nos rounded)

(Source Computed by Authors from FEC and IRS data) 368

Table 3 Size comparison of 2016 and 2012 contributions

(numbers rounded) breakdown of all itemized

contributions, grouped by “Firms,” percentages

of totals including super PACs, independent expenditures,

and other forms of big money by size (in % of all

contributions to candidate) (Source Computed

by Authors from FEC and IRS data) 369

Table 4 Industrial structure and the GOP race (Source Compiled

by the authors from FEC and IRS data) 382

Table 5 Industrial structure of the democratic race (Source Computed

by authors from FEC and IRS data) 407

Table 6 Three stages of the Trump campaign (Source Computed

by authors from FEC and IRS data) 417

Table 7 Clinton vs Trump industry differences in major party

candidate support 2016: Firm contributions

and distribution of money (in %—subtract Clinton % from

xxxii List of Tables

100% for Trump %) (Source Computed by authors from

Table 8 Size of contributions to Trump inaugural celebration

Table 1 Links between economic policies and possible

fallacies/synergies of compositions: some examples

in the framework of a network approach to macro-prudential

and other economic policies 505

Table 2 Fiscal policy: GDP losses in relation to baseline, resulting

from simultaneous fiscal consolidations in seven Euro area

countries from 2011 to 2013 simulated by the EU

Commission model QUEST (Source Constâncio 2015) 510

Table 3 Prototype overview of monetary, liquid, marketable assets

and of asset portfolio selection 520

Table 1 The hidden institutions of a capitalist economy:

from general equilibrium theory (GET) to regulation theory 547

Table 2 The political components of any institutional form

open a research agenda for comparative political economy 550

Table 3 As many forms of individual rationality as contexts 554

Table 4 Market economy versus capitalism: two research programs 559

Table 5 The difference between coordinated and liberal market

economies according to VOC 569

Table 6 A taxonomy for OECD national economies

(Source Amable et al 1997, pp 194–95) 573

Table 7 How Asia and Latin America differ 579

Table 8 Enlarging the diversity of socioeconomic regimes

(Source Rougier and Combarnous 2017, p 194) 581

Table 1 Import duties as a percentage of total imports

and total trade as a percentage of GNP, 1913

(Source Estevadeordal 1997, p 91) 609

Table 2 Policy trade-offs between domestic monetary policy,

capital mobility and fixed exchanges in Britain,

c.1870–1990 (Source Adapted from Obstfeld

and Taylor 2004, p 40) 610

© The Author(s) 2018

I Cardinale and R Scazzieri (eds.), The Palgrave Handbook of Political Economy,

https://doi.org/10.1057/978-1-137-44254-3_1

Political economy has regained a central position among the academic jects dealing with the polity and the economy This development is not a mere reclaiming of intellectual traditions It is also the expression of increas-ing awareness that the linkage between the economy and the polity is funda-mental to the understanding of contemporary societies

sub-The mutual relationship between economy and polity is rooted in the tive dimension of the provision and utilization of material resources This col-lective dimension presupposes the coordination of human actions such as those entailed by the division of labour, which in turn requires multi-layered organi-zational arrangements and governance structures The organization of this field depends on the way in which the objectives of different individuals and groups

collec-1

Political Economy: Outlining a Field

Ivano Cardinale and Roberto Scazzieri

2 I Cardinale and R Scazzieri

relate to one another, and on the constraints posed by the material sphere on the attainment of those objectives Because the organization of the material sphere depends on the weights attached to the objectives (both economic and non-economic) of different individuals or groups, the provision and utilization

of material resources are inherently political At the same time, achievement of objectives requires complex arrangements concerning the material sphere, which poses internally structured constraints that also depend on the specific objectives being pursued For example, the division of labour required for pursuing full employment may be different from that required for pursuing maximum growth.The objectives and constraints relevant to the material needs of the polity belong to multiple levels of analysis (micro, meso and macro) and relate to multiple levels of agency (say, individuals, productive sectors and states)

The aim of this Handbook is to outline the field of political economy as the

domain of the objectives of individuals and groups within the polity and the internally structured constraints, posed by the material sphere, to the attainment of those objectives

Political economy is both an object of study and a type of investigation The foregoing characterization of political economy as an object of study is associ-ated with a shifting concentration of attention between different aspects of the interface between the economy and the polity (Hicks 1976) Political econ-omists have typically adopted a view of the economy as a set of coordinated exchanges (Destutt de Tracy 1823; Jevons 1871; Walras 1874–1877; Debreu

1959; Arrow and Hahn 1971; Arrow 1983 [1969]) or as a system of dependent production activities coordinated through the division of labour (Quesnay 1972 [1759], 1766; Smith 1776; Leontief 1941, 1991 [1928]; Sraffa 1960; Pasinetti 1981) The emergence of economic theory as a specific realm of inquiry is a distinctive feature of political economy as a field of inves-tigation as it developed in seventeenth- and eighteenth-century Europe It is since that period that the structuring of economic theory shows a shifting con-centration of attention between the sphere of exchange and that of production (Baranzini and Scazzieri 1986; Hutchison 1988; Groenewegen 2002) On the one hand, exchange relationships and the conditions for the equilibrium of a set of interdependent markets lead to emphasizing mechanisms of social coor-dination that are independent of the deliberate intervention of policy mak-ers On the other hand, production relationships and the conditions for the viable interdependence of a set of production activities lead to distinguishing between the requirements for the effective coordination of those activities (the so-called viability requirements) and the type of coordination that is actually feasible under existing institutional arrangements The latter viewpoint is often conducive to the view that one should approximate requirements such as via-bility or full employment by means of policy measures taken by the State or

inter-1 Political Economy: Outlining a Field 3

other public bodies to complement the activities of private actors (relevant examples include industrial policies justified in terms of the infant industry argument and Keynesian employment policies)

The objectives and constraints relevant to political economy span a rality of levels of aggregation In fact, economic actions involve the aims of decision-makers at a plurality of levels (such as micro- or macro-decision- makers), the means available to pursue those aims, and the ‘system of events’ (objective conditions) in which those actions must be carried out (Slutsky

plu-2004 [1926]; Chipman 2004) Within the polity at large, systemic tives are generated through the mutual weighing (by means of agreement

objec-or conflict) of the partial objectives expressed by the principal stakeholders, which may in turn reflect the mutual weighing (also by means of agreement

or conflict) of other partial objectives belonging to lower levels of tion (Cardinale and Scazzieri 2018, final chapter, this Handbook) This means that the sphere of objectives has its own internal structure, and there-fore the mutual determination of objectives and of their modes of attain-ment takes place both at any given level of aggregation and across different levels of aggregation From this point of view, the polity looks like a complex and hierarchically ordered system of objectives, which determine each other at any given level and across the different levels (Cardinale 2017;

aggrega-2018, Chapter 22, this Handbook) The sphere of material cies and constraints also has a multi-layered, internally differentiated, struc-ture (Quadrio Curzio 1986, 1990, 1996; Quadrio Curzio and Pellizzari

interdependen-2018, Chapter 18, this Handbook) Any given level of aggregation shows

a constellation of interdependent units that are subject to specific resource constraints and proportionality conditions For example, individual produc-tive establishments may be free from physical resource constraints if resource inputs are only limited to the industry or systemic level On the other hand, establishments may be subject to a proportionality condition for utilization

of task-specific inputs that does not allow them to take full advantage of division of labour at the scale at which they are individually operating This may be due to Babbage’s law, by which ‘[w]hen the number of processes into which it is most advantageous to divide [the production process], and the number of individuals to be employed in it, are ascertained, then all facto-ries which do not employ a direct multiple of this latter number, will pro-duce the article at a greater cost’ (Babbage 1835, p 211; see also Scazzieri

2014) However, at a higher level of aggregation, structural constraints and opportunities may take a different form For example, scarcity constraints

on the utilization of non-produced inputs, which may not be binding at the establishment level, could become binding as we move to the industry

or systemic level (Scazzieri 1993) Also, a proportionality condition that

4 I Cardinale and R Scazzieri

cannot be met at the level of individual establishments may be satisfied as

we move to a higher level of aggregation such as the industrial sector or the whole productive system (Scazzieri 2014) The material sphere of the econ-omy highlights a complex division of labour, in which different patterns of interdependence can be identified as we move from one level of aggregation

to another This means that opportunities and constraints may emerge, appear and eventually emerge again as we move across different levels of aggregation

dis-Because of the internal differentiation of both objectives and straints, political economy needs to investigate the distinction and mutual dependence between different levels of aggregation and the var-ying opportunities that are open to actors at each level Accordingly, the

con-Palgrave Handbook of Political Economy aims to outline the field of the

objectives within the polity and of the structured conditions for their achievement

Material Conditions and Levels of

Aggregation

Political economy is a field of manifold overlaps and complementarities between aims, material conditions and the actions that may bring about desired outcomes Already at the formative stage of political economy as a field of study, political economists focused upon the conditions (‘causes’) making certain political objectives feasible and others unfeasible Giovanni

Botero’s Treatise on the ‘causes’ of the ‘magnificence and greatness’ of polities

is a case in point (Botero 1606 [1558]) In a similar vein, Antonio Serra highlighted the ‘causes that can make kingdoms abound in gold and silver even in the absence of mines’ (Serra 2011 [1613], p 99) while calling atten-tion to the distinction between ‘common factors’ and ‘specific factors’ lead-ing to national wealth, and thus also emphasizing the material conditions specific to the polity under consideration and the context dependence of any successful economic policy (Serra 2011 [1613], pp 117–155) Shortly after the publication of Serra’s work, Antoine de Montchréstien, to whom

the earliest modern use of the term ‘political economy’ (oeconomie politique )

is due, highlighted the role of multiple levels of decision making in the formation of national wealth: ‘every society, in general, appears as consist-ing of government and commerce [M]erchants are more than useful in the State And their quest for profit, which materializes through their work

1 Political Economy: Outlining a Field 5

and industry, contributes a good deal to the public good’ (de Montchréstien

1999 [1615], p 285, as partially quoted and discussed in Hont 2005, p 4) In a further development of this argument, James Steuart highlighted the interdependence between policy intervention, desired outcomes and the existence of self-directed decision-makers in the polity: ‘The principal object [of political economy] is to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious;

to provide every thing necessary for supplying the wants of society, and to employ the inhabitants (supposing them to be free-men) in such a manner

as naturally to create reciprocal relations and dependencies between them, so as

to make their several interests lead them to supply one another with their reciprocal wants’ (Steuart 1966 [1767], p 17; added emphasis)

In Steuart’s case, the causal mechanism through which political decisions can be implemented includes making interdependencies between actors coherent with the aim of supplying ‘one another with their reciprocal wants’ Steuart’s analysis acknowledges the coexistence of intended and unintended outcomes and recognizes that this coexistence may itself become a policy instrument under certain conditions A few years later, Pietro Verri would

go back to this point calling attention to the condition of imperfect mation upsetting the direct implementation of macro-decisions and high-lighting the effectiveness of indirect legislation: ‘the insight of everybody is limited, and narrow are its confines for the greatest part of the human kind,

infor-so, of the great social machinery, only a small set of moving devices may be

discovered […] [T]o invite and guide is the distinctive mark of a beneficial and enlightened legislator, whereas to force and prescribe is the mark of an

ordinary legislator’ (Verri 1964 [1796], pp 26 and 268; original emphasis) Around the same time, François Quesnay developed early insights by Pierre

de Boisguillebert (1707a, ) into a comprehensive analytical tool (the Tableau

économique ) aimed at disentangling the web of interdependencies between

economic sectors (Quesnay 1972 [1759], 1766) Quesnay’s contribution tackles the same problem addressed by Steuart and Verri but from a different point of view In his case, the social system is a mechanism that should follow

proportionality conditions to be identified independently of the statesman’s

intervention and of the actions of individual actors However, these tionality conditions reflect structural constraints and thus provide a bench-mark for assessing the effectiveness of policy decisions and that of individual agents’ responses to those decisions

propor-The relationship between political governance and the causal mechanism regulating the working of the economy has remained central to nineteenth- and twentieth-century political economy The effective demand/unemployment controversy that saw mainstream Classical Economists such as Adam Smith

6 I Cardinale and R Scazzieri

(1776), Jean-Baptiste Say (1803) and David Ricardo (1817) opposed to

‘oversupply economists’ such as Jean-Charles-Léonard Sismondi (1819) and Thomas Robert Malthus (1820) is rooted in their different approaches to the identification of causal paths in the economy For the mechanism of wealth production looks different depending on whether the production of interme-diate goods or that of final consumer goods is highlighted In the former case, production is a self-sustaining structure of interdependent activities, which may work independently of external triggers; in the latter case, production looks like a transformational machinery (of resources into consumer goods) whose operation depends on the existence of sufficient external sources

of effective demand (for this distinction, see Quadrio Curzio and Scazzieri

1986) The difference between alternative views of the causal mechanism of wealth formation is also at the root of subsequent discussions on the role of policy in the economy (Scazzieri 2018, Chapter 7, this Handbook) A focus

on the limited information available to both policy makers and individual

micro-actors leads to an emphasis on policy as a framing device triggering

insti-tutional conditions conducive to desired states of the economy, such as the best utilization of resources (Wicksteed 1910; Wicksell 1934 [1901–1906]; Hayek 1937; Arrow and Hahn 1971) On the other hand, the acknowledge-ment that this type of institutional framing may not be effective in achieving political objectives has led to more interventionist approaches to economic policy In this case, there is a further distinction arising from the difference between the macroeconomic and the structural view of the economy The macroeconomic approach visualizes the economy as a collection of resources generated by savings and leading to final consumer goods and highlights the importance of policy actions sustaining the level of effective demand, and thus also the level of employment and the degree of capacity utilization.The structural approach, on the other hand, sees the economy as a fundamentally circular system of interdependent production and consumption processes and highlights that policy measures may be needed to achieve the proportions between productive sectors that are necessary to a viable (i.e self-sustaining) economy The macro-approach is well expressed by John Maynard Keynes’s belief in ‘the vital importance of establishing certain central controls in mat-ters which are now left in the main to individual initiative’, to enable the State

‘to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them’ (Keynes

1936, p 378) The purpose of such central controls would be to establish

‘an aggregate volume of output corresponding to full employment as nearly

as is practicable’ without intervening in determining or orienting ‘in what proportions the factors of production will be combined to produce it [the aggregate volume of employment], and how the value of the final product

1 Political Economy: Outlining a Field 7

will be distributed between them’ (Keynes 1936, pp 378–379) Differently from the macro-approach, the structural approach to political economy takes the view that only certain proportions between productive sectors are consist-ent with the achievement of a self-sustaining (‘viable’) system of production and consumption This standpoint leads to acknowledging a scope for policy

in the economic sphere that is wider than the governance of macroeconomic aggregates, for the same aggregates may reflect sustainable or unsustainable proportions between sectors An instance of this approach is Adolph Lowe’s view that ‘to maintain steady production in the [economic] system, not only must each sector produce its respective output but parts of this output must

be “moved” by other engineering processes from the producing sector into some “utilizing” sector The same is obviously true of the output consisting

of consumer goods, whose aggregate must be distributed among the ers of all […] sectors […] In these physical processes in which inputs are transformed and outputs are shifted, definite quantitative relations must be maintained between inputs and output within each sector, between the out-puts of the [different] sectors, and between that part of each sector’s output which is applied “at home” and that part which is “exported” to other sec-tors’ (Lowe 1987 [1968], p 177) Lowe’s ‘definite quantitative relations’ entail that only certain proportions between sectors would be compatible with a viable (self-sustaining) economy A remarkable implication of this point of view is that viability would allow different maximum levels of employment for different sectors at any given time (Hicks 1973, 1974) This suggests that macro-objectives cannot be achieved by only controlling the level of aggre-gate magnitudes Recent discussions on the political economy of employment have again highlighted the distinction between policies targeting aggregate output and employment and policies combining output and employment targets with the governance of proportions between productive sectors Robert Solow clearly expresses the former viewpoint with his emphasis on the Keynesian revolution as opening ‘large vistas of useful research […] on the mechanisms by which monetary policy and fiscal policy can affect aggregate demand, and therefore output, when output is limited by effective demand’ (Solow 2012, p 269) He also acknowledged the need for a research agenda extending ‘the study of macroeconomic dynamics to incorporate the struc-tural changes […] in an analytical framework that is capable of looking at the evolution of capitalist economies’ (Solow 2012, p 271) Luigi Pasinetti,

work-in contrast, highlights that the pursuit of proportionality conditions should

be at the core of any policy targeting macro-aggregates since ‘there exists

a genuinely macroeconomic equilibrium condition that must be satisfied over-all’ but this condition holds through the changes in the composition

of aggregates that are triggered by technical progress and the evolution of

8 I Cardinale and R Scazzieri

consumers’ preferences In view of this, ‘it will be the task of the institutions

of the economic system to govern the interaction between individual efforts and the consumption choices so as to drive the economic system to the fulfil-ment of such macroeconomic condition’ (Pasinetti 2012, p 285)

Political economy highlights different ways of approaching the interface between objectives and constraints depending on whether the ‘reciprocal rela-tions and dependencies’ between the relevant actors are reliable instruments for the achievement of systemic objectives A relatively stable pattern of inter-dependence is more likely associated with interactions between actors that may be conducive to the achievement of systemic objectives without further political intervention (this is what we may call the ‘Steuart-Hayek case’) On the other hand, interdependencies that are often upset by structural changes are unlikely to be reliable instruments for the achievement of those objectives, and policy intervention into the internal structure of the economy may be needed (this is what we may call the ‘Lowe-Pasinetti case’) Finally, there may

be interdependencies that are relatively stable in the short period but are not

an effective instrument to the achievement of systemic objectives such as full employment (this is what we may call the ‘Keynes-Solow’ case) In the latter case, it is acknowledged that some degree of ‘central control’ may be required

to achieve macro-goals, but this control is limited to the level of conomic magnitudes and does not extend to the fine composition of those aggregates The structure and dynamics of interdependencies between rele-vant units of analysis are the central factor determining the character of the interface between objectives and constraints under given conditions

macroe-The foregoing reasoning has focused on systemic objectives and straints When considering different units, such as firms or sectors, different objectives and constraints may become relevant In the example provided in Sect 1, an individual firm may not face scarcity of a given non-produced resource, but the constraint might become binding at the sectoral level This makes the identification of the relevant actors in a given situation a central feature of political economy both as an object of study and as a type

con-of investigation For changes in the interdependencies that are most tant at any given time, or along any given dynamic trajectory, may trigger changes in the most relevant units of analysis Thus, it cannot be taken for granted who the relevant actors are in a given situation; this should be part of what political economy analysis must identify (Cardinale 2018, Chapter 21, this Handbook) The mutual shaping of agency and material interdependencies points to a vast field of investigation for political econ-omy as a type of analysis dealing with the changing interface between the economic and the political spheres

impor-1 Political Economy: Outlining a Field 9

Economy

The aim of the Palgrave Handbook of Political Economy is to outline the

field of political economy as the domain of objectives within the polity and of the internally structured constraints on their achievement Our aim relates to, but is also distinct from, what Sir Inglis Palgrave pre-

sented as the ‘primary objective’ of his Dictionary of Political Economy:

‘to understand the position of economic thought at the present time, and to pursue such branches of inquiry as may be necessary for that end’ (Inglis Palgrave 1894–1899) For our aim is to outline political economy

as a field of investigation addressing the material life of the polity seen

as a structured set of actions instrumental to objectives within the polity This aim entails a concentration of attention on the polity and its mate-

rial means Our approach also distinguishes the Handbook from The New

Palgrave A Dictionary of Economics (Eatwell et al 1987 ) and The New

Palgrave Dictionary of Economics (Durlauf and Blume 2008), which are both characterized by an internal focus on theoretical and empirical eco-nomics from the standpoint of their respective differentiation into special-ized fields and of their extension to fields previously seen as external to economic knowledge (Eatwell et al 1987, vol I, p ix; Durlauf and Blume

2008 vol I, p ix)

Part One of the Handbook (‘Foundations’) provides framing

contri-butions for this project The chapters by Vincent Dubois on the fields of policy-making and by Jeremy Adelman and Jessica Mach on the public sphere explore two fundamental constitutive spheres of the polity Dubois’s chapter (‘The Fields of Policy-Making’) provides the building blocks of a theory of the State and policy-making grounded in the social setting within which policy takes place Dubois’ contribution examines the policy field

as an internally differentiated structure including a plurality of politically relevant bodies and emphasizes that ‘the balance of power and modes of cooperation’ between stakeholders such as bureaucracies, professional organ-isations and experts exert a critical influence on policy decisions and their implementation This approach entails the view of policy as a type of action embedded in a system of social relationships Different policy domains pre-suppose different systems of relationships between individual and collec-tive actors; this requires the concept of ‘field’ as a social space distinguished

by specific activities and purposes At the same time, any specific policy is generated by interrelations within a multiplicity of spaces and sub-spaces

10 I Cardinale and R Scazzieri

Its characteristics point to the ‘system of positions’ of relevant stakeholders, which is the ‘arena in which various views and interests compete, accord-ing to the spheres the agents belong to, from state organisations to inter-est groups and experts’ As a result of the plurality of positions within each policy field, policy decisions reflect both the different stakeholders’ interests and the general interest expressed through the set of rules characterizing that field This interrelationship of private and public interests is essential to the legitimization of policy decisions, as it is by this means that external actors (say, public bodies) can generate policy decisions that can be seen as effec-tive responses to private needs and expectations The chapter by Adelman and Mach (‘Political Economy and the Public Sphere’) examines social interdependence as a breeding ground of both market integration and the breadth of the political field In these authors’ view, the coevolution and ten-sion between the two spheres are further proof of their close relationship,

as economic integration highlighting ‘workings and setbacks of the market’ also led to ‘resistances and pressures’ arising from the public sphere The chapter reconstructs the historical process leading to market integration on the one hand and to increasing awareness of a global public sphere on the other Since the age of nineteenth-century liberalism, this coevolution has been associated with a cleavage between the need ‘to keep markets from being submitted to the whims of public opinion’ and the need ‘to protect public affairs from the corrupting effects of markets’ The twin genesis of market integration and the public sphere highlights the constitutive inter-nal tension of liberalism while at the same time suggesting conceptual and policy tools to address the crises and failures of the market economy Thus, John Stuart Mill acknowledged that the public sphere could be the arena in which market disequilibria could be corrected, while the age of imperialism

in the latter part of the nineteenth century triggered widespread criticism and inspired proposals to overcome the setbacks of the market through an expanded active public sphere Keynesian economics (with its welfare state associations) and the post-World War II development programmes mirror each other in trying to make the development of the public sphere support the market economy (Keynesian economics) or vice versa (development policy) The chapter maintains that the path of market integration since the 1980s made the project of a ‘unified political economy with a public sphere’ increasingly difficult to implement

The relationship between the political domain and the sphere of merce has been a central object of investigation since the formative period

com-of political economy as a distinct field com-of inquiry The chapter by Craig Muldrew on ‘Political Economy of Markets’ examines the changing

1 Political Economy: Outlining a Field 11

attitudes of economic writers towards the governance of the economy between markets and State in the period between the formation of the early modern State and the industrial revolution Here, Muldrew examines the role of market governance in political economy discussions since the early seventeenth century and highlights the central role of social welfare objectives (poor relief) in policies intended to provide industrial employ-ment The chapter highlights that since the early seventeenth-century dis-cussions of market regulation, promotion of industry and international trade were conducted in terms of national welfare In turn, a primary objective in the pursuit of national welfare was to address ‘the problem of overpopulation and lack of agricultural employment by advocating the benefits of market-oriented commercialization to provide industrial work’ The political economy of markets that takes shape in the economic writ-ings of the seventeenth and eighteenth centuries shows an internal ten-sion between economists holding the view that subsistence needs are best addressed by self-regulating markets (French Physiocrats) and economic writers promoting the generation of a persistent surplus of manufactured exports as the best policy to promote growth and employment (English

Mercantilists) The success of England vis-à-vis France in providing growth

and employment through industrial development is the backdrop of the early nineteenth-century criticism of corn laws and poor relief in England (inspired by free-trade premises) and highlights the character of the polit-ical economy of markets as an instrument for the promotion of national wealth through a variety of policy measures that are sensitive to context

In a parallel investigation, the chapter by Sophus Reinert (‘Historical Political Economy’) discusses the ebb and flow of theoretical and historical approaches in the literature of political economy as marking moments of shifts within political economy as an object of study Here, Reinert high-lights that historical political economy has been associated—although sometimes as an ‘underground river’—with the development of economic thinking since its formative period, and that one of its most distinctive con-tributions has been to cast doubt on the idea that social improvement may derive from a ‘preordained tendency towards social advantage or improve-ment’ rather than from ‘purposeful human organization’ The chapter reconstructs the vicissitudes of the historical approach to political econ-omy by pointing out the tension between ‘theoretical elegance’ and ‘world’s complexity’ as the most distinctive feature of its successes and failures

Ferdinando Galiani’s criticism of Physiocratic laissez faire in eighteenth-

century France, Friedrich List’s disapproval of the promotion of free trade

by classical political economists and William Cunningham’s denunciation of

12 I Cardinale and R Scazzieri

‘cosmopolitan competition’ in the early twentieth century are all sions of an approach that links attention for experience and context to mis-givings about the unqualified extraction of policy guidelines from abstract (decontextualized) theoretical frameworks This point of view is not anti-theoretical but requires theory to be systematically developed to make

expres-it sensexpres-itive to the variety of condexpres-itions and historical contexts As Reinert points out (recalling a view expressed by Luigi Einaudi), historical knowl-edge is a ‘mediator between economic ideas and political practices’, so that political economy cannot but rely on historical judgment

The chapter on ‘Classical Political Economy’ by Ivano Cardinale

con-cludes this part of the Handbook It presents Classical Political Economy

(CPE) as a study of the key features of industrial economies The chapter first focuses on the analytical coordinates of the two key Classical Political Economists (Adam Smith and David Ricardo) in view of extracting their contribution to understanding industrial economies It goes on to use a modern theory inspired by the Classics to illustrate how CPE can be gener-alised to understand production, growth and distribution in modern indus-trial economies Starting from the premise that the central focus of CPE is

the study of the wealth of nations (i.e their income) as generated through

production rather than trade, two key issues frame the analysis of the chapter One is structural change, i.e the change in the composition of net product over time as a result of changes in sectoral proportions The other

is the problem of aggregation inherent in theories that aim to understand the interaction between parts (such as sectors) and whole (the economy)

In the case of CPE, it is about assigning weights (relative prices) to the ferent commodities that make up the net product The chapter concludes

dif-by highlighting that the legacy of CPE includes analytical tools to address problems of aggregation in society that go beyond the specific aims for which they were developed (i.e assigning weights to different commodities within the net product) CPE thus provides fundamental building blocks for

the Handbook ’s aim to understand the variety of objectives within the polity

and the constraints on their attainment that are posed by the material sphere.Part Two (‘Research Themes’) addresses areas at the interface between the economic and the political spheres that are central to political econ-omy and its transformations Economic theory has shaped much of the past and present discussion in political economy But different types of eco-nomic theory suggest different approaches The first chapter of Part Two, by Roberto Scazzieri (‘Political Economy of Economic Theory’), investigates the conceptual premises and analytical structures of exchange-oriented and production-oriented theories and discusses on that basis the implications of