Paper Example on Economic Development Theories: Examining Interrelationships for Policy Making

Introduction

Theory is a broad term that has extensively been used in the field of political economy to describe or refer to a systematic description of interrelationships among various distinct economic values. The principal purpose of economic development theories is however to examine the underlying connections among the several economic variables to offer a profound knowledge concerning the world as well as a solid basis for policy making (Bardhan & Ray, 2015). Ideally, economic development is adequately defined as the long-term transformations that take place within both the systems of productions and distribution of goods and services that have a significant influence on the general welfare of humans (Corporate Finance Institute.com). Political economy on the other can be described as the study of trade and production of goods and services along with their interrelationships with the distribution of national income, wealth, the government and different customs (Bardhan & Ray, 2015). In a complete definition, political economics primarily encompasses interdisciplinary studies concerning political science, economics and sociology all of which focus on providing a detailed analysis on how the economic system consisting of communists, capitalist and socialist, governmental organizations, as well as the political environment, influence each other in various ways.

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However, there is a broad set of economic theoretical or methodological approaches that play a prominent role in explaining the concept of economic development. Some of these theoretical approaches to the economy include the neoclassical economics, classical political economy, complexity economics, and original institutional economics (Metcalfe, 2018). As such, these approaches and theories to political economy help students in excellently answering fundamental concepts and questions when reading major works regarding politics and economics. Crucial political economy questions are still unresolved over a long time debate, for instance, is the application of neoclassical economics to non-competitive markets a valid option. Concerning this, the chief aim of this research paper is to critically evaluate the various methodological approaches that are mostly applied in explaining about political economy and in understanding the decision making the process in political economy for productive future policy making.

Methodological Approaches

In the modern world, political economy entails diverse but interrelated theoretical approaches that play a significant role in defining as well as studying politics and economics. Furthermore, the contemporary political economy is enormously influenced by the game theory primarily because it entails various groups that compete with the available finite sources and power that evaluate the policies that are bound to offer the most beneficial outcomes (Metcalfe, 2018). The game theory provides an extensive range of applications in economics and political science and is sufficiently defined as a mathematical approach implemented to solve problems between conflicting and cooperating parties that can make optimal rational decisions in different scenarios (Corporate Finance Institute.com). The study of questions about the political economy can thus be approached in any of the three methodological approaches which include international political economy approach, interdisciplinary and new political economy approach.

Approach One: Interdisciplinary Studies

Approaching the political economy from an interdisciplinary perspective mainly concentrates on political science, economics, and sociology to profoundly comprehend the impacts and influence that political institution, the environment, and economic systems have on each other (Jackson, Sorensen & Moller, 2019). Three primary sections are involved in interdisciplinary studies including its significant effects on international relations, the economic models concerning different political processes together with the responsibility of the government in allocating resources in various commercial systems.

Approach Two: New Political Economy

This particular approach substantially considers the economic policies as beliefs or actions that require further discussion instead of as a framework that only needs to be examined. It effectively combines both the ideologies of classical economics and the modern advancements in the field of political economy (Jackson, Sorensen & Moller, 2019). Also, the approach lay off all the long-standing ideals concerning agencies as well as the interest of countries and markets with the primary aim of inspiring political debate regarding the needs and requirements of the society (Corporate Finance Institute.com). In other words, this approach predominantly seeks to create normative and explicit assumptions, which in turn creates room for endless political debates about the preferences of society. It also deals with the assessment of the real-world political economy based on historical, cultural and social details.

Approach Three: International Political Economy

Also commonly referred to as the study of global political economy, this approach mainly focuses on analyzing the affiliation between economics and intentional relations (Jackson, Sorensen & Moller, 2019). It applies the different concepts from political science, economics, and sociology to explain how countries and institutions use the global economic interactions in shaping their economic systems and how they influence the political economy through their actions.

Future Policy Actions

The entire decision-making process about political, economical issues influenced by different groups and individuals plays a significant role in the formulation and implementation of specific policies with the most benefit. However, the policy actions in a political economy are primarily influenced by the economic and political interests of individuals in the government position with the primary objective of retaining power as well as the interests from a group of citizens who are always concerned with outcomes associated with the implementation of specific economic policies (Ravenhill, 2017). In addition to both political and economic interest, fundamental values and beliefs are also considered as a significant influence on policymaking. Notably, incorporating ideologies into economic models ensures that some political decisions are controlled by factors instead of self-interest (Ravenhill, 2017). Therefore, the most significant theoretical approach among the three that can be used in decision making for future policies is the new political economy approach since it treats the economic policies as ideologies that need to be comprehensively examined and dismisses self-interest of states and markets when it comes to policymaking.

Theoretical approaches to political economy therefore greatly help in appreciating the relationship between politics and economics and also in explaining the interdependence of political and the resources allocation along with the economic issues like inflation, unemployment, and poverty. Typically, every theoretical approach has its strengths and weaknesses as well as the ability to illuminate every aspect of the political economy.

References

Bardhan, P., & Ray, I. (2015). 24 Methodological approaches in economics and anthropology. The Elgar companion to social economics, 427.Corporate Finance Institute.com (n.d). "Political Economy" Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/economics/political-economy/

Jackson, R., Sorensen, G., & Moller, J. (2019). Introduction to international relations: theories and approaches. Oxford University Press, USA.

Metcalfe, S. (Ed.). (2018). Evolutionary theories of economic and technological change: present status and future prospects(Vol. 44). Routledge.Ravenhill, J. (Ed.). (2017). Global political economy. Oxford University Press.