1

Politics and economics

Politics
It is often assumed that political economy involves an integration of politics
and economics. It is less often conceded that the very idea of political economy
rests on a prior separation of politics and economics. If politics and economics
are conceptually fused, political economy cannot be thought to involve a
relation between distinguishable activities. Since this point is often confused
by talking about politics and economics as "organically linked" or the bound-
aries between the two as "blurred," we will comment on what this sense of
separation means.
Distinguishing politics from economics does not mean that they are com-
pletely separate, isolated from each other, or indifferent to each other. It
does not mean that politics and economics do not influence each other or
"occur" within the same concrete structures. For example, allocation of goods
and services may take place within market or political structures. And con-
crete organizations, such as banks, firms, interest groups, and unions, may
be political or economic according to the activities in which they are engaged
and the analytic categories of the investigator (Maier, 1987). So when we say
that economics and politics are separate, we mean only that they are analyt-
ically distinct. 1
If economics and politics are distinct, it follows that a book on various
theories of political economy must take account of these differences. The
challenge is twofold. First, we must identify different conceptions of the
economic and political. What are the major ideas associated with these two
central concepts? Second, we must identify the theoretical relations between
economics and politics. Sometimes, these theoretical relations are more or
less in place. Other times, we attempt to build them ourselves. The relations

1
Some have argued that the separation of economics and politics is itself the result of a protracted
historical process. Sartori (1973) points out that the ancient Greeks considered politics a central
aspect to man's life and did not differentiate a separate political sphere, as we do today.

7
8 Politics and economics
between politics and economics are what we mean by political economy. It
is a theoretical enterprise.
The remainder of the chapter examines various conceptions of economics
and politics. It will become clear that both economics and politics have
multiple meanings. It is best to confront this diversity at the outset. The
various approaches to political economy discussed in the book will be clearer
if these differences are taken into account.

Conceptions of the political

Concepts of politics are not as analytically sharp as those of economics, a fact
reflected in the numerous competing conceptions of politics. In Swift's Gul-
liver's Travels the key character laments how, in his discussion with the king,
he happened to say "there were several thousand Books among us written
upon the Art of Government [and] it gave him (directly contrary to my
Intention) a very mean Opinion of our Understandings" (Swift, 1726).
There are many competing ideas of what is political, none of which has
gained ascendancy by demonstrating clear theoretical superiority. Politics has
meant "who gets what, when, and how" (Lasswell, 1936), "the struggle for
power" (Morgenthau, [1948] 1960), "the art and science of government,"
"the socialization of conflict" (Schattschneider, 1960), "patterns of power,
rule, and authority" (Dahl, 1956), "the science of the state," "the authori-
tative allocation of values" (Easton, [1953] 1981), "pure conflict, as in us
against them" (Schmitt, 1976), and "the conciliation of conflicting interests
through public policy" (Crick, [1962] 1964). Power, authority, public life,
government, the state, conflict, and conflict resolution are all bound up with
our understanding of politics.
The preceding discussion points to some of the problems of conceptualizing
the political. We will develop here three ideas of the political that make sense,
have some coherence, and have potential for connections with economics.
Though not the only three ways of talking about politics, these conceptions
do represent three important traditions. They are politics as government, as
public life, and as the authoritative allocation of values.

Politics as government. One conception of politics makes it essentially equiv-

alent to government. By government, we mean the formal political machinery
of the country as a whole, its institutions, laws, public policies, and key
actors. Sometimes government and the political are made equal by definition.
Politics then refers to the activities, processes, and structures of government.
What goes on within the U.S. Senate, the German Bundestag, and the British
Parliament is by definition politics. What happens in society- that is, outside
Politics 9
the scope of the government proper - is not political. Societal phenomena
may have political implications, but they are not political per se.
Politics in this sense has a locus, a structural address. The central political
institutions reside in the capital of the country. They are the ones that are
authoritative in the sense of being able to decide for the country as a whole
and being able (that is, having the capacity) to achieve compliance. If some-
thing occurs within this arena, it is political; if it doesn't, it is not.
The politics-as-government approach offers a definition of politics in terms
of organization, rules, and agency. "Organization" refers to relatively con-
crete structures (formal organization). These might include courts, legisla-
tures, bureaucracies, and political parties. "Rules" refers to rights and
obligations as well as permissible procedures and strategies to be employed
in the political process. The basic rules of a government are set down in its
constitution, written or unwritten. These rules cover the organization and
distribution of political power as well as procedures regarding voting, leg-
islative strategies, and the permissible range of influence behavior. The basic
rules for the United States include both a functional and territorial division
of powers, the former involving a "separation of powers" among legislative,
executive, and judicial branches, the latter a splitting of powers between
central and outlying political units (federalism). England's basic rules are
quite different. Here executive power is not a formally differentiated
"branch" of government. Instead the prime minister's power rests on a
majority in the House of Commons. Finally, government includes agents or
personnel. These agents, situated in the overall political organization, "act"
in the sense that they undertake political initiatives (to retain office, increase
power, pass laws, and so on).
The study of government in the United States has been closely tied to an
emphasis on law. As Charles Hyneman put it in The Study of Politics, "The
central point of attention in American political science ... is that part of the
affairs of the state which centers in government, and that kind or part of
government which speaks through law" (1959:26-7). Similarly, Harry Eck-
stein, though careful to put some distance between the state and politics,
sees formal-legal studies as integral to the state (1979:2). Eckstein uses the
term "formal-legal" because the study of government was closely tied to
formal organization and to public law. Carl Friedrich's Constitutional Gov-
ernment and Democracy (1937) provides an example of the importance of
numerous governmental characteristics, while Douglas Rae's book, The Po-
litical Consequences of Electoral Laws (1967), demonstrates the importance of
differences in electoral rules.
The governmental approach does not rule out nongovernmental phenom-
ena as having political relevance; it places government at the center and
evaluates other phenomena as they impinge upon or are affected by govern-
10 Politics and economics
ment. Thus, the political role of the media, or the influence of interest groups
or economic classes, while not directly part of government as defined here,
may affect and be affected by governmental policies. The importance of such
phenomena is recognized as part of society. They affect governmental politics
but are not definitionally a part of the government.
The meaning of government can be clarified by distinguishing it from the
state (see Carnoy, 1984, and see Daedalus, 1979, for surveys). The term
"state" generally refers to a set of phenomena that are more inclusive than
government. It is broader than government in that the state includes insti-
tutionalized authority, laws, and patterns of domination, including those
resting on force, politically manipulated incentives, and reigning ideas. Ben-
jamin and Duvall define the state as "the enduring structure of governance
and rules in society" (1985:25). Defined in this way, the state does not "do"
anything in the standard sense. The state is not an agent or actor- govern-
ments are (Wendt and Duvall, 1989:43). "Government," on the other hand,
refers to agents, differentiated organizations, and rules that are embedded
in the state, but they do not exhaust our meaning of the state.
What does the state include that is not encompassed by government? The
idea of the state is tied to a broader conception of laws and rules than is
usually signified by the term government, including informal rules embodied
in customs, ideas, and parapublic institutions, what Peter Katzenstein calls
"policy networks" (1978:19). Policy networks are combinations of public and
private power made up of parts of the state bureaucracy and private asso-
ciations. Similarly, the Gramscian idea of hegemony reflects a concept of rule
that relies on ruling ideas and social forces as well as government more
narrowly defined (see Gramsci, 1971).
The attempt to equate politics and government raises two critical questions.
Is everything that happens "within government" political or is politics only
a portion of government? Are there phenomena outside government that are
political? If government defines what is political, we have to address ourselves
to the heterogeneity of what is entailed by this term. Much of what goes on
in government is private in goal if not in arena or institutional means. It is
concerned neither with public goods nor with means that are recognized as
part of the public sector. A politician may use public office to advance his
or her private career. A temporary appointment to a highly visible govern-
mental position may be coveted to enhance one's income from speeches and
book royalties after resigning public office. Our point is not that these ex-
amples are nonpolitical but that there is an aspect of them that can be viewed
as private (seeking personal wealth) and possibly even economic.
What does the governmental focus leave out that is normally considered
political? It omits what, following Easton's concept of the political system
(1965), we can call "political inputs" such as the expression of interests and
Politics 11

political demands by societal actors, their aggregation into broad programs,

the communication of political information by the privately owned media,
and the experience of political socialization by parents, schools, and churches.
It also omits combinations of private and governmental forces from active
consideration since these combinations reach outside the governmental sector.
Finally, the governmental notion of politics omits ideas of politics tied to
state structures conceived more broadly than government. Cox's notion of a
"historic bloc" encompassing governmental institutions, social forces, and
ideology is exemplary (Cox, 1986). Clearly the focus on government excludes
much that is often considered relevant. The justification for such exclusion
is that, if the concept of government is to be useful, it must refer to something
definite and precise. Expanding the concept of government causes much of
what is otherwise thought of as societal to become part of government (such
as schools, churches, families). A valuable distinction is weakened if not lost.

Politics as the public. One way of thinking about economics and politics is
to link economics to what is private, politics with the public. Individual ends
and activities resolve into two categories: those that are private (in motive
and result) and those that imply others. We do not want to minimize the
difficulty of making this distinction in practice or to suggest there are some
actions that are insulated from the rest of society. Nevertheless, in liberal
societies (by definition) there is a realm of the private that is treated as
personal. Thus, religious worship, sexual activities within the household, the
details of consumption (food and clothing preferences), and most aspects of
child-rearing are private matters.
A sharp distinction between private and public is difficult to enforce.
Certainly in the empirical world, boundaries shift. "Private" refers to affairs
that are substantially limited to individuals or groups directly involved in
exchange. The "public" is defined as the arena or activities that involve
others in substantial ways. While no action is ever without social determi-
nants, meanings, and implications, this does not necessarily make everything
public. Neoclassical economists ground the distinction between private and
public in what is and is not transmitted by the price system. Benefits and
damages resulting from exchange not charged or paid for are external effects
(externalities) and invite management by the state. John Dewey (1927) makes
the same distinction in terms of the scope and persistence of consequences
of transactions among individuals.
The idea of the public is broader than the neoclassical concept of exter-
nalities and public goods, yet narrower (in its politically relevant version)
than society as a whole. It is broader than externalities and public goods in
that it includes collective identities and shared values relevant for political
discourse. It is narrower in that there is a public arena not overtly political
 12 Politics and economics
(public dress codes, appropriate behavior in public places such as waiting
rooms and elevators, and so forth). It is more narrow in that not all aspects
of politics, at least in some versions, are public. Crick reminds us that "Palace
· politics is private politics, almost a contradiction in terms. The unique char-
acter of political activity lies, quite literally, in its publicity" ([1962] 1964:20).
And social spheres such as the family, the church, and private associations
are often seen as going outside the public realm.
In The Politics, Aristotle defended public life in the polis as essential to
the expression of man's higher social nature. In ancient Rome, the res publica
represented "bonds of association and mutual commitment which exist be-
tween people who are not joined together by ties of family or intimate as-
sociation" (Sennett, 1978; original edition 1973:3). In The Public and Its
Problems (1927), Dewey identifies the public as both the raw material of
politics and an essential component of the state. And In Defense of Politics
([ 1962] 1964), Crick sees the public character of actions as a core characteristic
of the political.
When we connect politics with the notion of public life, we bring to the
forefront a set of questions and problems surrounding what is the central
quality that makes activity and human interaction public. In responding to
these questions and problems two lines of argument need to be clearly dis-
tinguished. Indeed, the notion of the public has been interpreted in two
radically different directions.
The first, although historically the more recent, defines public by reference
to self-interest. The public encompasses either pursuit of self-interests that
coincide (a commonly held interest) or responses to ways in which the in-
dividual's pursuit of self-interest impinges on the welfare of others. The
connected concepts of public goods and externalities are the key terms within
this interpretation of public life. Its main distinguishing feature is rejection
of any notion of public that either transcends private self-seeking or responds
to human needs irreducible to private ends.
This contemporary notion of the public contrasts sharply with the more
traditional notion linked to concepts of public interest and public good. These
concepts carry with them the idea that the public has an existence, meaning,
and purpose irreducible to the pursuit of individual self-interest and the
ordering of private preferences. (For an account of this second notion see
Arendt, 1958.) Those who advocate the first of our two notions of the public
tend to view the second as metaphysical, if not mystical. It is their belief
that the only grounded social reality is the individual and his or her pref-
erences. Those who take our second notion of public more seriously argue
that social institutions have their own reality. They do not arise in response
to individual wants (although they often concern themselves with such wants).
Rather, they encompass private agents and make explicit their underlying
Politics 13
social connectedness understood as the grounding for their very existence as
individuals. This second view presupposes a social capacity that is prior to
the articulation of private ends.
When we consider political economy as involving the study of the relation
of public to private (or of a part of that relation), it makes all the difference
which notion of public we have in mind. If we focus on the first conception,
we are led to examine the ways in which individual interests relate to one
another, coincide, or negatively affect one another. If we employ the second
of the two, then the study of the relationship between public and private
means the study of the ways in which collective life undergirds, informs,
animates, and gives meaning to private self-seeking, and of the limits of self-
interest.
To illustrate these two different conceptions of the public, we explore the
use of this concept by John Dewey and Hannah Arendt. Dewey elaborated
his ideas about the public in The Public and Its Problems (1927). Arendt
developed her arguments in The Human Condition (1958).
In The Public and Its Problems, John Dewey attempts to link the public
with the state and to show how the latter, insofar as it is a liberal, democratic
state, is grounded in and limited by the scope of what is public. His first
task is to identify the core meaning of public. Dewey begins his search for
the public from a particular determining ground, a world of individuals and
their transactions. To the extent that their transactions are limited to them-
selves, that is, to the extent that they do not involve consequences for others,
he speaks of their activities as private. The germ of the public is found in
those transactions that involve others:

We take then our point of departure from the objective fact that human acts have
consequences upon others, that some of these consequences are perceived, and that
their perception leads to subsequent effort to control action so as to secure some
consequences and avoid others. Following this clew, we are led to remark that the
consequences are of two kinds, those which affect the persons directly engaged in a
transaction, and those which affect others beyond those immediately concerned. In
this distinction we find the germ of the distinction between the private and the public.
(1927: 12)

Dewey's idea of the public seems closely related to the neoclassical concept
of externality. Couldn't we just as easily say that the public refers to the set
of people whose preferences are affected (positively or negatively) by the
consequences of market exchanges? To be sure, a family resemblance does
exist, but so do important differences. Dewey is willing to talk about interests
as well as preferences. Thus a public interest may be affected even while
public preferences are not. For example, people may be dying because of
dirty air or a depletion of ozone in the atmosphere but may be unaware of
14 Politics and economics
the connection. Their interests in clean air and ozone have not become pref-
erences.
A second difference lies in Dewey's readiness to include the sick, insane,
infirm, and young in the public. Dewey asks why people in these groups are
peculiarly "wards of the state" (1927:62). They are because in their trans-
actions with others, " ... the relationship is likely to be one-sided, and the
interests of one party [will] suffer" (1927:62). The reasoning here is quite
general. It involves the inequality of status (and, Dewey might have added,
of power and resources) of parties to the transaction. Once this principle is
introduced, numerous so-called private transactions assume a public content:
minimum wages, relations between workers and capitalists, care of the young
and the old, access to health and educational facilities, and so on. Dewey in
fact raises all these issues and makes a case for placing them within the public
domain in a way that is consistent with his general idea of the public. Whether
this effort works is not our concern here. The point is that Dewey's public
is considerably broader than externalities.
Hannah Arendt's interpretation of the public differs sharply from that just
summarized. Her interpretation brings our attention to dimensions of the
problem often lost sight of in more recent discussions that focus on limitations
of private want satisfaction. Her approach is in some ways more traditional
and gives evidence of its classical origins. We think it important to retrieve
the alternative she suggests and to consider it, however briefly, together with
those more in line with contemporary ways of thinking.
The term "public," according to Arendt, refers to two distinct but closely
connected phenomena. The first has to do with the importance of what she
refers to as "appearing in public."
The presence of others who see what we see and hear what we hear assures us of the
reality of the world and ourselves, and while the intimacy of a fully developed private
life, such as had never been known before the rise of the modern age and the con-
comitant decline of the public realm, will always greatly intensify and enrich the
whole scale of subjective emotions and private feelings, this intensification will always
come to pass at the expense of the assurance of the reality of the world and men.
(1958:50)

The necessity for a public realm stems from the dependence that our "feeling
for reality" has on such a realm. In other words, Arendt's notion of the public
connects to a prior judgment regarding the way in which we experience,
perceive, and construct the reality of our lives individually and collectively.
The dependence of our sense of reality on the public presupposes that our
reality is already intersubjective. Notions of the public considered up to this
point do not carry this presupposition. In neoclassical economics our sub-
jective reality does not depend on our connection to a larger whole. Indeed,
Politics 15
within the neoclassical way of thinking, the world outside is understood as
an opportunity set and relates instrumentally to already defined preferences.
The idea of "appearing in public" carries a meaning lying outside the in-
strumental conception of public. On the contrary, Arendt's idea of public
has a constitutive connotation. To the extent that we treat personality as, in
important part, a social construct, "appearing in public" takes on special
importance, as part of our effort to connect with the social whole or to confirm
that connection with the whole without which we risk loss of our sense of
identity.
This observation leads naturally to Arendt's second dimension of the pub-
lic, the public as the "common world."

To live together in the world means essentially that a world of things is between those
who stand around it; the world, like every in-between, relates and separates men at
the same time.
The public realm, as the common world, gathers us together and yet prevents our
falling over each other, so to speak. (1958:52)

Arendt emphasizes that this common world is a human construct; indeed,

it is constructed in order to provide a world of things to instantiate our
common life. What is striking about this idea is the notion of a common
world that binds us together. The public not only helps to satisfy our private
wants, it binds us into a larger whole. In order to do this, it must have its
own objectivity, it must be made up of appropriate sorts of things.
Arendt's notion of the public can have different relations with politics. We
can, of course, identify the public with the political. This makes politics the
appearance in public needed to secure our sense of reality and connectedness,
both of which depend on our having a life in common. But public and political
need not be synonymous. The need for a public in Arendt's sense can en-
compass politics and more than politics. Forms of mass communication are
public insofar as they provide (some of) us with an opportunity to appear.
Yet this appearance may not be a political act (for example, a concert need
not be considered a political act although under appropriate circumstances
it may be that).
So long, however, as politics takes a part of the space of the public in
Arendt's sense, it will have ends not considered within the utilitarian calculus
(see Benhabib, 1989). These ends involve our sense of common life, the
reality we gain from participating in a common life, and our need to partic-
ipate in construction of the social artifacts of our life together. If politics
includes this dimension, it has a significant constitutive function for the
individual lost sight of when we assume that individuals have fully formed
preference orderings prior to both politics and public life.
16 Politics and economics
Politics as authoritative allocation of values. According to this conception,
politics and economics are similar in that both are methods of allocation.
The economic and the political processes are alternative ways of making
allocations regarding scarce resources. Politics refers not to the formal struc-
ture of government but to a distinctive way of making decisions about pro-
ducing and distributing resources. Unlike economics, which emphasizes
juridically voluntary exchange, the system of political allocation involves au-
thority.
Quite possibly, this difference in mode of allocation may reflect differences
in the types of goods being pursued (for instance, excludable versus nonex-
cludable) as well as the normative criteria governing interaction (such as self-
interest versus collective interest, individual gain versus equity). David Eas-
ton ([1953] 1981) suggests that the central question of political science is how
values are authoritatively allocated for society. He vigorously defends this
focus against competing conceptions of politics based on the state, power,
and conflict resolution. It is not that the authoritative allocation of values is
unrelated to these things but that focusing on these other things hits the core
of what is political only by accident, by virtue of their correlation with
authority patterns. The state is closely involved in authoritative allocations
in the sense that these allocations often take place within the state, through
state institutions, and are often activated and executed by state agents. But
the congruence is limited: Authority patterns occur outside the state too, and
much of what goes on inside the state is not authoritative. For Easton, the
strongest argument for this focus is that political science is not interested so
much in a particular institution as it is in the activity "that expresses itself
through a variety of institutions" (1981: 113). Easton's argument implies a
decoupling of politics as abstract process from the institutions normally as-
sociated with this process (government).
Where does this approach lead? It does not have to lead to the search for
authority in every nook and cranny of society - in the factories, schools,
family, and armed services. The societal component of the definition keeps
our focus on authoritative allocations for society as a whole. In one sense,
this leads us back to government, since government is the only societywide
political structure. But government does not equal politics. It is a structure
within which politics can take place. The activities and institutions of gov-
ernment are not by definition politics. Some governments, as Crick (1964)
points out, allow very little politics. Some strive to reduce politics to a min-
imum- for example, by ruling through coercion or managed consensus.
In addition, there is much outside governmental boundaries that is polit-
ical. These interactions, to the extent that they are regularized and related
to authoritative allocations in particular ways, are included in the concept of
"the political system." For example, in pluralist systems the activities of
Politics 17
interest groups and political parties would be considered political, in that
they are concerned either with the holding of authoritative positions or with
the organization and activities of shaping authoritative public policy. Simi-
larly, the acquisition of political images and information (of the nation, the
president, the central political institutions), although more remote than the
activities of pressure groups and parties, is often considered political.
The focus on authority implies an important normative question that needs
to be asked if the scope of the political is not to be indeterminate: What is
the proper reach of the authority system? If the boundary between economics
and politics is to be determined by the region in which voluntary exchange
shades into authoritative relations, we need to know something about those
activities best suited for market exchange and those best suited for authority
systems. One answer is that authority should be reserved for those activities
where voluntary exchange breaks down or where the structure of interests
among actors does not spontaneously yield mutually beneficial and self-
enforcing results. Another answer is that authority is called for to institute
and enforce righls or to achieve goals such as equality, universal health care,
and justice, ends that are not assured by the market. A third answer is that
the wielding of authority is not a normative issue, not a question of "the
proper sphere of government." Instead, it has to do with political enforcement
of particular (special) wills against others, such as capitalist against worker,
Catholic against Protestant, and so on. Politics deals with situations in which
there is simultaneously conflict and pressure for collective decisions. Some
will gain and some will lose. Thus, politics cannot be about collective mutual
gains and authority cannot be about what everyone approves. The focus on
legitimacy is a diversion that distracts us from the cleavages overridden by
state policies.

Relations among three approaches to politics

Before attempting to reconcile the three approaches discussed in the preced-
ing section, we should point out that there is a case for viewing them sepa-
rately. Each approach can be viewed as essentially different and can, when
elaborated, take us in a different direction. The politics-as-government ap-
proach relies on a particular institution, politics as affairs of the public relies
on the specification of a noninstitutional realm outside of private exchange,
and the authority focus depends on a certain way of making decisions and
of securing compliance. Each conception has its "home domain," its core
concepts, its notions of what is centrally political, and its often implicit rules
about what is outside the political arena. Yet few would deny that all three
approaches say something about politics. What are the relationships among
18 Politics and economics
the three approaches? What similarities and points of convergence are sug-
gested?
Let us begin to answer these questions by focusing on the second approach,
politics as public. The public refers to either the regulation of unintended
consequences of private actions and market failure or to the sense of common
interest, mission, identity, or conception of what it means to be a citizen of
a community.
While the idea of the public provides an approach to politics, it does not
stand alone. In one sense, it identifies the raw material out of which politics
takes place. The activities of government are concerned with taking binding
decisions for society as a whole. As such, government takes as its point of
departure those· matters that significantly involve "others." It does not try
to legislate individual affairs ad seriatim. In this light, the public and gov-
ernment are not two unrelated approaches. Indeed, they need each other to
complete their meanings. Without a public to serve as foundation, govern-
ment is cut adrift. How can it devise policies to settle societal conflicts or to
pursue harmonious social goals without a grounding in public society? "Pol-
iticking," the struggle for governmental office, and modern equivalents of
court intrigue would still occur, but politics pure and simple would not.
Conversely, without a governmental structure the public is only an inar-
ticulate mass of commonly affected interests, more or less privately held.
The public in this sense is simply an aggregate, a set of persons neither
cognizant of shared experience nor alert to its political potential. When these
separate circumstances are collectively understood, and when individuals play
a role in forging this collective understanding, the situation becomes political.
When this occurs, collectively mobilized interests are brought to bear as
pressures upon government, working through governmental channels, po-
litical parties, the bureaucracy, legislatures, and courts.
At the intersection between government and society, the public is a crucial
lever. From the vantage point of government, it is the raw material, the
subject matter of politics. From the public's vantage point, government is
both the arena for its expression and the instrument to achieve its aims, which
may include, significantly, the desire for a particular sphere of society (child
care, medical insurance) to be declared public.
The public does not simply use government as an instrument to its own
ends. It is also constituted by government. In some countries the government
charters and licenses interest groups, thus granting them public status and
the acknowledged right to affect public policy. The public becomes politically
articulate in part through government action.
In France, part of what is meant by the "strong state tradition" concerns
the capacity of the state to constitute (that is, to organize, recognize, control)
private associations. In pluralist theory, it is groups and group interests that
Politics 19
are the driving forces, "freely combining, dissolving, and recombining in
accordance with their interest lines" (Bentley, 1908:359). By contrast, in
France all private associations are required to register with the Ministry of
Interior; the Ministry grants them legal status, and it may dissolve certain
associations if they are deemed a threat to the state (Wilsford, 1989:132).
This pattern is characteristic of many countries that fall into what Stepan
calls the "organic-statist" tradition (1978:26-45).
How does the focus on authority relate to government and the public?
This focus takes us close to what we often mean by politics - commands
binding on society as a whole and enforceable by a sovereign (in other words,
an institution beyond which there is no legal appeal). However, unless we
are to treat authoritative decisions as definitionally identical to politics, we
cannot help feeling uncomfortable with authority as the exclusive focus. Its
connections to government and public are not clear.
This difficulty is not at all surprising. Indeed, Easton argued for the focus
on authoritative allocations of values precisely because of its imperfect cor-
respondence with governmental institutions and activities. These incongru-
ities reach in two directions: Not everything government does is authoritative,
and not everything that is authoritative is governmental. As examples of the
former, we can think of private gain in public settings, the utilization of
public office in the pursuit of private goals, and the maneuvering for private
advantage apart from the policy implications of such. Oddly, the term "po-
litical" has evolved to become one of the ordinary meanings to describe such
activities. We use the word "politicking" to describe those activities, reserv-
ing the word "politics" for other activities.
One omission concerns the scope of authoritative actions. Can any issue,
activity, or interest be the object of binding decisions for society? By itself,
the focus on authoritative decisions tells us nothing about what kinds of
activities are within the jurisdiction of the authority system. Perhaps this is
as it should be. With the scope of authority open-ended, the substance of
the political is unspecified and the distinctive focus of politics shifts to the
process level. In one country the production and distribution of food goods
are authoritative matters. In another, medical care is provided by a govern-
mental bureaucracy. In a third, the emission of industrial waste is subject to
authoritative regulations. In a fourth country, all three may be dealt with by
private exchange, or perhaps in the case of industrial wastes, simply ne-
glected.
We need not, however, consider the substantive content of authoritative
decisions totally arbitrary. Without specifying which activities qualify for
authoritative decision making, we can define some limits in terms of the
relationship between society and government. The focus on authority makes
most sense when integrated into a scheme where both public and government
20 Politics and economics

Nonpolitical Nonpolitical
Aspects of Public
Government

A= public
B = government
C = authority

Nonpolitical Authority Relations

Figure 1. Relationships among conceptions of politics

are present. The public anchors the idea of authority to a particular set of
social conditions. It ties nonarbitrary authoritative policies to a certain sphere
and by so doing provides some normative constraint on what authority struc-
tures can do.
If the scope of authority is limited to what is in some sense public, the
institutions through which authoritative decisions take place are governmen-
tal. Of course there are informal political organizations too, and these are
often involved in making decisions binding on society. But by and large, in
the modern system of the nation-state, the institutional locus of politics is
government. We suggest this focus as a starting point for political analysis
even if some political "locations" are minimized by doing so.
Our summary definition of politics is as follows: Politics refers to the
activities and institutions that relate to the making of authoritative public
decisions for society as a whole. This definition sees the focal point of politics
in the overlapping of three conceptually distinct areas. We represent this
overlap in a diagram, Figure 1.
In the figure there are three circles, each representing one of our approaches
(or constituents) to politics. There is a public sphere that is not political,
such as codes governing dress, speech, and behavior in public places. Much
of this is highly informal, enforced through norms and informal understand-
ings. There is a governmental sphere that is neither public nor authoritative,
at least in some sense. Part of what occurs in government concerns the
motivations, ambitions, and career goals of politicians, even though the pur-
suit of those goals takes place within a public space. Finally, authority re-
lations may be found in the family, church, factory, and school. Authority
Economics 21
by itself need not be political. Often enough, these three spheres overlap.
The shaded section (ABC) points to the overlap between government, the
public, and authority. Our definition points us toward this overlap.

Economics
In modern usage, the term "economic" has several meanings. These different
meanings are not exclusive, yet each is a core idea that anchors a distinct
approach to defining the subject matter of economics. Emphasis on one or
another of these meanings will lead toward different ways of thinking about
what is definitive about the economic dimension of our lives. In this chapter
we explore three core notions of the economic. Clearly distinguishing between
these notions will help us define different theoretical approaches in econom-
ics, and thus also in political economy.
First, the term economic is sometimes used to refer to a way of doing
things, as in the word "economically." If we use the term in this way, it
carries the connotations of efficiency, minimum effort, and close adaptation
of means to ends. Second, the term economic sometimes refers to a kind of
activity, usually aimed (as in production) at acquiring things we want or
need. The term "provisioning" expresses this sense of what is economic. A
third usage of economic ties it to market institutions. These institutions seem
to embody most forcefully the achievement of efficiency in the activities aimed
at acquiring for us the things we need. Economists often argue that we will
be most efficient in satisfying our wants if we organize the process through
market institutions. Mancur Olson notes that in nineteenth-century Britain,
the very word "economist" was taken to mean an advocate of laissez-faire
and "the belief that economic theory is applicable only to goods that fetch a
price in the markets of capitalist economies ... [that] has survived to the
present day" (1969: 140-1).
These three meanings of economic do not map neatly onto schools, theories,
or approaches. Nonetheless, each theory tends to favor one of the meanings
over the others. Because of this, we can learn something important about
the differences between theories by exploring the different ways we use the
term economic.

Conceptions of economics

Economic calculation. The first meaning of "economic" directs our attention

to a way of thinking and an associated orientation of the individual to the
world. Sometimes termed the "economic approach," this way of thinking
seeks to understand human action as an effort to achieve given ends in the
22 Politics and economics
face of external constraints. Such constraints originate in the limited supply
of means, or resources. How well we can satisfy our wants depends on the
means to which we have access. This depends both on what is available over
all, and on the part specifically available to us. The latter depends on the
way society defines property rights and allows property to be allocated among
its members.
Economic calculation is a way of utilizing what is available, given wants.
It is a way of judging institutional arrangements for using available means
according to how well they satisfy wants. It is also a way of understanding
social action as the outcome of private calculations of the likely impact of
action on private want satisfaction.
While currently dominant in economics, this approach has broad expres-
sion in the social sciences. In sociology, Max Weber ([1956] 1978) emphasized
the link between rational calculation (understood as a relation of means and
ends) and economic activity. His work provides a broad perspective on the
link between rationality, efficiency, and the definition of the economic ad-
vocated by many modern-day economists.
When based on the idea of calculation, economics defines its subject matter
in terms such as efficiency and constrained choice. Economics in this mode
begins with the activity of a choosing agent, the individual, attempting to do
the best he can to satisfy wants to the greatest degree possible in the face of
opportunities and constraints. From this starting point, analysis proceeds to
consider the implications of want satisfaction in the context of a group of
individuals characterized in this way. The better we adapt our means to our
ends, the more efficient we are in using our resources. Greater efficiency
means that we can satisfy our wants better.
This way of thinking about what is economic has a static quality that
follows from the notion of limited resources and given ends. Economizing is
a way of adapting to the way things are, not a process of change and devel-
opment. The central metaphor is allocation. We attempt to allocate our means
among our ends so as to achieve as much as we can with what we have.
"Economizing" carries this connotation of constraint captured in the maxim
"There's no such thing as a free lunch." If we are more efficient, we can
sometimes get more with what we have, but we cannot have more. If we
could, we might orient ourselves toward getting more rather than using
efficiently what we have.
Joseph Schumpeter (1942) made the point that an inefficient system might
grow more rapidly and in the long run achieve higher levels of productivity.
Schumpeter thought that capitalism is such a system because monopoly gains
from entrepreneurship stimulate innovation. In his theory, inefficiency im-
plied in monopoly is necessary to economic development. If this is so, the
goal of efficiency recedes in importance. Our first notion of the economic
Economics 23
rejects this claim and holds that the economic problem is that of doing better
with what we have.
The approach to economics centering on the notion of calculation is dis-
tinguished by its static orientation, with emphasis placed on constraints and
allocation. It is also distinguished by its generality. Unlike the other two
ways of thinking about what is economic, this approach makes the term
broadly applicable to human affairs. Indeed, it becomes a way of thinking
about all of our activities. The approach centering on calculation makes
constrained choice virtually synonymous with human action. This attribute
is of special importance for political economy, which concerns itself with the
boundaries between economics and politics. Identification of economic with
a way of calculating implies no restriction of the economic to particular sets
of human relations and activities. It allows and encourages us to think of
politics also as a sphere of economic calculation. Let us consider this impli-
. cation somewhat more closely.
Within the means-ends framework, understanding why people do what
they do means knowing their ends and the means available for them to achieve
those ends. Because we can characterize all human action and motivation in
terms of the ends pursued and the means available, the link between the
economic and the act of economizing makes all human action potentially
economic. This link makes it possible to evaluate instrumental action ac-
cording to economic criteria: Is it efficient in its use of means to achieve the
stated ends?
Weber emphasizes the rise of economic calculation and what he terms
"instrumental rationality" as the hallmark of the modern age. Modern man
relates to the world outside as means to his ends. Thinking about and un-
derstanding the world resolve themselves into making calculations of the way
we can best use it for our ends. Rationality is instrumental when it treats
things and other persons as means and not ends in themselves. Economists
working within this framework assume that individuals adopt an instrumental
attitude. They explain human behavior and judge human institutions ac-
cording to an economic calculation of outcomes. In principle, this approach
can be applied to any human behavior and to all human institutions. Econ-
omists and other social scientists influenced by this vision have applied it to
political processes and personal life (marriage, voting, suicide) as well as to
economic affairs more narrowly conceived. 2
While economists who understand their subject matter in the language of
calculation treat the problems of production and circulation of goods as
instances of economic activity, they do so not because such activity is in-

2
See Becker (1976) for a discussion of and examples of the extension of the concept of the
economic to encompass the broad range of social institutions.
24 Politics and economics
herently economic (as would be implied in our second meaning), but because
it can be interpreted on the basis of the notions of choice and efficiency. Yet
production and circulation of goods need not be done economically in the
sense that those engaged in productive activity need not work efficiently at
it and what they do need not be characterized in terms of choice. 3 If we want
to think of the activities associated with provisioning needs, whether involving
calculation in the above sense or not, as economic, we must leave behind the
first usage of the term and consider an alternative.

Material provisioning. The second usage of the term "economic" characterizes

earlier thinking about economic activity from Aristotle to Adam Smith and
Karl Marx. It also motivates the work of modern economists influenced by
the older traditions in economics. 4 These economists also use the term "eco-
nomic" to refer to a kind of activity. They identify this activity not by its
characteristic mode of calculation, however, but by its purpose: the produc-
tion and reproduction of goods, or the material provisioning of wants. Econ-
omists working within this framework do not deny that activities can be done
more or less efficiently. They do, however, consider production of the ma-
terial things needed to sustain life economic whether or not it is done effi-
ciently, and whether or not those engaged in it are conceived as making
choices.
This approach tends to equate economic activity with the "material life
process of society" (Sahlins, 1972:xii) and with concern for the "material,
substantive, things that sustained human beings" (Polanyi, 1957:83). The
interpretation of economic life as a process of material reproduction receives
its most general and deliberate formulation in the work of Karl Marx. For
Marx, "it is quite obvious from the start that there exists a materialistic
connection of men with one another, which is determined by their needs and
their mode of production, and which is as old as men themselves" (1964:41).
Notions such as material life and material connection refer to the processes
by which the members of a social order participate in the activities that lead
to their collective reproduction.
This emphasis on the "material" merits further consideration. From a
modern-day standpoint, identification of wants with material things seems
less compelling. Many of the goods economies provide (information or
entertainment, for example) are not primarily material. During the period
of the classical economists (considered in Chapter 2), however, the material

3
Whether and how it is possible to conceive of production and distribution as being in some
sense inefficient depends on our concept of efficiency. The concept itself raises serious diffi-
culties, especially as it is identified with economic rationality. For a discussion and critique,
see Godelier (1972:ch. 1).
4
See, for example, Sraffa (1960) and Dobb (1973).
Economics 25
dimension dominated, and it was not unreasonable to assume that provi-
sioning of needs was a matter of providing things in appropriate material
form.
A more general interpretation of the idea would focus our attention not
on the physical makeup of goods, but on the use of our human energies in
providing them. This provision of goods has two important dimensions:
production and circulation. Economic activity either produces the goods that
satisfy needs or moves those goods from those who produce them to those
who need them. This latter is the circulation of goods most often identified
with exchange.
The physical makeup of a good does not determine whether we use human
energy to create it or whether it can circulate from owner to owner. Property
rights in nonmaterial things (such as ideas) also change hands, and in this
sense circulate from one owner to another. Thus, we can employ the pro-
visioning idea whether or not we think that most wants demand material
things for their satisfaction.
Yet the spirit of the provisioning approach emphasizes material goods over
nonmaterial, often giving the former a special status and larger role in eco-
nomic affairs. While not inevitable, this emphasis follows naturally from the
perspective that sees provisioning as a kind of material circulation of the
things necessary to sustain life - to provide nutrition, warmth, and shelter.
The provisioning approach focuses our attention on basic needs and the goods
that sustain life in its more elemental senses.
The term "material connection" depicts the relation of person to person
and of the individual to social institutions in a way different from that of
economic calculation. This difference centers on the perception of individual
agents and of the constraints in which they operate. It also centers on the
way the agents are understood to relate to the social structure and material
universe that sustain them. We will briefly consider each of these differences.
When we identity the economic with a way of calculating, we immediately
place emphasis on the mental processes of the individual agent who does the
calculation. That is, the economic occurs in the mind of the agent, or at least
it begins there. Further, the specific calculation centers on subjective ends
ultimately known only to the individual. We outside know them only by
inference from the actions taken in their pursuit (the choices made by the
agent tell us something about his preferences). In the provisioning concep-
tion, the economic does not refer us to an attitude or mode of calculation on
the part of the individual, but to a systemic process.
In this framework, the starting point is not the individual and his pref-
erences, but the system or structure of reproduction of the society as a whole,
or at least of that aspect of society tied to satisfying wants. Here, we imagine
a system of interconnected needs determined not by the individual's private,
26 Politics and economics
subjective life, but by objective social facts. What we need depends not on
our subjective lives, but on our place in a larger structure.
The classical economists discussed in the next chapter provide us with two
instances of the structural or objective determination of wants: the placement
of the producer in a social division of labor, and the placement of the indi-
vidual into a social class. Placement of the producer in a social division of
labor refers to the way he depends on other producers for inputs needed to
produce his specific output- how the carpenter depends on those who provide
wood, nails, glue, paint, and other things needed to make a table, chair, or
house. The producer's needs do not depend on his subjective preferences,
but on what he produces and the technique used to produce it. Knowing
what he produces and the technology determine the nature of inputs required.
These required inputs are determined objectively, and the need for them is
likewise determined objectively. The economist influenced by this way of
thinking tends to focus on the objective determination of wants within a
system of the reproduction of a social division of labor.
The emphasis on provisioning links motivation to need rather than choice.
Through our economic pursuits, we seek to acquire things we must, in some
sense, have. These objects are requirements of life. As such, we do not prefer
to have them, or simply choose the best option among numerous alternatives.
5
Instead, we do what we must to assure provisioning of our Choice
and preference fall away, and with them the framework of thinking favored
by those seeking to identify economic with a form of calculation.
Even within the provisioning framework, of course, there remain wants
not immediately linked to reproduction of a division of labor: the wants of
the individual for means of consumption. Economists favoring the calculation
approach direct our attention to these wants and interpret them in terms of
preference and choice. The classical economists, or those influenced by their
method, do not operate this way. They understand consumer wants to be
determined socially and objectively rather than individually and subjectively.
To arrive at this social determination, theorists generally refer us to the
class position of the individual, especially his position with regard to own-
ership of the means of production. In Marxian language, your class position
depends on whether you own and gain your income from capital or whether
your only property is your laboring capacity. If the latter, then you are a
worker and your consumption needs are determined by the "subsistence."
The subsistence is an important idea in models such as these; we explore it
somewhat further in the next chapter. For the moment, we introduce it only
to emphasize that the idea of a worker's subsistence allows us to circumvent
any reference to the subjective state of mind and preferences of consumers

5
For a further discussion see Levine (1988:ch. 1).
Economics 27
when we think about the consumption needs of most of the population. What
these consumers need is their basic subsistence- food, clothing, shelter- in
a form and amount determined by objective social, historical, and cultural
factors. Differences among individuals have less importance than social prac-
tices in determining what workers eat and wear or where they live.
Reference to class position and to the social division of labor solves prob-
lems in the material reproduction approach that are correspondingly solved
by notions of subjective preference and choice in the economic calculation
approach. It solves those problems in a way that places less emphasis on
choice and calculation of how to maximize satisfaction, more emphasis on
objective structure, objective needs. The activity of the agent is understood
differently in this second conception of the economic.
How we understand constraints also differs here. This difference stems
from a shift toward a more dynamic conception of economic affairs, one
centering on reproduction and growth rather than allocation. 6 The notion of
fixed resources for satisfying wants plays little or no part. How much we
have available to satisfy wants depends on how much we invest in production
of goods. Without a notion of fixed means, it is difficult to apply the econ-
omist's notion of efficient allocation. Inputs are themselves products of past
production, rather than given resources. This shift alters many of the basics
of the analysis in important ways.
Piero Sraffa suggests this shift in the title of his short essay toward a critique
of economic theory, Production of Commodities by Means of Commodities
(1960). Sraffa's framework is one in which needed inputs to production are
themselves produced. The emphasis is on reproduction rather than allocation.
What constrains the system is not limited resources, but the history of the
economic process. In particular, the historical constraint has to do with the
size and utilization of the economic surplus. 7
The term "surplus" refers to the difference between output and the nec-
essary costs of its production. If we take the total product in a given period,
the surplus is that part not needed as inputs for the reproduction of the same
product in the next period. The surplus enters into the constraints of the
system because its magnitude and use determine whether the economy grows
or remains the same.
With a positive surplus, the opportunity exists for investment in additional
inputs that will make the level of output increase in the future. The surplus
is a fund for investment and economic growth. It represents the potential to
break the constraints on want satisfaction built into the existing level of
economic activity. The economic problem is not primarily that of using

6
See E. Nell (1967).
7
For a discussion in more general terms, see Baran (1957) and Walsh and Gram (1980).
28 Politics and economics
existing available inputs efficiently (this is more of a technical or engineering
problem), but of assuring the investment of the surplus so that the quantity
of inputs available will increase. Thus, constraints have an historical quality
about them: how much has been invested in the past, and how much is
currently being invested.
Identification of the economic with reproduction of a system of provisioning
of wants takes us in a different direction than does the idea of economic
calculation. Both see the economic as a kind of activity, but the nature of
the activity varies in significant ways. Our third way of thinking about what
is economic does not identify it simply with an activity, and thus takes us
in a distinct direction.

The economy. The separation of society into an "economy" and a "polity"

does not flow directly or inevitably out of either of the two approaches
considered so far (although it probably fits more easily into the approach that
identifies economic with provisioning rather than calculation). The idea of
the economy as a socially and historically specific institution is, nonetheless,
an important one. When we speak of the economy, we already assume the
existence of a separable entity: a place (perhaps the market if we can consider
that a place), a sphere (as Marx would have it), a moment of the whole in
the Hegelian sense, a distinct set of relations between persons not in essence
political or familial.
This usage parallels the historical emergence of the economy as a separate
institution. Karl Polanyi, more than any other contemporary thinker, has
drawn our attention to this aspect of modern social organization.
A self-regulating market demands nothing less than the institutional separation of
society into an economic and political sphere. (1944:71)
As is shown in the next chapter's discussion ·of the classical approach, the
argument for the self-regulating market is an argument for the separateness
of the economy as an institution.
References to the separateness of the economy immediately invoke objec-
tion and doubt from those convinced that the modern project of political
economy is to rethink that separation and explore the interpenetration and
integration of economic and political processes. Because of this, the third
sense of the economic, since it insists on separability, raises most clearly the
central theme of this book. It will prove helpful, therefore, to explore it more
closely to assure that we are clear on what separateness connotes. 8
Separateness of the economy does not mean its independence of the other
aspects of social life. It does not mean that the economy can, in fact, stand

8
See Levine (1989).
Economics 29
alone. Even those economists most committed to the idea of market self-
regulation maintain that the market depends on the state for a set, albeit a
limited set, of requirements for its own survival. Adam Smith insists that
the state not only maintain internal order and security from foreign invasion,
but also engage in substantial public works where the private sector lacks
the means needed given the scale of the project. Separateness does not, then,
mean either autonomy or the absence of significant state involvement in
economic life.
In order to understand what it does mean, it may prove helpful to suggest
an analogy. When we speak of the separateness of persons, of their autonomy
or independence, we do not mean that they could survive by themselves,
that they are not in important ways socially formed and determined, or that
they relate to others with indifference, unaware of the ways in which, together
with those others, they form a single larger whole. We mean instead that
each is recognizably distinct, related to others yet different from them. Sep-
arateness allows us to speak intelligibly about the individual.
The same holds for the separateness of the economy. It means that the
economy is distinct, different from, and not equivalent to polity or family.
When engaged in our economic affairs, we are not directly engaged in family
life or politics. This holds true when the economy is indeed separate, even
though our economic affairs presuppose a political and legal framework.
Considering it separate allows us to talk intelligibly about the economy.
The reality of an economy as a distinct system of relations is not contingent
on individual preferences and choices. Economic institutions endure; indi-
viduals find their way in and through them. Individuals may not form them
as means to satisfy their wants, although economic institutions have a purpose
bound up with want satisfaction.
When we refer to "the economy," then, we move away from the more
individualist methodology favored by those who identify economics with a
mode of calculating. The notion of an economy understands it as an enduring
social reality of its own kind capable of influencing, forming, and even de-
termining motivations and ways of thinking. The economy has its own social
purpose irreducible to those we associate with politics and family life. This
purpose is not contingent on the preferences of agents or the universal de-
mands of material reproduction. We can think of preferences and of material
reproduction without thinking about the economy. When we think about
the economy, we must have in mind something more than, and something
different from, the central concepts of economic calculation and material
reproduction. What is this something more and different?
The answer refers us to the institutions of private property and contract.
These institutions involve us in a distinct set of relationships with others and
in a specific orientation to our private ends. The economy is a sphere of
30 Politics and economics
pursuit of self-interest, a place that validates preoccupation with our private
concerns. The relations we enter into are normally understood to be instru-
mental to those private concerns. This makes the economy at least potentially
a set of relations between persons distinct from the social relations that
connect persons politically or personally.
For this reason, Polanyi links the separateness of the economy to the
prevalence of the institution of contract. The economy connects independent
property owners pursuing private interest through the use and exchange of
their private property. So long as family and polity are not formed by links
of exchange and pursuit of self-interest, they are not part of the economy.
Neither, then, is the economy part of family or polity.
Thus, so long as we think the buying and selling of votes is antithetical
to the political process, voting is not part of the economy. We can impose
other demands on the election process than those associated, in the economy,
with self-interest. Similarly, so long as we consider it inappropriate to treat
the family as a sphere in which members pursue their respective self-interests
and contract one with the we do not consider family a part of economy.
If we treat family members' as ends in themselves, such relations are not
instrumental and not subject to economic calculation. When we recognize
the obligation, in certain spheres of social interaction, to treat others as ends,
we narrow the domain of economy, separating it off as a distinct sphere.
If we understand the economy as an enduring reality, we can begin to
think about institutional imperatives built into its structure. Such institutional
imperatives do not derive from the preferences of individuals. We can derive
the goals of social structures from individual ends only if we make the struc-
ture contingent on those ends. This would violate the notion of the structure
as an enduring social reality. The structure precedes the participant. If the
actions of the participant are to be intelligible, that intelligibility must stem
from attributes of the social structure that envelop him. One way to put this
is to note that this approach implies that the economy understood as a struc-
ture sui generis moves the individual according to its own structural imper-
atives and that economics needs to consider what those imperatives are. We
will pursue this possibility further in the next chapter. In anticipation of that
discussion, we mention here some salient features of the problem.
The end or goal most closely associated with the institutional reality of
markets has traditionally been that of capital accumulation and economic
development. Adam Smith considered accumulation of wealth the main jus-
tification for free-standing markets. Within such institutional arrangements,
individual self-interest works for the goal of the maximization of the national
revenue. Karl Marx continues this theme of the revolutionizing impact of
market economy in his famous discussion of the progressive mission of cap-
italism in The Communist Manifesto (Marx and Engels, [1848] 1955). And,
Economics 31
in the twentieth century, Joseph Schumpeter developed his argument for
capitalism as a system of change and development whose raison d' etre was
the transformation of the methods of production, the means of consumption,
and the forms of organization of economic institutions.
These classic contributions to economics all treat economy as an organi-
zation that drives us in a particular direction, and economics as primarily
the study of the logic of that organization and the ends likely to be achieved
by it. This is the logic of the self-regulating market, the sphere of voluntary
contractual relations between property owners including owners of labor and
means of production. The institutional reality of the (market) economy be-
comes the subject matter of economics.

Economics and political economy

The three different meanings of economic bear on how we think about the
relation of economics to politics. It is not simply a matter of how we relate
economics to politics, but of what we mean by the terms. How they are
related follows from how we define and use them.
When we use "economic" in the sense of economic calculation, then politics
becomes one place to apply such calculation. Economics is a way of acting,
politics a place to act. In politics, we can exhibit economic behavior or not.
If we do not, however, this poses a problem for those who identify economic
with a form of calculation. For them, the intelligibility of our action depends
on the connection between means and ends. The action becomes intelligible
when we can show how it follows from a means-ends calculus. If action does
not make sense in this way, it does not make sense. Thus, if it is not ultimately
economic, it does not make sense. Those favoring this approach tend to
assume that economic refers us to a basic perspective on human motivation
and behavior so that it is necessary to assume economic calculation in both
if we are to think coherently about politics or markets.
One result of placing emphasis on economic calculation is that economics
tends to dominate. The economic approach explains what we do and why
we do it. Politics simply describes the context. If we wish to explain politics,
we need to think in terms of economics. This dominance of economics ex-
presses an important and enduring theme of political economy as we suggest
in the Introduction. Political economy has been less about the interrelation
between economics and politics understood as separate endeavors, more about
the subordination of the political to the economic.
This dominance clearly has to do with the necessity, given the identification
of the economic with a mode of calculating, that we start out with the interests
of the individual agent when we attempt to explain both individual and group
activity. Emphasis on calculation leads to emphasis on subjective preference,
32 Politics and economics

individual motivation, and self-interest. The approach centering on calcu-

lation necessarily involves us in a method that starts from and refers back to
individual states of mind and calculations.
The use of economic in the sense of calculation works against the idea of
the separation of the economic from the political. It tends to expand the
terrain of application of economics well beyond its traditional boundaries
either in market relations or in the material provisioning of wants.
The idea of material provisioning does tend to limit the econ"omic and thus
allow for a meaningful separation of economic activity from political. It does
not, however, require such a separation. In some systems, material provi-
sioning takes place within a political system and in some it takes place through
familial relations. Indeed, in its original meaning, the term economic referred
to household management. The reference was not to an economy, but to one
of the dimensions of family life. Economic relations were also familial rela-
tions. This statement makes sense within the provisioning definition of the
economy.
The generality of this approach allows it to consider economies separate
from or integrated into the political system. At the same time, the approach
exhibits some difficulty in conceiving of the economy as a system of social
relations. Thinkers following the logic of the notion of provisioning tend to
attempt to do so in technical-material language - for example, depicting
economic activity in the framework of an input-output system. This makes
the social world of the economy an external context within which economic
activity takes place. The term economic tends, then, to refer us to nonsocial
relations that follow nonsocial laws.
The third approach, as we have already seen, emphasizes the separateness
of the economy. It focuses our attention directly on the social relations that
define economic affairs and not on pre- or extrasocial processes variously
integrated into the economy or left separate. This approach gives up the
generality of the first two in exchange for a deeper social rooting of the
economy. Here, the economy is one social sphere, rather than material activity
or private calculation situated in relation to the genuine social realities of life
outside of economy.
We can refer to this approach as a kind of benchmark precisely because
it does emphasize the separateness of economy rather than its merger into
the other social realms. It allows us to focus attention on the implications of
(1) the modern penchant for diminishing the separateness of the spheres of
social life, and (2) the associated tendency to make one or the other (often
the economic, as we have seen) dominant.