'Political Economy' and

'Economics'

PETER GROENEWEGEN

This article provides a survey of the origin of the term 'political economy' and
its changes in meaning, emphasizing in particular its first modern usage in the
18th century, its demise from the end of the 19th century, when it was gradually
replaced by the word 'economics', and its revival in a variety of forms, largely
during the 1960s, which have altered its meaning from more traditional usage.
What follows is therefore largely definitional and etymological, designed to
indicate the lack of precise meaning associated with both the term 'political
economy' and its more modern synonym, 'economics'.
The origin of words starting with 'econom' is Greek, from oikos meaning
'house' and nomos meaning 'law' in the sense appropriate to astronomy when
it deals with 'the law and order of the stars' (Cannan, 1929, p. 37). The traditional
meaning of oikonomike or economics, was therefore 'household management'.
Aristotle ( 1962, p. 30) used it in this sense when analysing households as 'three
pairs: master and slave, husband and wife, father and children'. This meaning
persisted in moral philosophy until the middle of the 18th century, for example,
in Hutcheson (1755) and Smith (1763, p. 141). The Latin oeconomia likewise
meant management of household affairs and extended to management in general
including orderly arrangement of speech and composition. The French oeconomie
or economie took over this wider meaning of management from the Latin and
when combined with politique it signified public administration or management
of the affairs of state. Arthur Young ( 1770) applied thiswider meaning in the title
of a treatise on agricultural management. Using 'economy' as a synonym for
'thrift', 'frugality' and careful management of the finances of households and
other organizations also derives from the Latin adaptation. 17th-century concern
with nation-building gave the term 'public administration' a wider scope, and
given developments in France under Henry IV and Richelieu it is not surprising
that the term 'political economy' made its first appearance there. This first use

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is generally attributed to Montchretien ( 1615), but King ( 1948) indicates prior

use in Mayerne-Turquet (1611). Because the relationship between state and
economy it signified was so appropriate to the times, King suggests that other,
perhaps earlier uses, may be found. Petty (1691, p. 181 and cf. 1683, p. 483) used
the term in England. As Cannan (1929, p. 39) surmised, he could as well have
used 'political economy' as 'political anatomy' to describe his analysis of the
Irish economy, considering he used 'political arithmetick' for the art of making
more precise statements on the political economy of nations, interpreted as their
comparative strengths (cf. Verri, 1763, pp. 9-10, who speaks of the science of
political economy in this manner). Cantillon (1755, p. 46) referred to an
'oeconomy' in the sense of an economic organism in which classes exist as
interdependent units, but his book remained an 'Essay on Commerce'.
More precise formulations of political economy as a science of economic
organization, though with continuing connotations of management, regulation
and even orderly natural laws, are found in Physiocracy. Quesnay's early usage
generally implies the traditional meanings, but in addition he applied the term
to include discussions of the nature of wealth, its reproduction and distribution.
This double meaning is particularly evident in his Tableau economique. It
is therefore no accident that Mirabeau (1760) spoke of economie politique 'as if
it consisted of a dissertation of agriculture and public administration as well as
on the nature of wealth and the means of procuring it' (Cannan, 1929, p. 40).
During the subsequent decades the second meaning became more dominant, the
word 'science' was added to it (an innovation attributed to Verri, 1763, p. 9)
and by the 1770s it almost exclusively referred to the production and distribution
of wealth in the context of management of the nation's resources.
Sir James Steuart ( 1767) is the first English economist to put 'political economy'
into the title of a book. Its introductory chapter explained that just as 'Oeconomy
in general, is the art of providing for all the wants of the family', so the science
of political economy seeks '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 the society, and to
employ the inhabitants ... 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 reciprocal wants' (1767, pp. 15, 17). Steuart's
full title gave the subject matter to be covered: 'population, agriculture, trade,
industry, money, coin, interest, circulation, banks, exchange, public credit and
taxes'. In 1771 Verri published Reflections on Political Economy, the preface of
which referred to a new department of knowledge called political economy.
Although Smith did not use 'political economy' in his title the introduction and
plan of his book refers to 'different theories of political economy' and at the start
of Book IV he defined the term as 'a branch of the science of a statesman or
legislator' with the twofold objectives of providing 'a plentiful revenue or
subsistence for the people ... [and] to supply the state or commonwealth with
a revenue sufficient for the public services' (Smith, 1776, pp. 11, 428). Elsewhere
( 1776, pp. 678-9) Smith indicated that he saw political economy as an inquiry

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into the nature and causes of the wealth of nations or, as the physiocrats had
initially suggested, the science of the nature, reproduction, distribution and
disposal of wealth.
The association of the science, political economy, with material welfare proved
to be particularly hardy, as was its association with the art oflegislation. Bentham
(1793-5, p. 223) put the matter concisely when he argued, 'Political Economy
may be considered as a science or as an Art. But in this instance as in others, it
is only as a guide to the art that the science is of use'. Torrens (1819, p. 453)
also called it 'one of the most important and useful branches of science' while
James Mill (1821, p. 211) and McCulloch (1825, p. 9) defined it as a systematic
inquiry into the laws regulating the production, distribution, consumption an
exchange of commodities or the products of labour. 'Confounding' the art with
the science was criticized by Senior ( 1836, p. 3) as being detrimental to its
development, a position likewise taken by John Stuart Mill (1831-3) and which
also reaffirmed its moral and social nature. In this influential essay, Mill ( 1831-3,
p. 140) defined political economy as 'the science which traces the laws of such
of the phenomena of society as arise from the combined operations of mankind
for the production of wealth, in so far as those phenomena are not modified by
the pursuit of any other object'. This position was more or less adhered to in
his later Principles ( 1848, p. 21 ), when he defined its subject matter as 'the laws
of Production and Distribution, and some of the practical consequences deducible
from them .. .'. Cairnes ( 1875, p. 35) condensed this to the statement that 'Political
Economy ... expounds the laws of the phenomena of wealth.'
The middle of the 19th century saw two criticisms of this meaning of political
economy. Marx ( 1859, p. 20) identified the study of political economy with a
search for 'the anatomy of civil society' or, as Engels ( 1859, p. 218) put in his
review of the book, 'the theoretical analysis of modern bourgeois s0ciety'. This
preserved the name but criticized the scope and method of political economy.
Others suggested the name be changed because it had become misleading. Hearn
(1863) put forward Plutology or the theory of effects to satisfy human wants;
MacLeod (1875) proposed 'economics', defining it as the 'science which treats
of the laws which govern the relations of exchangeable quantities', a nomenclature
of whose virtues he successfully persuaded Jevons (Black, 1977, p. 115). When
in 1879 the Marshalls published an elementary political economy text, they called
it The Economics of Industry. The new name of MacLeod and the Marshalls was
favourably referred to in the second edition of Jevons's Theory (1879, p. xiv)
because of convenience and scientific nicety (it matched mathematics, ethics and
aesthetics) and Jevons 's last published book ( Jevons, 1905) bore the title Principles
of Economics. Although Cannan (1929, p. 44) claimed Marshall (1890) induced
acceptance of the new name, this only came with the later editions, and the
change was not completed until the early 1920s (Groenewegen, 1985). Even then,
Marshall (1890, p. 1) appeared to treat the two names as synonyms: 'Political
Economy or Economics is a study of mankind in the ordinary business of life; it
examines that part of individual and social action which is most closely connected
with the attainment and with the use of the material requisites of well-being.'

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Just as J.S. Mill (1831-3, pp. 120-1) had attempted retrospective codification
of scope and method in the 1820s, so Robbins ( 1932, p. 16) redefined
economics in its marginalist form as 'the science which studies human behaviour
as a relationship between ends and scarce means which have alternative
uses'. This did more than supply a meaning for the new term, 'economics'.
It destroyed the view classical economists had of their science, as Myint (1948)
clearly pointed out. Others (e.g. Knight, 1951, p. 6) complained that Robbins's
definition neglected the link between economics and the 'individualistic or
"liberal" outlook on life, of which "capitalism", or the competitive system,
or free business enterprise, is the expression upon the economic side, as democracy
on the political'. However, the major drawback of the Robbins definition was
its irreconcilability with Keynes's work with its proof of the possibility of
unemployment equilibrium and hence contradicting Robbins's requirement
for the existence of an economic problem that resources have to be scarce.
Modem mainstream definitions of economics (Rees, 1968; Samuelson, 1955,
p. 5) have simply combined the Robbinsian resource allocation problem with
the new economics of employment, inflation and growth developed from Keynes's
work.
Robbins's definition also aimed to make economics a 'system of theoretical
and positive knowledge' (Fraser, 1937, p. 30), preferring to reserve the older
name, 'political economy' for applied topics such as monopoly, protection,
planning and government fiscal policy, subjects included in his essays on political
economy (Robbins, 1939). Although Schumpeter (1954) held a similar opinion
he was careful to warn that 'political economy meant different things to different
writers, and in some cases it meant what is now known as economic theory or
"pure" economics' (p. 22). These views of political economy conflict with the
pragmatic Cambridge outlook on economics, derived from Marshall's description
of economics as 'an engine for the discovery of concrete truth', encapsulated by
Keynes ( 1921, p. v) in his famous introduction to the Cambridge Economics
Handbooks: •Economics is a method rather than a doctrine, an apparatus of the
mind, a technique of thinking which helps its possessor to draw correct
conclusions.' This sentiment is concisely summarized by Joan Robinson's view
of economics (1933, p. 1) as 'a box of tools'.
Marxists had never abandoned the older terminology of political economy.
Dobb ( 1937, p. vii) defended 'political economy' against the new term •economics'
because its controversies 'have meaning as answers to certain questions of an
essentially practical kind', associated with the 'nature and behaviour' of the
capitalist system. Likewise, Baran (1957, p. 131) argued for a 'political economy
of growth' because an 'understanding of the factors responsible for the size and
the mode of utilization of the social surplus ... [is] a problem, not even
approached in the realm of pure economics'. For the classical economists, use
of the surplus had been a major research question. Political economy is therefore
a very appropriate title for the endeavours of some contemporary economists to
resurrect both practical and theoretical aspects of the classical tradition in what
they describe as the surplus approach.

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By the 1960s the radical libertarian right from Chicago and the Center for the
Study of Public Choice appears to have appropriated the title 'political economy'
for their wide application of Robbins's ( 1932) injunction that analysis in terms
of 'alternatives' is the key distinguishing feature of economics. This effectively
replaced Robbins's question 'what is or is not economic in nature?' with the far
wider one of 'what can economics contribute to our understanding of this or
that problem?'. This opens up the way for an economics of 'family life, child
rearing, dying, sex, crime, politics and many other topics' which some of its
practitioners identify with Adam Smith's research agenda (McKenzie and
Tullock, 1975, p. 3). Others continue to associate the term 'with the specific
advice given by one or more economists ... to governments or to the public at
large either on broad policy issues or on particular proposals' or, alternatively,
as another term for 'normative economics' (Mishan, 1982, p. 13).
At the approach of the 21st century, both terms - 'political economy' and
'economics'- survive. During their existence, both have experienced changes of
meaning. Nevertheless, they can still essentially be regarded as synonyms, a feature
of this nomenclature reflecting an interesting characteristic of the science it
describes. In its sometimes discontinuous development, economies or political
economy has invariably experienced difficulties in discarding earlier views, and
traces of old doctrine are intermingled with the latest developments in the science.

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