Module 7: Political Economy

What is political economy?

The study of how politics and economics are related and how their relationship shapes the balance between freedom and equality.

What are markets?

The interactions between supply and demand that allocate resources. They can be centralized or decentralized and are regulated by the government.

What is property?

Property rights are regulated by the state. Intellectual property includes ideas, processes, art, and code, protected by copyright and patent laws.

What are public goods?

Goods provided or secured by the state that are available for society and indivisible (e.g., roads, security, clean air, water, healthcare, and education).

What are social expenditures?

Also called the welfare state, these are government-funded benefits such as unemployment benefits, healthcare, education, and tax breaks.

What is taxation?

The system through which the government collects revenue. Progressive taxes make the wealthy pay more, while regressive taxes disproportionately impact the poor.

What is monetary policy?

Policies managed by central banks that regulate money supply and interest rates to control inflation and economic stability

What is inflation?

A rise in prices due to increased demand or limited supply, often managed by central banks through interest rate adjustments.

What is deflation?

A decrease in prices caused by too many goods and not enough money, leading to economic downturns.

What is regulation?

Rules that set economic boundaries, control prices, prevent monopolies, ensure workplace safety, and protect consumers.

What is trade policy?

Policies governing tariffs, quotas, and trade barriers to regulate the exchange of goods and services between countries.

What is liberalism in political economy?

A system prioritizing a free market with minimal government intervention. The state focuses on securing property rights and enforcing contracts

What is social democracy?

A system balancing free markets with strong social welfare programs, ensuring economic equality and government intervention in markets.

What is communism?

A system where the state controls all economic resources to eliminate class divisions and ensure equal distribution of wealth

What is mercantilism?

A state-focused economic system emphasizing national power and industrial policy, often involving tariffs and selective industry support.

What is GDP?

Gross Domestic Product, measuring the total market value of all goods and services produced within a country in a year.

What is GDP (PPP)?

GDP adjusted for purchasing power parity, which accounts for cost-of-living differences across countries.

What is the GINI index?

A measure of income inequality in a society. A higher score means greater inequality.

What is absolute poverty?

The percentage of a population living on less than $2 per person per day.

What is the Human Development Index (HDI)?

A measure of national development based on life expectancy, education, and income per capita.

How is happiness measured in political economy?

Happiness is studied through subjective well-being surveys, often showing wealthier countries are happier, but not always.

What are some arguments supporting global liberalization?

• Increased trade efficiency

• Higher economic growth

• Access to more markets and innovation

What are some concerns about global liberalization?

• Rising inequality

• Economic dependence on other nations

• Potential exploitation of labor and resources