1. Foundations of Political Economy – Final Exam Study Guide
2. Statist perspectives
a. Development of world economy as division of labor (core, periphery, semi-
periphery). Mobility vs. underdevelopment, kicking away the ladder (telling
developing countries not to do like developed countries have done, not giving
them the same opportunity).
b. Sees states as autonomous, acting in their own interest. It assumes that politics
and economy are inseparable, they cannot be studied separately
(embeddedness). Yet, it was still influenced by neoclassical economics
c. The economy and state shape each other. It looks at theories of state behavior
(what can/can’t they do and why); states are motivated by their own national
interest
d. There are 2 levels: states have to look at domestic and international concerns.
Elaborating on that, states are interested by ‘national interests’, which differ in
capacity. “Capitalism is too important to be left to the ‘capitalists’, you want a
state that can stop things” → states and businesses have different ideas.
Capitalists often think short-term and on how to make the most profit → not
seeing the bigger picture. (for example: in war, states start playing a more
important role in economic activity)
e. The 2 key theorists are Max Weber (bureaucracy is vital to capitalism) and
Friedrich List (normative theory of states in world market)
f. It lacks an overarching theory
3. Feminist perspectives
a. focus on gender relation in the economy and in what way it shapes the economy
b. takes into account the unpaid jobs as part of the economy too
c. labor is the source of value (value of a good is determined by the total amount of
socially necessary labor)
d. wants to integrate women and care into the labor market (reproductive labor)
e. capitalism and patriarchy are interrelated
f. feminisms rather than one coherent paradigm
i. Questions of dichotomies: productive/reproductive labor
g. primarily criticises the long-existing male dominance
4. Growth and productivity
a. Productivity: ratio of output to inputs; it is a question of efficiency. The more
productivity, the more economic growth will occur which will lead to an
improvement of the standard of living
i. Productivity matters because it determines the competitiveness of firms
and nations
ii. To boost productivity, one can increase the capital intensity, intensify the
labor process or adjust the management (e.g. threaten to fire someone)
iii. types of productivity growth:
1. achieved through investment → capital intensity
2. achieved without investment → intensification of labour process
, b. Growth: the expansion of output which can result in economic development, but
unlike development it cannot be measured by a single indicator
i. A change in productivity affects growth (and profitability).
c. Division of labor led to huge productivity gain and expansion of wealth. Changes
in technology are at the root of economic development. Also, work organization
(assembly line and moving assembly line) can help with productivity and growth.
d. Why does productivity matter?
i. it increases income
ii. it has the potential to improve livelihoods
iii. it determines competitiveness of firms, industries
iv. it determines competitiveness of regions, nations
5. Welfare and poverty
a. Welfare: Satisfying basic human needs and implies protection from deprivation
of needs in times of adversity. Welfare entails the development of human
capabilities and freedoms, the achievement and maintenance of social
autonomy, and the ability not merely to function or subsist but to thrive and
pursue one’s livelihood in a dignified and meaningful way. Welfare and wellbeing
can be used interchangeably. Welfare can be subjective (when it enquires about
how people see their lives) and objective (when it looks at quantitative factors in
different countries). Three worlds of welfare can be distinguished (Espen-
Andersen)
i. Liberal (US, Canada, Australia)
1. Benefits only for low income people > stratified/stigmatized
2. Tendency to push people toward market reliance
ii. Conservative (Austria, France, Germany)
1. States are often ready to replace the market as a source of
welfare, but welfare is often insurance-based
2. Class differences and traditional structures are maintained;
traditional family values
3. But: states step in when family lack ability to support
iii. Social Democratic
1. Scandinavia
2. Everyone receives generously, but dependent on income > states
assume role of welfare provider
3. It can serve as a motivation for the state to encourage full
employment
4. Decommodification of welfare services
b. Poverty: Opposite of welfare. Involuntary deprivation of human needs.
i. 40%+ of the world population lives below a PPP of $2,50
ii. Poverty headcount is sensitive to the precise level of international
poverty lines and sensitive to the reliability of household surveys
iii. Downward bias: some numbers of poverty are made lower than they
actually are, in the end making the trend look more positive
iv. determinants of poverty
, 1. ‘natural’ → the distributional randomness of nature
2. ‘social’ → 1) growth, productivity… 2) institutions, technologies…
3) exploitation and oppression… 4) contingent events
v. Three forms of poverty:
1. Absolute versus relative poverty
a. Absolute: Failure to be in command over income to fulfill
the most basic human needs (food, water, shelter) for
survival. You have no control and its involuntary.
b. Relative: Poverty in regard to certain standards of
consumption which are considered necessary to maintain
“decency”; related to inequality. Rich countries don’t have
absolute poverty, but it can have a high relative poverty >
inequality
2. Multidimensional poverty (Some people may have basic
necessities (clothes or food) buy may have little to no access to
things like education and/or healthcare. It demonstrates whether
people are able to participate in society.
6. GDP
a. Gross domestic product. The total monetary value of what has been produced
within a country over a given period of time, usually a year. To calculate GDP, we
measure output (product), by value added. Producers output minus
intermediate output value.
b. NDP is the Net Domestic Product (which is very hard to measure). It’s the GDP
minus the wear and tear of machines. NDP is more accurate than GDP in the long
run, but GDP is more accurate in the short run. We use GDP though, because
there is no agreed upon way to measure depreciation.
c. (Use of) GDP is criticized though because household work is not counted, nor
does it measure the standard of living. It can cover up a lot of inequality, nor
does it count non-monetary things such as the environment (and its
destruction).
d. Measure GDP through the income approach, output approach, or expenditure
approach.
7. Intensive versus extensive growth
a. Intensive growth: transforming the way things are produced (using inputs more
productively). This form is usually associated with wealthy countries.
i. Increased effectiveness
ii. Quality of efficiency
iii. Quality of inputs
b. Extensive growth: adding external factors that lead to growth (expansion of
quantity of inputs used). This form is usually associated with lower-income
countries.
c. Both concepts were introduced by Karl Marx
8. Simon Kuznets
2. Statist perspectives
a. Development of world economy as division of labor (core, periphery, semi-
periphery). Mobility vs. underdevelopment, kicking away the ladder (telling
developing countries not to do like developed countries have done, not giving
them the same opportunity).
b. Sees states as autonomous, acting in their own interest. It assumes that politics
and economy are inseparable, they cannot be studied separately
(embeddedness). Yet, it was still influenced by neoclassical economics
c. The economy and state shape each other. It looks at theories of state behavior
(what can/can’t they do and why); states are motivated by their own national
interest
d. There are 2 levels: states have to look at domestic and international concerns.
Elaborating on that, states are interested by ‘national interests’, which differ in
capacity. “Capitalism is too important to be left to the ‘capitalists’, you want a
state that can stop things” → states and businesses have different ideas.
Capitalists often think short-term and on how to make the most profit → not
seeing the bigger picture. (for example: in war, states start playing a more
important role in economic activity)
e. The 2 key theorists are Max Weber (bureaucracy is vital to capitalism) and
Friedrich List (normative theory of states in world market)
f. It lacks an overarching theory
3. Feminist perspectives
a. focus on gender relation in the economy and in what way it shapes the economy
b. takes into account the unpaid jobs as part of the economy too
c. labor is the source of value (value of a good is determined by the total amount of
socially necessary labor)
d. wants to integrate women and care into the labor market (reproductive labor)
e. capitalism and patriarchy are interrelated
f. feminisms rather than one coherent paradigm
i. Questions of dichotomies: productive/reproductive labor
g. primarily criticises the long-existing male dominance
4. Growth and productivity
a. Productivity: ratio of output to inputs; it is a question of efficiency. The more
productivity, the more economic growth will occur which will lead to an
improvement of the standard of living
i. Productivity matters because it determines the competitiveness of firms
and nations
ii. To boost productivity, one can increase the capital intensity, intensify the
labor process or adjust the management (e.g. threaten to fire someone)
iii. types of productivity growth:
1. achieved through investment → capital intensity
2. achieved without investment → intensification of labour process
, b. Growth: the expansion of output which can result in economic development, but
unlike development it cannot be measured by a single indicator
i. A change in productivity affects growth (and profitability).
c. Division of labor led to huge productivity gain and expansion of wealth. Changes
in technology are at the root of economic development. Also, work organization
(assembly line and moving assembly line) can help with productivity and growth.
d. Why does productivity matter?
i. it increases income
ii. it has the potential to improve livelihoods
iii. it determines competitiveness of firms, industries
iv. it determines competitiveness of regions, nations
5. Welfare and poverty
a. Welfare: Satisfying basic human needs and implies protection from deprivation
of needs in times of adversity. Welfare entails the development of human
capabilities and freedoms, the achievement and maintenance of social
autonomy, and the ability not merely to function or subsist but to thrive and
pursue one’s livelihood in a dignified and meaningful way. Welfare and wellbeing
can be used interchangeably. Welfare can be subjective (when it enquires about
how people see their lives) and objective (when it looks at quantitative factors in
different countries). Three worlds of welfare can be distinguished (Espen-
Andersen)
i. Liberal (US, Canada, Australia)
1. Benefits only for low income people > stratified/stigmatized
2. Tendency to push people toward market reliance
ii. Conservative (Austria, France, Germany)
1. States are often ready to replace the market as a source of
welfare, but welfare is often insurance-based
2. Class differences and traditional structures are maintained;
traditional family values
3. But: states step in when family lack ability to support
iii. Social Democratic
1. Scandinavia
2. Everyone receives generously, but dependent on income > states
assume role of welfare provider
3. It can serve as a motivation for the state to encourage full
employment
4. Decommodification of welfare services
b. Poverty: Opposite of welfare. Involuntary deprivation of human needs.
i. 40%+ of the world population lives below a PPP of $2,50
ii. Poverty headcount is sensitive to the precise level of international
poverty lines and sensitive to the reliability of household surveys
iii. Downward bias: some numbers of poverty are made lower than they
actually are, in the end making the trend look more positive
iv. determinants of poverty
, 1. ‘natural’ → the distributional randomness of nature
2. ‘social’ → 1) growth, productivity… 2) institutions, technologies…
3) exploitation and oppression… 4) contingent events
v. Three forms of poverty:
1. Absolute versus relative poverty
a. Absolute: Failure to be in command over income to fulfill
the most basic human needs (food, water, shelter) for
survival. You have no control and its involuntary.
b. Relative: Poverty in regard to certain standards of
consumption which are considered necessary to maintain
“decency”; related to inequality. Rich countries don’t have
absolute poverty, but it can have a high relative poverty >
inequality
2. Multidimensional poverty (Some people may have basic
necessities (clothes or food) buy may have little to no access to
things like education and/or healthcare. It demonstrates whether
people are able to participate in society.
6. GDP
a. Gross domestic product. The total monetary value of what has been produced
within a country over a given period of time, usually a year. To calculate GDP, we
measure output (product), by value added. Producers output minus
intermediate output value.
b. NDP is the Net Domestic Product (which is very hard to measure). It’s the GDP
minus the wear and tear of machines. NDP is more accurate than GDP in the long
run, but GDP is more accurate in the short run. We use GDP though, because
there is no agreed upon way to measure depreciation.
c. (Use of) GDP is criticized though because household work is not counted, nor
does it measure the standard of living. It can cover up a lot of inequality, nor
does it count non-monetary things such as the environment (and its
destruction).
d. Measure GDP through the income approach, output approach, or expenditure
approach.
7. Intensive versus extensive growth
a. Intensive growth: transforming the way things are produced (using inputs more
productively). This form is usually associated with wealthy countries.
i. Increased effectiveness
ii. Quality of efficiency
iii. Quality of inputs
b. Extensive growth: adding external factors that lead to growth (expansion of
quantity of inputs used). This form is usually associated with lower-income
countries.
c. Both concepts were introduced by Karl Marx
8. Simon Kuznets
