Prominent Political Economists

Why This Matters

Understanding the major political economists isn't about memorizing names and dates—it's about grasping the foundational debates that still shape international economic policy today. Every trade agreement, currency crisis, or development strategy you'll encounter on the exam reflects tensions between these thinkers' core ideas: markets vs. states, free trade vs. protectionism, individual freedom vs. collective welfare. When you see an FRQ about IMF conditionality or the WTO's role, you're really being asked to navigate arguments these economists established centuries ago.

The thinkers in this guide fall into distinct intellectual camps, and exams test whether you can identify which theoretical tradition explains a given policy or outcome. Don't just memorize that Keynes favored government intervention—know why his framework differs from Smith's, and when each approach applies to real-world scenarios. Master the underlying logic, and you'll be able to tackle any question they throw at you.

---

Classical Foundations: Markets as Self-Regulating Systems

The classical economists established the intellectual case for free markets and limited state intervention. Their core insight: economic actors pursuing self-interest, guided by price signals, produce efficient outcomes without central coordination.

Adam Smith

• The "invisible hand" describes how individual self-interest aggregates into collective prosperity—the foundational metaphor for market liberalism
• Free markets and limited government form the basis of classical economics and later neoliberal international economic policy
• Division of labor explains productivity gains from specialization, a concept that scales up to explain international trade patterns

David Ricardo

• Comparative advantage demonstrates that all countries benefit from trade by specializing in relatively efficient production—the theoretical backbone of free trade agreements
• Economic rent explains returns to scarce resources like land, a concept later applied to natural resource politics and development economics
• Labor theory of value influenced Marx's critique of capitalism, making Ricardo a bridge between classical and radical traditions

---

The Marxist Critique: Capitalism as Exploitation

Marx rejected the classical assumption that markets benefit everyone equally. His framework centers on class conflict and structural exploitation built into capitalist production relations.

Karl Marx

• Class struggle between the bourgeoisie (owners) and proletariat (workers) drives historical change—capitalism inherently produces exploitation, not mutual benefit
• Historical materialism argues that economic structures (the base) determine politics, culture, and ideology (the superstructure)
• Revolutionary transformation toward socialism/communism represents Marx's solution to capitalist inequality—influencing dependency theory and critiques of global economic hierarchy

---

The Keynesian Revolution: States Rescuing Markets

Keynes challenged classical orthodoxy by arguing that markets can fail catastrophically and require active state management. His framework emerged from the Great Depression's demonstration that self-correcting markets don't always self-correct.

John Maynard Keynes

• Aggregate demand drives economic output and employment—challenging the classical assumption that supply creates its own demand
• Government intervention through fiscal policy (spending, taxation) can stabilize economies during downturns and prevent depressions
• Modern macroeconomics and institutions like the IMF reflect Keynesian principles—his ideas shaped the post-WWII Bretton Woods system

---

The Neoliberal Counterrevolution: Markets Over States

Hayek and Friedman led the intellectual pushback against Keynesian interventionism, arguing that government action creates more problems than it solves. Their ideas dominated international economic policy from the 1980s onward.

Friedrich Hayek

• Critique of central planning argues that no government can possess the information needed to coordinate complex economies—socialism inevitably produces inefficiency and tyranny
• Spontaneous order emerges from decentralized market interactions; prices convey information no planner could replicate
• Neoliberal foundations in Hayek's work influenced the Washington Consensus and structural adjustment programs of the 1980s-90s

Milton Friedman

• Monetarism holds that controlling money supply is the key to price stability—shifting focus from Keynesian fiscal policy to central bank independence
• Free market advocacy influenced deregulation, privatization, and trade liberalization policies globally
• Permanent income hypothesis reshaped understanding of consumption, arguing people base spending on long-term expected income rather than current earnings

---

Contemporary Critics: Rethinking Globalization

Recent political economists have challenged both classical liberalism and simple state-vs-market frameworks, emphasizing information problems, institutional context, and the uneven distribution of globalization's benefits.

Joseph Stiglitz

• Information asymmetry undermines classical assumptions of perfect markets—buyers and sellers rarely have equal knowledge, creating systematic market failures
• Government intervention is necessary to correct these failures, particularly in developing economies facing predatory international finance
• Globalization critique highlights how liberalization policies often increase inequality rather than delivering promised prosperity

Dani Rodrik

• Globalization trilemma argues nations cannot simultaneously have deep economic integration, national sovereignty, and democratic politics—they must sacrifice one
• Context-specific policies challenge one-size-fits-all prescriptions from international institutions; successful development requires tailoring strategies to local conditions
• Industrial policy rehabilitation argues that strategic state intervention can promote development, contrary to neoliberal orthodoxy

---

International Political Economy Theorists: Beyond Economics

These scholars bridge economics and international relations, analyzing how power, institutions, and non-state actors shape global economic outcomes.

Robert Keohane

• Neoliberal institutionalism argues that international institutions (WTO, IMF, regional trade agreements) enable cooperation even among self-interested states
• Complex interdependence describes how economic ties create mutual vulnerability, changing the nature of international power
• Regime theory explains how rules and norms persist even when the hegemonic power that created them declines

Susan Strange

• International political economy as a distinct field owes much to Strange's insistence on integrating power analysis with economic study
• Non-state actors and markets exercise structural power that state-centric theories miss—corporations and financial markets shape outcomes independently
• Four structures of power—security, production, finance, knowledge—provide a framework for analyzing who benefits from global economic arrangements

---

Quick Reference Table

---

Self-Check Questions

1. Which two economists both developed labor theories of value but reached opposite conclusions about whether capitalism benefits workers? What explains their divergence?

2. If an exam question asks you to explain the theoretical justification for free trade agreements, which economist's concept should you reference, and why does it matter that countries have different relative efficiencies?

3. Compare and contrast Keynes and Friedman on how governments should respond to economic recessions. What role does each assign to fiscal vs. monetary policy?

4. How would Stiglitz and Hayek disagree about whether the IMF should impose conditions on loans to developing countries? What underlying assumptions about markets drive their positions?

5. An FRQ asks you to analyze why international economic institutions persist even when powerful states' interests change. Which theorist's framework best addresses this question, and what key concept would you apply?