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Marxist and liberal, schools. Refining
Ricardo’s labour theory of value, Marx argued
thatcapitalismexploits workers, and that the
crucial relationship between political and eco-
nomic processes is the way in which capitalism
engenders, and is shaped by, political struggle
betweenclasses(seemarxist economics). In
his view, capitalism was an advance over pre-
viousmodes of production, as it promoted
the autonomous individual in the workplace
and in political life, but sooner or later would
founder on class conflicts that neither the mar-
ket nor the state could finesse, giving way to a
more collective, political economy founded on
communismorsocialism.
In the 1890s, partly in response to Marx’s
critique of capitalism, a marginalist, subjectiv-
ist political economy emerged almost simul-
taneously in Britain, France, Austria, Sweden
and Italy. William Stanley Jevons, Le ́on
Walras, Carl Menger and Knut Wicksell
argued that value was determined by con-
sumers’ utility, not labour value (seeutility
theory). Using a pleasure/pain calculus, they
argued that the marginal utility of everything –
that is, the extra pleasure from obtaining an
extra unit of acommodity– is inversely pro-
portional to supply. In free markets, con-
sumers would thus pay the right amount for
everything purchased: its marginal utility to
them. The American John Bates Clark
extended the calculus to labour and capital,
concluding that labour and capital will always
be paid fairly in free markets, according to
their marginal productivity to society. This
school ofneo-classical economicscame to
describe itself as simply ‘economics’, because
in this view the economy, if left alone by the
state, would maximize social welfare all by
itself, harmoniously coordinating citizens’
desires. In short, the political could be evacu-
ated in favour of theeconomy, to the benefit
of society.
Just as liberalism has conservative and pro-
gressive variants, so does liberal political econ-
omy. Conservative, Lockean liberalism argues
that freedom is the result of maintaining a min-
imal ‘night-watchman’ state; progressive liber-
alism (beginning in late-nineteenth-century
Britain and migrating to the USA during the
twentieth century) argues that state interven-
tion is necessary to secure the freedom and
well-being of those impoverished by capital-
ism. The former school, now associated with
the project ofneo-liberalismand its architects
Milton Friedman and Friedrich von Hayek,
became global common sense. It still sees itself
as undertaking political economy (publishingin the Chicago school’s Journal of Political
Economy), and pays close attention to political
processes, but only because such processes ten-
dentially undermine what it regards as the
proper functioning of a capitalist economy.
The latter school flourished in Britain and
Europe during the Great Depression and until
the mid-1970s, under the magisterial influence
of John Maynard Keynes. As fordism or
Keynesianism, it pursued the principle of con-
tinual state intervention to manage the contra-
dictions of capitalism to the benefit of the
nation and its least well-off citizens, and saw
itself as inheriting the mantle of the ‘classical’
nineteenth-century political economy of
Smith, Ricardo and Marx. This rapidly fell
from favour in the context of the crises of post-
war Fordism and the Reagan and Thatcher
revolutions, although contemporary economic
commentators such as Joseph Stiglitz, Jeffrey
Sachs and Paul Krugman seek to keep the
flame alive.
Whereas liberal political economy domin-
ates political science and economics, at least
in the globalnorth, political economy in
geographyis usually taken to mean some
variant or critical elaboration on the line of
thought precipitated by Marx. During the
1970s,radical geographysuccessfully dis-
placed liberal market-oriented approaches to
economic geography, associated withloca-
tion theoryandspatial science, and diver-
sified itself. In sum: versions ofmarxism, from
dialectical to analytical, articulate a political
economy approach centred on class struggle.
realism examines how the necessary
economic relations and political conflicts of
capitalism are complicated by differences
in geographical context.regulation theory
explores state-economy relations at various
scales, comparing Fordist and post-Fordist
regimes of accumulationacross space and
time. Approaches viagovernmentalityargue
for more attention to everyday behaviour,
the conduct of conduct, rather than the state,
as shaping state-civil society relations.
Approaches influenced byfeminismandpost-
structuralismdraw attention togenderand
identities other than class as emergent
domains of inequality andconflictunder cap-
italism.social movementsapproaches theorize
the emergence of social contestations of capit-
alism (see also resistance). The cultural
turnstresses the importance of discourse and
representation to the dynamics and contradic-
tions of capitalism. Diverse and community
economies approaches emphasize the ongoing
importance of non-capitalist economic andGregory / The Dictionary of Human Geography 9781405132879_4_P Final Proof page 548 1.4.2009 3:20pmPOLITICAL ECONOMY