The famous concept of the invisible hand was given by Smith in his book “ An Inquiry into the Nature and Causes of the Wealth of Nations” (1776).
Household definition economics free#
Political economists like Adam Smith emphasized that free markets possess the ability to maximize the resources of the country rather than a strict state regulation on production and consumption. Political economy developed majorly as a reaction to mercantilism during the mid-18 th century. Mercantilists also believed that state action is necessary to optimize the stock of assets of a country. It is an economic system advocating the idea of maximizing exports and minimizing imports for the economic prosperity of the nation. Political economy as an academic discipline dates back to the span from 16 th to 18 th century, during the period of mercantilism. Political economics helps us to understand the formulation and execution of public policies and their effect on the economy as well as the social systems.
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Thus, political economy is the study of how to manage a state taking into account its political, economic and social characteristics
Here, the state is the household of the citizens. The term ‘Political economy’ itself is derived from Greek words polis meaning “city” or the state and oikonomos which means “housekeeper” or the one who manages a household. It borrows ideas and theories from political science, economics and sociology. Political economy is the branch of social science that analyses the correlation between the state, markets and society.
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