The New Political Economy

Abstract

As the institutional structure of society provides the vehicle for a growing economy, any satisfactory dynamic theory must be able to explain political as well as economic change. While this is important in the case of developed societies, it is absolutely essential for lesser developed societies.¹ The fact that orthodox economics has not been able to develop a dynamic theory to explain both economic and political change is a major limitation, not only in understanding the real world, but also in providing a basis for policy. The new political economy, true to its neoclassical foundations, provides only a comparative—static analysis of the interaction between special-interest groups and governments on distributional issues.