Book I
Introduction
1. Order of presentation
The basic idea of this book is that Keynes’s General Theory is generalised even further by including endogenous government in the model so that we arrive at a truly general Political Economy. The argument can be presented in a top-down fashion, for example by repeating the IS-LM model before the amendments are introduced. This order appears to be uninviting and therefor the argument is presented in a bottom-up fashion. We better discuss the amendments before we look at the consequences for theory as a whole. We start with the new economic synthesis and the argument for the Economic Supreme Court, since these motivate the book.
2. The general theory
Political Economy is the science of the management of the state. More in general, ‘economics’ is Greekish for ‘management theory’. [ [1] Marshall already explained that ‘economics’ is wider than ‘political economy’, see his “Principles of economics” (1947:43). The proper definitions are:
· Economics ‘in a narrow sense’ puts the approach, methods and tools, of the discipline central, and looks at a variety of subjects.
· Political Economy puts the subject, the management of the state, central.
· Economics ‘in a broad sense’ joins the ‘narrow sense’ and Political Economy.
One way to view these distinctions is to visualize a matrix with the sciences in the rows and the subjects in the columns. The common economist may to some extent neglect the inputs of the other disciplines, but the political economist must draw on the resources of philosophy, history, law, sociology, politicology, social psychology, biology, physics and so on. [ [2] Political Economy is, just by definition, the study that tries to integrate all human knowledge about the management of the state. Political Economy is, in that respect, the proper continuation of ancient philosophy on that subject matter.
Confusions easily arise when these definitions are not understood. [3]