The Difference Between Economics and Politics

Economics is the science that deals with goods and services and the welfare of humankind, while politics, on the other hand, is the science of running governmental affairs. Nonetheless, over the years there has been a strong and obvious relationship between economics and politics. Economic theories serve as the platform behind political policies; the ideas behind government actions. They are also shaped by the same force that they affect; politics. As a result of political actions, economists have developed consequent theories, like the ones concerning market failures. This relationship between economics and politics is significantly shown in the PBS episode of The Commanding Heights: The Battle of Ideas.

During the beginning of the First World War, when the economic ideologies of the world changed from a focus on free-trade to a planned economy, the ideas of John Maynard Keynes thrived. He shaped the mindset of the British government, as well as many other countries' at that time, and also helped them create their war-time economies. Keynes was a strong believer of government intervention and that is what he encouraged. Countries began to spend against the wind; spending money during bad times and saving money during good times. This kind of government stimulation also meant that they would provide subsidies to companies in need of financial help. Therefore, through his strong economic theories, John Maynard Keynes was able to influence the political actions of the governments during the beginning of the twentieth century.

Meanwhile in Russia, the economic ideologies of Karl Marx thrived after the end of the First World War. In search of a better world, Vladimir Ilyich Lenin developed a socialist state by abolishing trade, commerce and private property. He followed one of Marx's famous sayings, "from each according to his ability, to each according to his need". Unfortunately, this kind of philosophy created an environment where cold and famine triumphed, due to the economy's inability to create the necessary wealth in order to succeed. Consequently, this type of market failure, created by political actions, caused a change in the economic theories that formed a mixed-market economy. The people were given the ability to own small businesses and trade with one another, which created value and improved their living conditions. Once again, the connection between economics and politics is shown through the formation and demise of the socialist ideology.

On a final note, Milton Friedman and Friedrich Von Hayek's economic theories have also been significantly shaped as a result of political actions. During the time when many countries were focusing on planned economies and the ideas of John Maynard Keynes, there were countless market failures that occurred. Inflation was the major issue, but it was the cause of government intervention. This influenced both Friedman and Von Hayek to develop new theories