Scope of Political Economics

Scope of Political Economics
For purposes of exposition the field of political economy is often divided into four parts: production, consumption, distribution, and exchange. Some authors omit one or another of these divisions, treating its problems under the remaining heads.
Production
The department of production is concerned with the creation of wealth through the united efforts of land, labor, and capital. The creation of wealth involves the bringing into existence of utilities, that is, of capacities to satisfy wants. Utilities are created by changes in form of goods, or in their location, or by keeping them from a time of less demand to a time of greater demand.
Consumption
Consumption is concerned with the destruction of utilities in goods. It is the utilization of wealth, the carrying out of the purpose for which wealth is produced.
Distribution
The department of distribution considers the manner in which the wealth which has been produced is divided among the agents which have produced it. The shares in distribution are: rent, which is paid to the landlord for the use of the land; wages, which is the return to the labourer; interest, which goes to the capitalist for the use of his capital; and profit, which is the reward of the entrepreneur or undertaker of the business.
Exchange
Finally, exchange has to do with the transfer of ownership of wealth. Under this head are discussed money and credit and international exchanges.
Other subjects
Outside of these four divisions separate chapters are usually devoted to a consideration of taxation, monopolies, transportation, economic progress, and other problems. Adam Smith and his immediate followers were more closely concerned with the problems of production. Owing to the world’s remarkable progress in that direction in the last century, the inequalities of distribution have come more and more into prominence, and this is now the favourite field of the economist.

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