The contemporary revival of interest in political economy highlights the coexistence of different and opposed conceptions among scholars and policy makers in addressing the interface between the economy and the polity. One set of approaches focuses on individual actors in the marketplace or in the public sphere, while another set of approaches shifts the emphasis to the state as a self-contained and internally undifferentiated collective actor. This chapter outlines a conception of political economy that moves beyond this dichotomy and develops the view that individuals, markets, and states are embedded in a relational field composed of multi-level social interdependencies and institutions. The aim of the chapter is to explore the ‘constitution’ of political economy as the multi-layered and relatively persistent configuration of domains and sub-domains in which economic structures and political actions mutually reinforce or hinder one another, thereby determining the dynamics of social wealth – what we call ‘commonweal.’ The chapter conceptualises political economy as a relational field resulting from overlapping spheres of social life. It refers to the social relationships enabling the material provision of human needs and brings to the fore the political dimension of need satisfaction, which involves balancing and coordinating differentiated interests in society.

The constitution of a given economy involves features of invariance in the constellations of positions associated with the existing division of labour. The positions of individual or collective actors relative to one another turn a mere collection of actors into a structured body of interdependencies that is already political and economic prior to its formal establishment through a visible settlement. Interdependencies between actors are conducive to plural ways in which interests arise and group affiliations are shaped. This chapter emphasises the distinction between conciliation of interests as compromise between partial interests and conciliation as pursuit of partial interests under a ‘systemic interest’ reflecting the viability of a given body of interdependencies. Institutional architectures are relatively stable systems of formal and informal rules that determine which constellations of affiliations and interests are possible and which ones may be expected for any given pattern of relative positions. There is a two-way relationship between interdependencies and institutional architectures. Alternative patterns of interdependence are associated with different identifications of systemic interest and different patterns of conciliation under that constraint. On the other hand, institutional architectures may trigger interests that may or may not be compatible with existing interdependencies and their transformation over time.

This chapter outlines a conception of the body politic as an organised plurality of actors governed by ordering principles that aim to achieve ‘correct proportions’ between various levels of agency and thereby ensure viability of the system over time. Fundamental dispositions in the body politic are directed towards mutual recognition rather than the mere pursuit of ‘influence’ through political power or economic wealth. This implies that actors are relational beings, embedded in relationships enabling them to organise social, political, and economic associations. The chapter discusses contractualism in political economy, considering its separation of economics from the body politic and its reduction of political economy to instrumental rationality and maximising choice. The contractualist approach is contrasted with a relational perspective that emphasises interlocking institutions that channel within the body politic existing social dispositions and interdependencies. The chapter also explores the implications for political economy of the latter view, building on the work of political and economic theorists of the Enlightenment such as Paolo Mattia Doria and Antonio Genovesi. Their approach is consistent with a non-contractualist view of the evolution of civil life which emphasizes the primacy of plural levels of aggregation and intermediate affiliations in the development of the body politic.

The notion of ‘constitution’ refers to the fundamental architecture of a polity considered as an organised collective structure encompassing multiple levels of agency and a variety of plural institutions beyond the state. A given constitution of the economy provides a set of conditions determining which patterns of division of labour are feasible under the existing structure of the polity, and which ones are not. This chapter outlines a framework for analysing the economic constitution in terms of the relatively invariant constellation of dispositions and interests characterising the existing polity. A given economic constitution is consistent with a limited range of variation of the division of labour and group affiliations, while more radical changes might take the economy away from the existing constitutional arrangement. On that basis the chapter also conceptualises the ‘economic body’ as the pattern of organised complexity arising from the relative positions and feasible motions within the economy and characterising the economic constitution of the polity. Finally, the chapter explores the way in which alternative arrangements of social networks influence the response patterns of economic constitutions to factors of change and provides a heuristic for identifying feasible policy options and transformation trajectories under given circumstances.

The constitution of a political economy is not a fixed constellation of relationships but a set of principles governing which relative positions and transformations are feasible under the existing constitutional arrangements. Constitutional principles imply that persistence and change are closely intertwined: a degree of persistence ensures the identity and stability of a political economy, while openness to transformation is necessary to allow resilience vis-à-vis shocks and adjustment to societal change. Each economic body is identified by a particular division of labour, representation of interdependencies, and dispositions of individuals and groups in the economy. Dispositions and interests are also central in the constitution of the political body, which leads to a definition of systemic interest and of the range of variation within which a given systemic interest can accommodate different constellations of partial interests. This conception of political economy makes principles of economic ordering essential to the life of the polity, and acknowledges the existence of political alliances or conflicts arising from division of labour between centres of agency in the economic sphere. The consideration of matches and mismatches between the two spheres opens a line of investigation that is central to understanding the history and prospects of political economies.

Mutually fitting objectives presuppose capabilities and dispositions whose relative positions are identifiable and mutually recognized. This chapter reconstructs Adam Smith’s argument from his theory of fellow feeling to the theory of the division of labour and examines E.G. Wakefield’s reappraisal of Smith’s theory in terms of the distinction between simple cooperation and complex cooperation. Complex cooperation in the production sphere requires that the specific tasks carried out by specialized actors generate networks of materials transferred from one producer (or set of producers) to another. Division of labour by complex cooperation involves the dimensions of capabilities, tasks, and materials and requires proportionality conditions at the level of capabilities and tasks as discussed in Babbage’s law of multiples. A functioning network based on complex cooperation also requires a proportionality condition for interdependent materials in the light of the Hawkins-Simon condition for a self-reproducing economy. Alternative arrangements of capabilities, tasks, and materials bring about different production regimes, which are associated with different modes of coordination between production processes. The chapter examines the conditions under which the change of production regime entails switching to a different structure of social networks and leads to a different material constitution of the polity.

Both the economy and the polity are embedded in a relational field. This field generates the range of relative positions that individuals and groups take within it while making other positions impossible. The constitutions of the economy and of the polity reflect objective arrangements of positions providing constraints and opportunities for human agency. They may also shape actors to follow specific courses of action rather than others. Certain policy actions may be compatible with the existing economic constitution but not with the existing political constitution, and vice versa. Only policy actions compatible with both the economic and the political constitution can be conducted without changes in either. A constitutional heuristic is needed to assess whether a certain policy is feasible under a given constitutional settlement or not. This chapter focuses on the multi-dimensional and multi-level architecture that policy design should follow in light of the relevant constitutional heuristic. Policy actions are designed and implemented across manifold modes of association in the material sphere and plural modes of collective action in the political sphere. The chapter provides a framework grounded in constitutional heuristic for the analysis of embedded policy measures in the industrial, credit, and international trade fields.

The Introduction outlines the book’s conceptual foundations, starting with a theory of political economy as constitution that builds on both economic and political thought to conceptualise the relationships between the economic and the political bodies. Accordingly, the body politic is an orderly arrangement of individuals and groups fitting a collective condition, or purpose, which would at a minimum include the persistence of the political body itself. Similarly, the economic body is an orderly arrangement of individuals and groups fitting a systemic condition for material sustenance and welfare, which would at a minimum ensure resilience of an organised economic sphere. The theory of political economy shows shifts between a focus on dispositional activities (such as allocation of capabilities or resources) and a focus on material and social interdependencies. This dynamic often makes it difficult to identify the underlying unity of political economy. Reductionist theoretical developments, both in economic and in political theory, have failed to address the embeddedness and mutual shaping of dispositions and structures at multiple levels of aggregation in the economy and the polity. The Introduction sketches a new theoretical framework that avoids both types of reductionism by highlighting the close integration between human dispositions and socio-economic interdependencies.

This chapter examines the relationship between sociability and interdependence. Sociability describes a fundamental feature of reality, namely the fact that individuals and groups are embedded in mutual relationships and institutions reflecting relative positions in the social domain. Interdependence encompasses both potential and actual ties involving material interests and immaterial dispositions. Sociability is a condition of relationality which develops dynamically through a complex interplay between dispositions, actions, and their consequences. This interplay tends towards either cooperation or conflict depending on whether different actors’ dispositions and actions converge towards a shared objective. The chapter explores the relationships between interdependence and congruence conditions in the social domain, building on the work of thinkers such as Shaftesbury, Paolo Mattia Doria, and Adam Smith to emphasise the relevance of the non-contractualist tradition in investigating interdependence in the social sphere. The insights of those earlier theorists help to devise a method of ‘circumscription’, which allows identifying partial similarity amid diversity and builds on that basis forms of social congruence. The relationship between partial similarity and plural mappings of interdependence leads to alternative patterns of affiliations for individuals and groups and provides a basis to discuss the likelihood of cooperation and conflict in a political economy.