Politics and economics share an intimate relationship. To separate either in analysis is unfair, as it dismisses the interdependency between both schools of thought. Thus, in issues pertaining to the Political Economy, there is a fusion between politics and economics to obtain the most thorough and holistic understanding of both spheres. Political economy is concerned with the allocation of scarce resources in a world of infinite wants and needs. In order to allocate these resources, politics are used within a state to provide for the people. Of the different analytic frameworks there are two dominant perspectives: Liberalism and Realism. Liberalism can be attributed to a political doctrine that takes protecting and enhancing the freedom of the individual and their economic activities to be paramount in nation-states, while Realism is based on certain assumptions or premises that nation-states are the dominant actors within the political economy and the proper units of analysis. Other units of analysis are subordinated to the nation-state and therefore superfluous to integrate into evaluation. This paper is directed towards liberalism and realism paradigm; a matrix very useful in comprehending the behavior of the nation-state and in describing, explaining, and predicting political economy. The paper recommends that liberalism should operate under real-world conditions, reflecting state interest and aggrandizement, and such advancement should result in peace instead of the expected dose of conflict.
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