The integrated study of how economic production, distribution, and exchange are shaped by — and in turn shape — political institutions, laws, class relations, and power. "Political economy" was the name the subject went by from its 18th-century origins through the late 19th century, before the marginalist revolution split off a narrower, technically formalized "economics" that increasingly presented itself as a value-free science.
Adam Smith's Wealth of Nations (1776) is the founding text: a wide-ranging work that takes the division of labor, the moral psychology of exchange, the role of the state, the politics of merchant interests, and the history of economic development as parts of a single inquiry. David Ricardo sharpened its analytical tools (comparative advantage, rent theory, the labor theory of value). John Stuart Mill's Principles of Political Economy (1848) was the standard teaching text for decades. Karl Marx's Capital (subtitled "A Critique of Political Economy") turned the tradition against itself, using its own categories to build a systematic indictment of capitalism.
The marginalist revolution of the 1870s (Jevons, Menger, Walras) redefined the subject around individual choice under scarcity, formalized it mathematically, and largely detached economic analysis from its earlier political and moral embeddings. The new "economics" could look at markets without asking where market orders came from, whose interests they served, or why they persisted — a gain in analytical power, many have argued, at the price of a shrinking of vision.
"Political economy" as a living tradition persisted on the margins: in Marxist economics, in Karl Polanyi's work, in institutionalism (Thorstein Veblen, J.R. Commons), in some development theory, and in contemporary subfields like comparative political economy, international political economy, and the history of economic thought. The term's revival since the 1990s reflects a sense that purely technical economics, however useful, cannot answer the political questions that matter most.