The term "political economy" can be defined as the study of and use of how economic theory and methods influence political ideology. More importantly, the study of political economy analyzes the distribution of power and wealth and the nature of the state. It is important to understand the role of the government in order to understand the theorist point of view of economic regulatory practices and interference. We start with the role of the state in more social aspect, which allows us to make conclusion of what measures would be taking in a market economy. Theorists such as Machiavelli, Hobbes and Polanyi, believe in government intervention and the empowerment of a sovereign power, while Smith, and Mill share a more neo-liberal perspective on the governments role in the economy. However, the ideal role of the government and in economy is to have both regulatory practices and democratic foundations. In "The Prince," Machiavelli opens his prescription by explaining two kinds of states. He furthers his writing by explaining the expected functionality of the state and how sovereigns of that state should rule in order to acquire and remain in power. Machiavelli doesn't specifically describe the role of a state in an economy; however, based on his description of the state and its insatiable desire for power, the state would hold all power, whether it be political or economic. Machiavelli states, "Well-ordered states and wise princes have studied diligently not to drive the nobles to desperation and to satisfy the populace and keep it contented" (Machiavelli, pg. 297). .
Machiavelli explains that power should be acquired by any means possible, but in order for a ruler to contain his power, he must keep his people content. Although the role of the state acts in a self-interested manner, the overall social welfare is significant to the prosperity of a ruling power. Similar to an imperialist perspective of theorists such as Joseph Schumpeter, Machiavelli makes it notable that the purpose of a state colonizing other territories is to gain economic expansion and political power.
