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Political economists are divided over the nature of two paradigms: the paradigm of distribution and the paradigm of production. These paradigms may be related, especially at the extremes, but there are a vast number of individuals who hold almost diametrically opposite views on these two paradigms in the same context.
Societies produce more than isolated individuals, and labor with the aid of capital produces more than labor alone. Societies also generate more waste, and capital makes demands for investment and organization. The first can be referred to as the social surplus and capital surplus respectively, and the second as social costs and capital requirements . One of the most important social costs is war. Indeed the difference between political economy and economics is that, in economics, war is a temporarily alteration in price variation, the old joke being that "World War III, should it come, will be noted in two sentences in the Wall Street Journal, with an article inside on its effect on soybean futures."
The paradigms of political economy may be classified based on their view of distributing the social costs and benefits, and the capital costs and benefits.
Libertarianism: Libertarianism denies that there is any significant difference between capital surplus and social surplus: it claims that all improvements to productivity are capital surplus and belong to the individual. Libertarianism further contends that by paying for inputs, an individual has already paid for the social cost of their activity, and that to avoid disutility, individuals will rationally trade effects of economic activity that are adverse. Libertarians, therefore, generally believe in an absolute standard of value, generally the gold standard. They point to John Locke, Thomas Jefferson, Adam Smith and Ralph Waldo Emerson as antecedents, and argue that they are merely continuing "classical liberalism". In the libertarian framework, since there is no social surplus, any attempt to distribute is unjustified - that is, economics is separate from the political sphere.
Libertarianism's main school of thought was the Austrian School of economists, and found expression in laissez-faire economics. Libertarians may be said to be economic and social extreme individualists. Important, or at least widely cited, thinkers in Libertarian thought include Ayn Rand, Hayek and Ludwig_von_Mises
Liberalism: Liberalism believes that capital surplus should accrue to the individual, but that social surplus and cost should be distributed as widely as feasible within the context of maintaining the individuals' expectation to the surplus of their own efforts. Liberals therefore support state intervention in political economy to measure and distribute social costs and benefits. Many thinkers are, therefore, held in common between libertarianism and liberalism - since when the social surplus is perceived of as being low, or in particular areas, liberals believe that there is nothing to distribute. Liberals also agree with Conservatives about the need to protect against the ill effects of social disorganization, even though the manner of doing so differs.
Liberalism sees the expansion of individual rights (from the philosophy of Jean-Jacques Rousseau and Thomas Jefferson) as being the entitlement to a certain reasonable standard of life for all members of society. From the pragmatic viewpoint, this is the necessity of human capital sufficient to engage in the full range of production.
Liberalism has been proposed by such thinkers as John Dewey, John Rawls, Isaiah Berlin , economists such as John Maynard Keynes and educators such as Mortimer Adler.
Conservatism: Conservatism believes that capital surplus accrues to the individual, and that there is little or no social surplus, but that there are significant social costs, which must be distributed across the society. Examples of this include military service, standards of personal morality and charity.
Conservative thought became established in English philosophy with the work of Thomas Hobbes, but became a political doctrine with Edmund Burke. Conservatism in the modern period looks to libertarian economic thinkers, but toward the absolute need for social structure enforced by normative institutions such as religion and nationalism. Prominent modern schools of Conservative thought include the work of Leo Strauss in the USA.
Socialism: Socialism believes that the ratio of capital surplus to social surplus is very low, that most of the surplus involved in human production is predicated on the producer being a member of society, and therefore argues for social control of the means of production and an egalitarian distribution of wealth, in order to provide benefits to all members of a society.
Socialism evolved from critiques of human misery in the late 18th century, such as those of the political philosopher Fourier. In the view of the socialists, the market could never efficiently distribute the social surplus, and private ownership merely substituted one form of tyranny for another (the tyranny of the capitalists replaced the tyranny of feudal lords). In the present day, many social democratic parties believe in some form of socialism which requires that corporations and major public works be guided by political as well as economic factors, for social goals. In addition, most socialists adhere to some form of utilitarian philosophy, which states that the best form of society is the one that produces the best results for the greatest number of its members.
Communism: Communism believes that there is no difference between capital surplus and social surplus, which is a view it shares with libertarianism. But, in the reverse of the libertarian viewpoint, it argues that all surplus is socially created. The most prominent communist thinker was Karl Marx, who was the founder of the school of thought known as Marxism. Other important Marxists include Friedrich Engels, Vladimir Lenin and Leon Trotsky.
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