Political economy is an interdisciplinary branch of the social sciences that focuses on the interrelationships among individuals, governments, and public policy.

Political economists study how economic theories such as capitalism, socialism, and communism work in the real world. At its root, any economic theory is a methodology that is adopted as a means of directing the distribution of a finite amount of resources in a way that is beneficial for the greatest number of individuals.

In a wider sense, political economy was once the common term used for the field we now call economics. Adam Smith, John Stuart Mill, and Jean-Jacques Rousseau all used the term to describe their theories. The briefer term economy was substituted in the early 20th century with the development of more rigorous statistical methods for analyzing economic factors.

Political Economy as a base for developing Education System of India.
Economics of Education as an area of study cannot be said to be a separate field of  inquiry that is totally different from the ordinary economics. Economics of Education is  the application of Economic principles, concepts, laws to the process of Education.  Economics of education studies human behaviour (in terms of human decisions),  action(s) and reaction(s)) about schooling (Babalola, 2003). It further looks into how  human behaviour affects economic development. Economics of education is one of the  branches of ordinary economics, though, it is the study of how educational managers  make official or approved choices from scarce available resources which is meant for the  realisation of the best possible educational outcomes. Economics of Education employs  the use of some elementary concepts commonly used in labour economics, public sector  economics, welfare economics, growth theory and development economics. World  known classical economists like Adam Smith, Alfred Marshall, John Stuart Mill had  discussed education and development extensively, advocating for public investment in education. So, by the 1950s, economists gave attention to issues such as the relationship  between education and economic growth; relationship between education and income  distribution and also the financing of education.  Economists analyse the production of education in this world where resources such as  the capital invested in buildings or technology and the labour of the teacher workforce are  necessarily scarce. This scarcity of resources means that policymakers must decide:  1. How much to spend on each stage of education (i.e. what to produce); 2. How to  provide educational services in a way that maximises its benefits to society (i.e. how to  produce education); and 3. Who should have access to each stage of education (i.e. for  whom is education provided).  There are three decision makers or stakeholders in the educational system. These are (1)  The society (2) The institutions or providers (suppliers) of education and (3) Individual or  households (purchasers of educational services). The twin problem of scarcity and choice  face these major stakeholders.  The fundamental problem of economics of education is how the society, institution and  the households make use of the limited human and material resources they have, to best  satisfy their unlimited wants for education. The solution to the fundamental problem  requires the application of certain economic concepts.  The study of economics of education includes private and social rates of returns to  education, human capital and signalling theories of education, non-pecuniary benefits of  education, education and economic development, contribution of education to the  economy, measuring educational expenditure, manpower planning, educational planning  and human resource development, educational cost, cost analysis, educational production,  educational effectiveness and efficiency, costs-efficiency and cost-effectiveness, costbenefit analysis and economics of teacher supply, educational and equity. 
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