Traditional concepts of political economy have focused on top down, macro-level approaches that examine institutions and its rules. More recently, ‘institutional economics’ and other methodologies have emphasised the need for a bottom up, micro-level, ‘game theory’ approach that looks at individual interactions and individual incentives to follow institutional rules. This is of interest in fragile states contexts, where institutions are often forced to undergo rapid and significant change. Both these macro and micro approaches have been incorporated into DFID’s ‘drivers of change/politics of development’ framework. The ‘sustainable livelihoods’ approach also combines macro and micro approaches, but focuses more on observances of people’s day to day coping strategies in crisis and conflict situations.
New political economy and drivers of change/politics of development frameworks examine how economic, social and cultural systems interact with the political system to affect people’s lives on the ground. They also look at competing rules of games in formal and informal institutions; shifting coalitions that contribute to or prevent state collapse; state capacity, authority and legitimacy; and how rent seeking and patronage can at times prevent violent conflict and contribute to state stability.