Classical economics
From Wikipedia, the free encyclopedia.
Classical economics is a school of economic thought whose major developers include William Petty, Adam Smith, David Ricardo, and John Stuart Mill. It is seen by many as the first modern school of economic thought.
Classical economists attempted to explain growth and development. They produced their "magnificent dynamics" during a period in which capitalism was emerging from a past feudal society and in which the industrial revolution was leading to vast changes in society. These changes also raised the question of how a society could be organized around a society in which every individual sought their own (monetary) gain. Why would such a society not collapse in chaos? Classical economists reoriented economics away from an analysis of the ruler's personal interests to a class-based interest. Francois Quesnay and Smith, for example, identified the wealth of a nation with the yearly national income, instead of the king's treasury. Smith saw this income as produced by labor applied to land and capital equipment. Once land and capital equipment are appropriated by individuals, the national income is divided up between laborers, landlords, and capitalists in the form of wages, rent, and profits.
Classical economics tended to stress the benefits of trade, an analysis organized around the natural price of commodities, and either the cost of production theory of value or the labor theory of value.
It was largely displaced by marginalist schools of thought (such as the Austrian School) who saw value to derive from the marginal utility that consumers found in a good rather than the cost of the inputs that made up the product. Ironically, considering the attachment of many classical economists to the free market, the largest school of economic thought that still adheres to classical forms is the Marxist school. This may be due to the fact that Karl Marx died before marginalist theories were widely accepted.
See also