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Classical economics is a school of economic thought. It came into prominence with the publication of Wealth of Nations by Adam Smith in 1776. Classical economics evolved with time and was influenced by doctrines like mercantilism, physiocracy, classical liberalism and the industrial revolution. Stalwarts like Adam Smith, John Stuart Mill, David Ricardo, W. Jevons, Alfred Marshall, Jean-Baptiste Say and Pigou contributed towards the development of classical economics. While Smith dealt with various factors affecting the economic growth of countries, Ricardo was more involved with issues of distribution. Neo-classical economics developed as an extension of classical economic theory from later half of the 1800s.
Classical economists believed that economic agents via maximization of self-interests automatically contributes to the maximization of social interests via ‘invisible hand’ (forces of demand and supply). In classical economics land, capital and labour are three prime factors of production. They also assumed ‘full employment’. As per classical economists, an economy is either moving towards equilibrium or is in equilibrium.
Classical political economy as Marx addressed it was a vehicle for investigation of capitalist production mode. As per Marx, from the 1830s there was a distinct socio-political change, with the emergence of the working class. Marx perceived that methodological limitations of the framework of classical political economy prevented it from doing full justice to the effects of the emergence of this new economic force called the working class. In this respect Marx pointed out certain drawbacks of Ricardo’s work. Marx’s detailed criticism of classical economics involves the latter’s misconception of issues like value, capital and money. According to Marx, classical economists explained framework of ‘bourgeois production’ while holding factors like division of labor, money and credit as fixed. However they fail to provide a satisfactory answer as to how these relations governing production processes are themselves attained ( historical process of their generation).
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This glossary post was last updated: 29th March, 2020 | 9 Views.