Classical economics is the school of economic thought that runs from the work of Adam Smith in the late eighteenth century through the economists who followed him, including David Ricardo, Thomas Malthus and John Stuart Mill, into the middle decades of the nineteenth century. Classical economists analyzed how competitive markets coordinate the self interested decisions of individual buyers and sellers into a broadly beneficial social order without central direction, and they generally explained the value of goods by reference to the labor and other costs required to produce them. The school also developed early accounts of free trade, comparative advantage and the long run tendency of an economy toward a stationary or steadily growing state. Classical economics gave way to the marginalist or neoclassical economics that followed the marginal revolution of the early 1870s, when economists including William Stanley Jevons, Carl Menger and Leon Walras reworked value theory around subjective marginal utility rather than cost of production, though historians of economic thought continue to debate exactly where the classical period should be said to end.
Facts
Disputed
End YearHistorians of economic thought commonly place the end of the classical period in the early 1870s, when the marginal revolution associated with William Stanley Jevons, Carl Menger and Leon Walras reworked value theory around subjective marginal utility rather than labor or production cost, but the exact boundary year is not agreed and some accounts extend the classical label through John Stuart Mill into the 1880s. Core TenetMarkets ordinarily coordinate individual self interest into overall social benefit without central direction, and the value of a good tends to reflect the labor and cost required to produce it. 1 Classical Economics
Connections
Associated Figures and Events
Source An Inquiry into the Nature and Causes of the Wealth of NationsAdam Smith
The concept was developed within the classical economics tradition, most famously by David Ricardo in the early nineteenth century.
Source On the Principles of Political Economy and Taxation
Source On the Principles of Political Economy and Taxation
Source An Inquiry into the Nature and Causes of the Wealth of NationsAdam Smith
Ricardo's comparative-advantage case for free trade was the classical school's central argument for repeal.
Source Encyclopaedia Britannica
Source An Inquiry into the Nature and Causes of the Wealth of NationsAdam Smith
Malthus is grouped with the classical school by convention, though his conclusions about population and long-run growth diverge sharply from the optimism of Smith and Ricardo.
Source Wikipedia
Critiqued Here
Balance of Payments, Concepts Why this is disputed. Smith and Ricardo argued the mercantilist focus on a bilateral trade surplus mistook the source of national gain from trade.
Source An Inquiry into the Nature and Causes of the Wealth of NationsAdam Smith
Rejected Here
Why this is disputed. Structuralists reject the classical free-trade prescription as ignoring the structural terms-of-trade disadvantage peripheral commodity exporters face.
Source The Economic Development of Latin America and Its Principal Problems
Influenced
Source Manchester Liberalism (Wikipedia)
Wikipedia's own opening definition of the neo-Ricardian school derives it from Piero Sraffa's close reading of David Ricardo, the Classical Economics figure already live on this atlas.
Source Wikipedia
Sources
1. The New Palgrave Dictionary of Economics
Palgrave Macmillan
Encyclopaedia Britannica
An Inquiry into the Nature and Causes of the Wealth of Nations
Adam Smith, 1776Book I, Chapter I: Of the Division of Labour
The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is anywhere directed, or applied, seem to have been the effects of the division of labour.
- Associated Figures and Events: Adam Smith
Associated Figures and Events: Invisible Hand, Book IV, Chapter II
Smith used the phrase led by an invisible hand as a founding idea of classical economics.
- Associated Figures and Events: Balance of Payments
- Associated Figures and Events: Supply and Demand
Wikipedia
Wikimedia FoundationClassical economics, lead section
Classical economics, also known as the classical school of economics or classical political economy, is a school of thought in political economy that flourished primarily in Britain in the late 18th and early-to-mid 19th century.
- Associated Figures and Events: David Ricardo
- Associated Figures and Events: Thomas Malthus
Associated Figures and Events: Say's Law, Say's law
Say's Law is an economic principle stating that production generates the demand necessary to purchase that production
Influenced: Neo-Ricardian Economics, Neo-Ricardian economics, Lead section
The neo-Ricardian school is an economic school of thought that derives from the close reading and interpretation of David Ricardo by Piero Sraffa.
Influenced: Georgism, Georgism, lead section
Economists from Adam Smith and David Ricardo to Milton Friedman and Joseph Stiglitz have observed that a public levy on land value does not cause economic inefficiency, unlike other taxes.
View the Source On the Principles of Political Economy and Taxation
- Associated Figures and Events: Diminishing Marginal Returns
Associated Figures and Events: Comparative Advantage, Chapter 7
Ricardo set out comparative advantage as a foundation of classical trade theory in 1817.
The Economic Development of Latin America and Its Principal Problems
Debated With: Latin American Structuralism
Manchester Liberalism (Wikipedia)
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