classical economics

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Classical Economics

A set of related economic theories that trace their origins to the Enlightenment. Adam Smith is commonly thought to be the father of classical economics. He and those who followed him believed that economies work most efficiently when economic actors attempt to maximize their own self-interests, and that doing so tends to maximize the interests of society as a whole. For example, a man may open a mechanic shop to make a profit for himself, but, in the process, he may hire otherwise unemployed mechanics and service otherwise broken cars, which then facilitates business for the rest of the community. See also: Invisible hand, Neo-classical economics, Socialism.

classical economics

a school of thought or a set of economic ideas based on the writings of SMITH, RICARDO, MILL, etc., which dominated economic thinking until about 1870, when the ‘marginalist revolution’ occurred.

The classical economists saw the essence of the economic problem as one of producing and distributing the economic wealth created between landowners, labour and capitalists; and were concerned to show how the interplay of separate decisions by workers and capitalists could be harmonized through the market system to generate economic wealth. Their belief in the power of market forces led them to support LAISSEZ-FAIRE, and they also supported the idea of FREE TRADE between nations. After about 1870, classical economic ideas receded as the emphasis shifted to what has become known as NEOCLASSICAL ECONOMIC ANALYSIS, embodying marginalist concepts. Classical economists denied any possibility of UNEMPLOYMENT caused by deficient AGGREGATE DEMAND, arguing that market forces would operate to keep aggregate demand and POTENTIAL GROSS NATIONAL PRODUCT in balance (SAY'S LAW). Specifically they argued that business recessions would cause interest rates to fall under the pressure of accumulating savings, so encouraging businesses to borrow and invest more, and would cause wage rates to fall under the pressure of rising unemployment, so encouraging businessmen to employ more workers. See LABOUR THEORY OF VALUE, KEYNES, PRIVATE ENTERPRISE ECONOMY.

References in periodicals archive ?
Indeed, the fast-changing world is forcing people to take a new look at a number of political theories built on classic economics.
TOKYO: When asked if he had ever read the classic economics textbook by Paul Samuelson, something almost all first-year students in the subject read, Japanese Minister of Finance and Deputy Prime Minister Naoto Kan replied: "I read about 10 pages.
As for classic economics, the pound and Swissie are both heavily dependent on the Euro Zone for Trade.
The danger is that we are entering a period of "stagflation" which contrary to classic economics is where prices keep rising and yet there is no growth in the economy or private sector employment.
Freakonomics" is the field of behavioral economics which attempts to combine the pure logical tools of classic economics with understanding the emotional impulses of human behavior.
Classic economics says that pure commodity markets operate on a supply/demand curve model, with higher demand created by lower prices and higher supply created by higher prices.
So wrote Henry Hazlitt in his classic Economics in One Lesson.
He also earned an MBA in quantitative economics from Miami Business School, and he earned MBAs in classic economics and finance from St.