The Classical School of Thought

The Classical school of thought usually starts with Adam Smith in the late 18th century.

The Classical school of thought ends with John Stuart Mill, in the middle of the 19th.

From an economic point of view, the most important development was of course the advance of capitalism and its transformation to an industrial one.

Political economy is a joint product.

The Emergence of modern science changed the conception about the place of human beings in the universe

Adam Smith wrote History of Astronomy.

Atomistic philosophy is a product of modern science.

The Industrial Revolution of the late 18th and early 19th centuries was the most decisive transformation of society.

The basic analytical units of the Classical Political Economy are the social classes and their relations or conflicts.

Classical analysis adopts a “macro” or an “aggregate” analytical framework, whose “structural” variables are institutions and technology.

The Classical school takes production and capital accumulation as the main analytical focus.

Classical school is concerned with long run behavior of the economic system and its equilibrium conditions

Competition is understood not as “perfect competition” but “free competition”, referring to the mobility of capital among the sectors of the economy, seeking higher profit rates.

Adam Smith can be seen as the founder of an independent economic science that has its own subject matter and an exclusive analytical structure, developed in his book The Wealth of Nations in 1776.

The Invisible Hand metaphor, which was first devised by Adam Smith offers an analytical framework for an individual choice-driven market system, capable of bringing solutions to “economic” problems.

Invisible Hand describes the working of the market system, so as to reconcile mutual interests of individual decision units.

Contemporary economics regards wealth as the collection of financial and physical assets owned by individuals or countries.

“Natural price” of a commodity refers to “the whole value of the labour, land and profit, which must be paid in order to bring it thither”.

Thomas Robert Malthus is famous mostly for his population theory arguing that population grows faster than the production of foods necessary to feed people, and it constitutes a major important peril with regard to production and accumulation.

“General Glut” means the aggregate supply is greater than the aggregate demand, and therefore, produced output cannot be absorbed by the consumption of the country.