Classical Economics
School of economic thought largely centred in Britain that originated with Adam Smith and reached maturity in the works of David Ricardo and John Stuart Mill.
The theories of the classical school were mainly concerned with the dynamics of economic growth.
Reacting against mercantilism, classical economics emphasized economic freedom. I
t stressed ideas such as laissez-faire and free competition.
Many of the fundamental principles of classical economics were set forth in Smith's Wealth of Nations (1776), in which he argued that a nation's wealth was greatest when its citizens pursued their own self-interest.
Neoclassical economists such as Alfred Marshall showed that the forces of supply and demand would ration economic resources to their most effective uses.
Smith's ideas were elaborated and refined by Ricardo, who formulated the principle that the price of goods produced and sold under competitive conditions tends to be proportionate to the labour costs incurred in producing them.
Mill's Principles of Political Economy (1848) gave the ideas greater currency by relating them to contemporary social conditions. Among those who have modified classical economics to reach very different conclusions are Karl Marx and John Maynard Keynes.
Adam Smith(The Father of Economics)
baptized June 5, 1723, Kirkcaldy, Fife, Scot.
died July 17, 1790, Edinburgh
Scottish social philosopher and political economist.
Adam Smith, paste medallion by James Tassie, 1787; in the Scottish National Portrait Gallery, …
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The son of a customs official, he studied at the Universities of Glasgow and Oxford. A series of public lectures in Edinburgh (from 1748) led to a lifelong friendship with David Hume and to Smith's appointment to the Glasgow faculty in 1751. After publishing The Theory of Moral Sentiments (1759), he became the tutor of the future Duke of Buccleuch (1763–66); with him he traveled to France, where Smith consorted with other eminent thinkers.
In 1776, after nine years of work, Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, the first comprehensive system of political economy.
In it he argued in favour of an economic system based on individual self-interest that would be led, as if by an “invisible hand,” to achieve the greatest good for all, and posited the division of labour as the chief factor in economic growth. A reaction to the system of mercantilism then current, it stands as the beginning of classical economics. The Wealth of Nations in time won him an enormous reputation and would become virtually the most influential work on economics ever published. Though often regarded as the bible of capitalism, it is harshly critical of the shortcomings of unrestrained free enterprise and monopoly. In 1777 Smith was appointed commissioner of customs for Scotland, and in 1787 rector of the University of Glasgow.
Alfred marshall
born July 26, 1842, London, Eng.
died July 13, 1924, Cambridge, Cambridgeshire
economist, one of the founders of English neoclassical economics.
The first principal of University College, Bristol (1877–81), and a professor at the University of Cambridge (1885–1908), he reexamined and extended the ideas of classical economists such as Adam Smith and David Ricardo.
His best-known work, Principles of Economics (1890), introduced several influential economic concepts, including elasticity of demand, consumer's surplus, and the representative firm. His writings on the theory of value proposed time as a factor in analysis and reconciled the classical cost-of-production principle with the theory of marginal utility. See also classical economics.
Jhon stuart mill
born May 20, 1806, London, Eng.
died May 8, 1873, Avignon, France
British philosopher and economist, the leading expositor of utilitarianism.
He was educated exclusively and exhaustively by his father, James Mill. By age 8 he had read in the original Greek Aesop's Fables, Xenophon's Anabasis, and all of Herodotus, and he had begun a study of Euclid's geometry; at age 12 he began a thorough study of scholastic logic.
In 1823 he cofounded the Utilitarian Society with Jeremy Bentham, though he would later significantly modify the utilitarianism he inherited from Bentham and his father to meet the criticisms it encountered.
In 1826 he and Bentham cofounded London University (now University College). From 1828 to 1856 he was an assistant examiner in India House, where from 1836 he was in charge of the East India Company's relations with the Indian states.
In the 1840s he published his great systematic works in logic and political economy, chiefly A System of Logic (2 vol., 1843) and Principles of Political Economy (2 vol., 1848). As head of the examiner's office in India House from 1856 to 1858 he wrote a defense of the company's government of India when the transfer of its powers was proposed. In 1859 he published On Liberty, a trenchant defense of individual freedom. His Utilitarianism (1863) is a closely reasoned attempt to answer objections to his ethical theory and to address misconceptions about it; he was especially insistent that “utility” include the pleasures of the imagination and the gratification of the higher emotions and that his system include a place for settled rules of conduct.
In 1869 he published The Subjection of Women (written 1861), now the classical theoretical statement of the case for woman suffrage. Prominent as a publicist in the reforming age of the 19th century, he remains of lasting interest as a logician and ethical theorist. See also Mill's methods.
David Ricardo
born , April 18/19, 1772, London, Eng.
died Sept. 11, 1823, Gatcombe Park, Gloucestershire
British economist.
The son of a Dutch Jew, he followed his father into the London stock exchange, where he made a fortune before turning to the study of political economy, in which he was influenced by the writings of Adam Smith.
His writings in support of a metal currency standard were influential. In his major work, The Principles of Political Economy and Taxation (1817), he examined the movement of wages and the determination of value, asserting that the domestic values of commodities were largely determined by the labour required for their production. His Iron Law of Wages stated that attempts to improve the real income of workers were futile and that wages tended to stabilize at subsistence level. Though many of his ideas are obsolete, he was a major figure in the development of classical economics and is credited as the first person to systematize economics.
Jhon Keynes
born June 5, 1883, Cambridge, Cambridgeshire, Eng.
died April 21, 1946, Firle, Sussex
British economist, known for his revolutionary theories on the causes of prolonged unemployment.
The son of the distinguished economist John Neville Keynes (1852–1949), he served in the British treasury during World War I and attended the Versailles Peace Conference. He resigned in protest over the Treaty of Versailles, denouncing its provisions in The Economic Consequences of the Peace (1919), and he returned to teaching at the University of Cambridge.
The international economic crisis of the 1920s and '30s prompted him to write The General Theory of Employment, Interest and Money (1935–36), the most influential economic treatise of the 20th century.
It refuted laissez-faire economic theories, arguing that the treatment for economic depression was either to enlarge private investment or to create public substitutes for private investment.
Keynes argued that in mild economic downturns, monetary policy in the form of easier credit and lower interest rates might stimulate investment. More severe crises called for deliberate public deficits (see deficit financing), either in the shape of public works or subsidies to the poor and unemployed. Keynes's theories were put into practice by many Western democracies, notably by the U.S. in the New Deal. Interested in the design of new international financial institutions at the end of World War II, Keynes was active at the Bretton Woods Conference in 1944.
Jeremy Bentham
born Feb. 15, 1748, London, Eng.
died June 6, 1832, London
British moral philosopher and legal theorist, the earliest expounder of utilitarianism.
A precocious student, he graduated from Oxford at age 15. In his An Introduction to the Principles of Morals and Legislation, he argued that mankind was governed by two sovereign motives, pain and pleasure. The object of all legislation, therefore, must be the “greatest happiness of the greatest number”; and since all punishment involves pain and is therefore evil, it ought only to be used “so far as it promises to exclude some greater evil.” His work inspired much reform legislation, especially regarding prisons. He was also an exponent of the new laissez-faire economics of Adam Smith and David Ricardo. Though a vocal advocate of democracy, he rejected the notions of the social contract, natural law, and natural rights as fictional and counterproductive (“Rights is the child of law; from real law come real rights; but from imaginary laws, from ‘law of nature,' come imaginary rights”). He helped found the radical Westminster Review (1823). In accordance with his will, his clothed skeleton is permanently exhibited at University College, London.
Karl Marx (Heinrich)
born May 5, 1818, Trier, Rhine province, Prussia [Ger.]
died March 14, 1883, London, Eng.
German political philosopher, economic theorist, and revolutionary.
He studied humanities at the University of Bonn (1835) and law and philosophy at the University of Berlin (1836–41), where he was exposed to the works of G.W.F. Hegel.
Working as a writer in Cologne and Paris (1842–45), he became active in leftist politics.
In Paris he met Friedrich Engels, who would become his lifelong collaborator. Expelled from France in 1845, he moved to Brussels, where his political orientation matured and he and Engels made names for themselves through their writings. Marx was invited to join a secret left-wing group in London, for which he and Engels wrote the Communist Manifesto (1848). In that same year, Marx organized the first Rhineland Democratic Congress in Germany and opposed the king of Prussia when he dissolved the Prussian Assembly. Exiled, he moved to London in 1849, where he spent the rest of his life. He worked part-time as a European correspondent for the New York Tribune (1851–62)
while writing his major critique of capitalism, Das Kapital (3 vol., 1867–94). He was a leading figure in the First International from 1864 until the defection of Mikhail Bakunin in 1872. See also Marxism; communism; dialectical materialism.
