Classical Economics

Definition

Classical economics is a broad term referring to the dominant economic thought in the 18th and 19th centuries. It emphasizes the self-regulating nature of markets, suggesting that markets can achieve optimal resource allocation without government intervention.

Origin

Classical economics originated in the late 18th century, with Scottish economist Adam Smith considered its founder, particularly through his 1776 publication, 'The Wealth of Nations'. Additionally, the Spanish Scholastics and the French Physiocrats made early contributions to its development.

Categories and Features

The main features of classical economics include the free market, labor theory of value, and economic growth theory. The free market theory emphasizes the self-regulating nature of markets; the labor theory of value suggests that the value of goods is determined by the labor required to produce them; and the economic growth theory focuses on the impact of capital accumulation and technological progress on economic development.

Case Studies

A typical case is the British Industrial Revolution, where classical economic ideas promoted the implementation of free market policies, leading to rapid economic growth. Another case is the economic policy of the United States in the 19th century, where minimal government intervention, influenced by classical economics, fostered the development of capitalism.

Common Issues

Investors often encounter issues such as over-reliance on the market's self-regulating ability, overlooking the possibility of market failures. Additionally, the emphasis on labor value in classical economics might lead to neglecting other value factors.