CLASSICAL ECONOMICS Meaning and
Definition
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Classical economics refers to the economic theories and principles that were developed and popularized during the 18th and 19th centuries by economists such as Adam Smith, David Ricardo, and John Stuart Mill. It is considered the foundation of modern economics and is characterized by its emphasis on free markets, individualism, and limited government intervention.
The central tenet of classical economics is the idea of the invisible hand, a concept introduced by Adam Smith in his book "The Wealth of Nations." According to this theory, if individuals are allowed to pursue their own self-interest and engage in voluntary exchanges, the market mechanism will automatically allocate resources efficiently, leading to economic growth and prosperity. Classical economists believed that free trade, competition, and specialization were key drivers of economic progress.
Another significant concept in classical economics is the labor theory of value, developed by David Ricardo. This theory states that the value of a good or service is derived from the amount of labor required to produce it. Classical economists also emphasized the role of savings and capital accumulation in promoting economic growth, as well as the importance of stable money supply and low inflation.
While classical economics provided valuable insights into the functioning of markets, it has been subject to criticism and has evolved over time. Although some of its principles still find relevance today, particularly in free-market economic policies, classical economics has been supplemented and expanded upon by subsequent economic theories and schools of thought.
Etymology of CLASSICAL ECONOMICS
The word "classical" in "classical economics" refers to the period during the late 18th century and early 19th century when this school of economic thought emerged. "Economics" comes from the Greek word "oikonomia", meaning "household management" or "administration". The classical economists sought to understand and explain the principles of economic organization and how economies function. They looked at fundamental concepts like production, distribution, consumption, and wealth accumulation. Some of the prominent classical economists include Adam Smith, David Ricardo, and John Stuart Mill.
