Thursday, 4 October 2012

Economic School of The Week - Classical Economics

Our regular readers may have noticed that this Wednesday we wrote about student finances rather than one of the regular Economist of The Week posts. This was no coincidence - today's post is while being an integral part of the series, aims to conclude and summarise the first major era of the economic sciences, classical economics. 

Note: Click on the names of the economists to read about them in further detail.

Source: Wikimedia

Chosen approach


Despite the name, 'economic schools' doesn't have to do anything with primary education. Rather, they are schools of thought, the common framework of a group of economists, who may have differing opinions on certain matters, but their ideas have been influenced by each others' and agree on most issues.

Economics schools of taught compromise of more than the summary of the life and works of it's contributors. Economists of certain schools are united by their time period, and their social-economic experiences. Hence when attempting to summarise classical economics, we will organise the , and then find the common patterns and characteristics of their works and working conditions.

Adam Smith


Adam Smith's ideas about economics were a result of his extensive knowledge in moral philosophy, enhanced by his extensive abroad experiences. Hence, his approach was a theoretical one - an attitude which was a general characteristics of his contemporaries as well. In his view, the correct economic model - of free markets and supply and demand - was a natural extension of his broader system of ethics, not a model dedicated to explain economics processes for their own sake.

David Ricardo


Ricardo's approach of economics was radically different from Smith's. He was a practical man, a professional and successful stock broker on his own. By starting to study economics academically, he seeked to provide explanations to the economic phenomena he have seen and experienced in his career. Had his observations been different from Smith's, the formers model wouldn't have passed the test of time - but the fact that it did shows just how accurate their assessment of macroeconomics was.


Jean-Babtiste Say


Say's heritage is exceptionally intriguing due to the fact that he was the first economist to embrace and expand Smith's ideas abroad. Throughout the 18th century, Britain has been substantially more advanced than the rest of the continent in both economic and political terms - the United Kingdom's contemporary social structure was the birth bed of modern capitalism in an age when on the continent the non-feudal society was still only emerging. However, the fact that Say's approach did become acceptable and famous on the continent as well shows the universality and applicability of the new approach.


Thomas Malthus


Malthus's approach is unique among the others because he wasn't a philosopher or a finance professional - he was a priest, and his ideas about economics were intertwined with his belief in an omnibenevolent God. His contribution to the field - his growth and wage model - are both a consequence of this: he believed that the unsustainability of unchecked growth was a divine test, and that moral restraint was it's only solution. And while his approach found few followers, his ideas nonetheless had a huge influence on his successors, firstly discussing the quantitative limitations of the lassez-faire model.

John Stuart Mill


Mill's approach is similar to Smith's in the sense that his economic ideas were only a branch of his broader utilitarian understanding of the world - yet it was a more balanced one, gaining first hand political and economic experience himself as an MP for Westminster, and his ethical concerns over the equality of women and other social issues. His contribution to the school of classical economics was not just the revision and perfection of his predecessors' ideas, but by adapting them to his own age - the 19th century -, he provided a guideline for economic thinkers for decades to come.

Conclusion


As can be seen above, classical economists were separated by time, location, and very often approach - yet the general methods they use in scientific research and the conclusions they reached are the same. With the exception of Say, classical economists were all citizens of the British Empire, the foremost advocate of capitalism and liberty of thought in the 18th and 19th century - and while certain constraints were still put on thinkers both by their environment and upbringing, it nonetheless created an atmosphere of innovation.
 Early economics was in a sense, intuitive - theories, while derived empirically, were not quantified in the sense as eg. the Marshallian curves quantify changes in supply and demand. Hence, classical economics is both more interdisciplinary and philosophical than it's successors - on the other hand, it was possibly this broadened scope which allowed it's thinkers to lay the groundworks of the 'grand model' of free market capitalism. In the end of the day, what we today call 'classical economics' is not just a compilation 'first modern economists' - but the first valid and conclusive (even if somewhat exceeded) attempt at explaining the allocation of resources in the world around us.

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