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As a coherent economic theory, classical economics start with Smith,
continues with the British Economists Thomas Robert Malthus and David
Ricardo. Although differences of opinion were numerous among the
classical economists in the time span between Smith’s Wealth of Nations
(1776) and Ricardo’s Principles of Political Economy and Taxation
(1817), they all mainly agreed on major principles. All believed in
private property, free markets, and, in Smith’s words, “ The individual
pursuit of private gain to increase the public good.” They shared
Smith’s strong suspicion of government and his enthusiastic confidence
in the power of self-interest represented by his famous “invisible
hand,” which reconciled public benefit with personal quest of private
gain. From Ricardo, classicists derived the notion of diminishing
returns, which held that as more labor and capital were applied to land
yields after a certain and not very advanced stage in the progress of
agriculture steadily diminished.
The central thesis of The Wealth of Nations is that capital is best
employed for the production and distribution of wealth under conditions
of governmental noninterference, or laissez-faire, and free trade. In
Smith’s view, the production and exchange of goods can be stimulated,
and a consequent rise in the general standard of living attained, only
through the efficient operations of private industrial and commercial
entrepreneurs acting with a minimum of regulation and control by the
governments. To explain this concept of government maintaining
laissez-faire attitude toward the commercial endeavors, Smith
proclaimed the principle of the “invisible hand”: Every individual in
pursuing his or her own good is led, as if by an invisible hand, to
achieve the best good for all. Therefore any interference with free
competition by government is almost certain to be injurious.
Although this view has undergone considerable modification by
economists in the light of historical developments since Smith’s time,
many sections of The Wealth of Nations notably those relating to the
sources of income and the nature of capital, have continued to form the
basis of theoretical study of the field of political economy. The
Wealth of Nations has also served as a guide to the formulation of
governmental economic policies.
Malthus, on the other hand, in his book An Essay on the Principle of
Population (1798) imparted a tone of dreariness. Malthus’s main
contribution to economics was his theory that a population tends to
increase faster than the supply of food available for its needs. This
theory contradicted the belief prevailing in the early 19th century
that a society’s fertility would lead to economic progress. Malthus’s
theory was often used as an argument against efforts to better the
condition of the poor. Food, he believed, would increase in arithmetic
ratio (2-4-6-8-10), but population tended to double in each generation
(2-4-8-16-32) unless that doubling was ruled out by “natural
selection”. According to Malthus’ natures checks and balances were
positive: “The power of population is so superior to the power of the
earth to produce subsistence for man, that premature death must in some
shape or other visit the human race.” The forms it took included war,
epidemics, pestilence and plague, human vices and famine, all combining
to level the world’s population with the world’s food supply.
The only escape from over-population and the horrors of the
so-called, “positive check” was in voluntary limitation of population,
not by contraception, rejected on religious grounds by Malthus, but by
late marriage and, consequently smaller families. These pessimistic
doctrines of classical economists earned for economics the nature of
the “dismal science”.
The writings of Malthus encouraged the first systematic demographic
studies. They also influenced subsequent economists, particularly David
Ricardo, whose “iron law of wages” and theory of distribution of wealth
contain some elements of Malthus’s theory. In his major work,
Principles of Political Economy and Taxation (1871), Ricardo offered
several theories based on his studies of the long-range distribution of
wealth. Ricardo feared increasing population would lead to a shortage
of productive land. He supported the classical theory of international
trade, emphasizing national specialization of freedom of competition.
Although representation of the classical economist has changed
throughout time, its basis is still the center for most political
guidelines. In everyday life we live, breathe, and work in conditions
that have been set forth previously by all three, Smith, Malthus, and
Ricardo It’s hard to imagine an economy, for that matter, a world
without these natural ways of being and diversity.
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