Classical economics

From Hobson's Choice

Early phase of economics; flourished mainly 1800 to 1874, when it was superseded by the marginalist revolution. Characterized by labor theory of value and emphasis on cost of production.

1 Context
2 Classification
3 See Also
4 External Links & Sources
5 Resources at this site

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Context

Economics was regarded as a branch of philosophy prior to the period of the classicals; this is one reason for the name: the classical period in economics represents the beginning of economics’ existence as an independent field of study.

Another reason is that the basic precepts of the classicals have retained their prestige as the perennial touchstone of validity, so too classical suppositions and conclusions remain sacrosanct in contemporary economics. These were:

Supply creates its own demand
All saving is invested
Markets determine prices based on factor availability and opportunity cost
Labor is a commodity (and ideally, as cheap as possible).

Classical economics is ideally distinguished from its precursor, the philosophers of the Enlightenment, because of several important distinctions: first, writers like Adam Smith and Beccaria were not obsessively devoted to pro-capitalist polemics; both were advocates of rational conduct against conservativism. In contrast, there can be no doubt that writers like Senior or Say were focused on making the case for the bourgeoisie.

The stimulus for the classicals was a series of controversies afflicting Britain in the wake of the Continental Wars. During this conflict, there was a move to restrict the importation of grain (the Corn Laws, 1815-1846) in order to protect the landlords and gentlemen farmers. This kept the price of corn artificially high and was defended in part on the grounds that wheat was a strategic crop; Britain required a strong domestic supply. Opponents of the Corn Laws, which included a huge cross section of the British intelligensia, argued that it made the cost of living excessive, so that British industrial workers required too high a subsistance wage. (An undercurrent was that, surprisingly, UK tariffs were quite high,^[1] and it was hoped that lower British tariffs on the miniscule commerce in wheat would be reciprocated by Britain's trading partners in the much larger trade of industrial goods.

Another major controversy was the bullionist controversy over the convertability of paper notes into gold. At the time, the convertability issue led to frequent runs. During the war with France (1797-1814) there was a particularly severe run that caused the UK to suspend convertability. Since the Continental Wars had stimulated the economy to the extent that there was creeping inflation, the Bullionists (led by David Ricardo) confidently demanded immediate and full restoration of full convertability. But in the years following the end of war, there was deflation and recession; in 1819 convertability was resumed, worsening the crisis and leading to the Peterloo Massacre. But more significant was the analysis of the role of currency and banking on the economy. The classical economists were split during the controversy; there was never a stict consensus on the orthodoxy of gold convertability.

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Classification

Because of the early (and amateurish) character of early writing on economics,^[2] there is a great variation in opinion among the main figures. Rev. Thomas Robert Malthus is sometimes referred to (as in Wikipedia) as a developer of classical economics; elsewhere, as on the CEPA/New School economics site, he (and Torrens) are classed as anti-classicals. Malthus' views tended towards pure laissez-faire in the economic sphere, as did Ricardo's, but Malthus owned that there could be a general glut of goods, something Say and Ricardo vehemently denied. Col. Robert Torrens was highly influential; but he held his positions with caveats that made them unacceptable to his allies. Sometimes Henry Thomas Carey (USA) is ranked among the classicals, but he was a protectionist.

Surprisingly, Karl Marx is frequently listed as a classical economist, which is surprising not because he was anti-bourgeoisie, but because his Capital was written as an attack on the classical school. Many years after the marginalist revolution had supposedly buried classical economics, and Keynesianism was thought to have buried the neoclassicists (or marginalism), Piero Sraffa and Luigi Pasinetti revived much of Ricardian thought.^[3]

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External Links & Sources

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College of Economics & Public Administration (CEPA)

Prominent figures in the development of Classical economics
Issues in Neoclassical economics
Schools related to Classical thought

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Wikipedia entries

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Library of Economics & Liberty (website)

Frédéric Bastiat (trans. W. Hayden Boyers) Economic Harmonies (complete text online), The Foundation for Economic Education, Inc (1996; 1st published 1850)

John Stuart Mill Priciples of Political Economy (complete text online), Longmans, Green and Co., ed. William J. Ashley, 7th Ed, (1909; 1st ed. published 1848); Essays on Some Unsettled Questions of Political Economy (complete text online), Longmans, Green, Reader, and Dyer Co., 2nd ed. (1874; 1st ed. published 1844)

David Ricardo, On the Principles of Political Economy and Taxation (complete text online), 3rd Edition, (1821; 1st ed. published 1817)

Jean-Baptiste Say(trans. C. R. Prinsep), A Treatise on Political Economy (complete text online), Lippincott, Grambo & Co..5th Edition, (1855; 1st ed. published 1803)