The classical economic theory can be described as a self-regulating market in which the economy is always able to achieve the natural level of GDP, when it’s free of intervention. The idea of the classical economic theory began to dominate the market in the 18 and early 19 century, during this time it was seen as the foundation for classical economics. It made the process of buying and selling an organized system instead of a chaotic scene, thus also increasing the national wealth. The classical approach also diminishes the role of the government; it gives power to consumers and businesses stating that the problem will correct itself over time, focusing on long-term goals. In the case of Adam Smith, he argues minimizing government intervention and taxation the free market will adjust the supply and demand curves to an optimal point where the market benefits. Smith coins this as the “invisible hand” idea, in which looking out for our own interest in the market benefits, and it’s the invisible hand that adjusts the curves to an optimal point where it’s the most beneficial for the market. David Ricardo, another classical economist also viewed the whole market as one, but with a bit of a different perspective with the ideas of labor, rent, interest and comparative advantage. Ricardo emphasizes international trade and the theory of value of the labor market to strengthen the market. The way in which these two theorist look at the market is very broad because they are accounting for various factors as well as the economic landscape of the market, the fundamental idea behind classical economics. Adam Smith is said to be one of the main founders of the classical economic idea he analyzed the complex patterns and ways in which the free market and individuals act according to their own self-interest. “The Wealth of Nations” clearly examines the way in which Adam Smith analyses these concepts. He argued that the wealth of a nation was based on part of...
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