Economics: The Evolution Of Classical And Classical Economics

Economics is a science that compacts with the study of human activities as a relationship between ends and rare means which have different uses. Economics attempts in explaining economic behavior, which arises due to exchanging of scarce resources. Basically, it wasn't divided into two branches until the occurrence of the “Great Depression” in the 1930s.

Schools of economic thought

1) Classical school

● Neo-classical

● New classical

2) Keynesian economics

3) Post Keynesian economics

Classical Economics

There were many different economic theories available before the evolution of the classical economic thought. The pioneers in formulating the classical economic view are Adam Smith, David Ricardo, Thomas Malthus.

Classical economy comes

The logical foundation of this approach is found to be the issue in the distribution of income provided in terms of demand for factors of production.

This long period method of reasoning is still alive in contemporary economics. The classical economics thought had its concern mainly on laws in relation to emerging capitalist economy, conducting economic activities through market systems which depend on each other and had its basis on money and also in rapid changes in technology and industry. Classical economics is also characterized by sophisticated division of labor and wage labor.

Attention is given mainly to two factors in relation to the rate at which capital is accumulated and how the economy expands and also how the growth in social production is distributed among social classes.

The difference between the actual value and market value of the relevant variables is distinguished in this method.

The former version of this method reflected on all kinds of influences accidental and temporary and the method introduced later expressed the not accidental and non-temporary forces governing the economic

The long period method which was adapted by classical authors conceptualizes how the forces gravitate according to the situation.

The pure logic of the relationship between relative price and the distribution of income was analyzed for an ideal environment with salient features such as static prices, uniform rates of profits and remuneration.

This static view forwarded by classical economists is an assumed state of which we have no idea how it could come to being or be developed in the future. Therefore, classical economics is considered to be static not dynamic.

Market price depends on the difference between current supply and effectual demand.

● If the price difference is positive the market price is less than the natural price.

● If the price difference is negative, the market price is greater than the natural price.

● If the price difference is zero, the market price is equal to the natural price.

Output of a commodity increases if the market price is above the natural price.

Even Though the long period method was considered the core of economic analysis, short run problems were also given an