Classical Economists and Their Contributions
Without classical economists such as Adam Smith, Thomas Robert Malthus, and David Ricardo, modern economic theory would not be the same. 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 portrayed public benefit with personal quest of private gain. From Ricardo, economics 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 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 harmful.
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 study in 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), set a tone of dreariness. Malthus’ 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...