The Pros And Cons Of Classical Economics

citizens suffered under a feudal, capitalistic economy with little opportunity to fiscally advance. Marx believed in a government that provides for all people rather than the few wealthy. Both Smith and Marx develop enticing arguments for their respected theories on economics that carry merit after centuries of change.

Adam Smith is a proponent of capitalism, more specifically, laissez faire economic. Laissez faire is an economic policy in which businesses operate in the free market with little to no regulation from the government in a free market. Smith would disagree with Karl Marx because the two have different idea when it comes to economics. Smith argues that capitalism is the best form of economics because human self interest drives positive results in the economy. In addition, Smith would argue that invisible hand of the marketplace would help control the economy through supply and demand. When the supply is greater than the demand, the price of the product would be lower than the standard price. The opposite is that when supply is lower than the demand, the price would be above the standard price. With this, Smith believes that laissez faire would be the ideal economic plan. Furthermore, Smith would also argue that competition would lead to better product for the people as competition forces businesses to compete with each other for customers, leading to innovations and better products.

Modern economic society can be described as a combination of certain points from several theories combined into one. Changing dynamics and economic needs of nations has spawned a development of various, and contrasting, economic systems throughout the world. Perhaps the two most contrasting philosophies seen in existence today are that of capitalism and communism. The two philosophers most notably recognized for their views on these economic systems are Adam Smith and Karl Marx. This paper will identify several fundamental aspects of economic philosophy as described by Smith and Marx, and will compare and contrast the views of these

In, The Wealth of Nations, Smith explained why capitalism is the most known economic system. He gives credit to the defenders of the principle parrot his basic arguments. The theme of The Wealth of Nations is what Smith's supporters called the doctrine of laissez-faire capitalism. This doctrine had the world of economics functions under natural laws. It operated exclusively on politics. Government in the economic order of things did not like these natural laws, and said the laws disrupted the nation's economy. The hands-off policy permits citizens to complete economic freedom, and shows that governments could promise the growth of a nation's wealth. Smith realized that under a free enterprise system, individuals would pursue their own self-interests. He said that selfish individuals need competition, so

Smith's theory that capitalism is a self-sustaining system regulated by the competition between self-interested businesspeople influenced the economic system adopted by the United States which gained its independence the same year Wealth of Nations was published. Furthermore, Marx's belief that capitalism could never work due to the creation of monopolies that would exploit the proletariat influenced the communist developments in Eastern Europe in the twentieth century. Despite the differences between their viewpoints, the two philosophers agreed that businesspeople are only concerned with profit, and the wellbeing of the working class was of high importance to society. Furthermore, both were unable to predict the realities of their theories, and throughout the twentieth century, history exposed certain flaws in both capitalist and communist societies.

Prior to the popular use of the market, two other solutions were used for economic problems. Heilbroner explains how useful the traditional and command economy are. Beginning with traditon, which is identical to the characteristics of the primitive. This solution

Smith was concerned with the well-fare of all citizens, and thus came up with the concept of limited laissez-faire capitalism. He chose the world limited because he believed there were three areas where the government’s involvement was necessary. First, government needed to maintain order and defense. Additionally, the government needed to protect all members in society from injustice and oppression. Lastly, the governments involvement in

Modern political economic theory and philosophy can be greatly attributed to the works of two men who seemingly held polar opposite views on the subject. Adam Smith, a Scottish philosopher, published his most well-known work An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 and is most often associated with the ideas and principles of the political economic system known as Capitalism. At the other end of the spectrum is Karl Marx; the German philosopher most often associated with Communism and the author (or co-author) of The Communist Manifesto. This paper seeks to discuss the core differences in their respective political economic philosophies with regards to what economic value is and what the role of government should be in their versions of political economy. This will conclude with the argument that while Smith 's work had laid the foundation for modern economic philosophy, it was Marx who would ultimately leave the most significant impression upon the world with his revolutionary ideas.

Classic Economics was an ideology that came through when the transition from a feudal to a capitalist

From a political point of view, Smith wrote that Government intervention should be kept to a minimum within society. From a mercantilist point of view this was a terrible suggestion, however Smith argued that government intervention in markets will cause a limitation in productivity, and therefore not maximise efficiency. However if left alone as discussed in the previous paragraph, each party will seek to maximise its own prosperity within the given constraints, in turn maximising the

This system was lined out in Adam Smith’s book, Inquiry into the Nature and Causes of the Wealth of Nations, where he criticized the mercantilism system. In the book, Smith expressed three basic principles of economics, while attacking mercantilism. First, Smith criticized the use of tariffs to protect industries. He believed that if a country was able to produce a product cheaper than it was better to buy it from them then to produce it yourself and that free trade was a fundamental economic principle. Second, Smith believed in the labor theory of value. This theory expressed that the nation’s wealth should not determined by the amount of silver, gold, land it possessed, but by the labor of individual farmers, artisans, and merchants. Third, Smith suggested the state should not interfere with economic matters; instead they needed to fulfill three basic functions: protect society from individuals, defend individuals from injustice and oppression, and maintain public

In economics, some classical liberals believe that ‘’an unfettered market’’ is the most efficient mechanism to satisfy human needs and channel resources to their most productive uses. The minimal government advocacy of an ‘’unregulated free market’’ is founded on an ‘’assumption about individuals being rational, self-interested and methodical in the pursuit of their goals. Adam Smith was not an advocate of pure capitalism. Adam Smith allowed for many exceptions to a strictly free-market economy. The classical liberals advocated policies to increase liberty and prosperity. They sought to empower the commercial class politically. They abolish royal charters, monopolies and the protectionist policies of mercantilism to encourage

The Classical economic school of thought reflects on competition as instrument in forcing of market price to its natural level

For example, when a good is scarce, the prices goes up, so consumers try to avoid buying and therefore conserving the resource. Then, the suppliers want to find more of the source as to get a better profit. The reasons behind their actions are selfish, yet they benefit all of society. Smith identified that the pursuit of profit and the power of self-interest would increase motivation and result in more advances in technology. His model of capitalism was on the basis of freedom and selfishness as a motivator for society. It was also on the basis that the economy would go through recessions and expansions but fix itself. Recessions are periods in the economy in which unemployment goes up, while profits and spending goes down; a slowdown of the economy. An expansion is essentially the exact opposite. The classical model of economics states that the economy will continue to go through these fluctuations over time and will fix itself with no help, thus not needing a government to give influence.

The Neoclassical school maintains the position that markets can reconcile competing interests between capital and labour due to the function of the invisible hand, a theory stemming from the Classical school of economics, notably the economist Adam Smith (Chang 2012:116). This theory posits that “economic order can emerge as the unintended consequence of the rational actions of many people, each propelled by their own interests” (Friedman 2011:120). Neoclassical economics affirms that this “economic order” arises from the tendency of markets to equilibrate; that is, to naturally revert to a state where the desires of all economic agents are satisfied through the mechanism of the market (Stillwell 2012:158). This market mechanism is said to assure