Classical Economics Essay

The neo- unadulterated scotchs fecal matter has been touted as the electrical switch to Greco-Roman stintings sweat as it appe ard to carry been presented as an emolument to the beliefs and ideologies of that of the perfect sparings movement. Not many people agree with this detail as it stands though.While some think that the neo- virtuous movement represents an evolution of stintingal speculation from the early and probably flawed version which was the classical frugal surmisal to a more advanced, sophisticated and improved possibleness, others believe that the neo-classical movement represents the birth of an entirely newfangled discipline that had distinguishable to quit a lot of the questions and switch offs that the classical economic movement had been riddled with instead of try to find a better approach to arriving at reasonable solutions for those studys.As a military issue of these contrasting views, it is necessary to delve into the origins of both m ovements, bunk out a thorough analysis of the modus operandi and arrive at a reasonable conclusion by victorious a subjective military position on the matter.In doing this, some of the issues that bequeath be intercommunicate imply the specific issues that the neo-classical economic movement and the classical economic movement rattling address, how ofttimes intersection delegate on that point is between the named couch of issues, the kinds of analytical regularitys apply in both economic movements, and whether the neo-classical analytical method is more useful at accomplishing its own goals as well as that of the classical economic methods (even better than the classical economists themselves). Classical economic scienceThe birth of the classical political scrimping movement is mostly attributed to Adam Smith as a result of his 1776 publication entitle The Wealth of Nations, although Jean-Baptiste Say, David Ricardo, Robert Thomas Malthus and John Stuart Mill (ov er a period of around hundred years) are all seen as the study contributors to the development of the movement (Evans & Phillips, 2006). Adam Smith l charge emphasis on the fact that a perfect economy is self-regulatory in the sense that the inevitably of the creation present in that economy are automatically satisfied.He coined the term invisible hand as a mechanism that is creditworthy for the propelling of the populace to pursue their individual self-interests which indirectly promotes the general avail of the society (Evans & Phillips, 2006). This emphasis served as the prefatorial foundation of the classical economic movement. David Ricardo on the other hand, tenored that bread and issue were drastically modify by increase in the pr spyglass-skating rink of withd birthday suit. The increase in rent according to Ricardo was as a result of the increasing population which is a consequence of the fixed availability of prop (Evans & Phillips, 2006).Reverend Robert Thom as Malthus in his suggestion averred that unemployment in a grocery store economy is ca utilize by the economy being frugal with spending. However, he was more famous for his population opening that beg offs that food occupation increased at an arithmetical progression epoch population increased at a geometrical progression (Evans & Phillips, 2006). This implies that with cartridge holder, the population will soon outgrow food supply and the limited do of available which will result in mixture magnitude returns to drive (Evans & Phillips, 2006).The diminishing returns to labor in turn leads to a radical reduction in the standard of living as a result of the low final payment that workers are paid. John Stuart Mills proposition took into consideration, the fact that mental imagery allocation and income distribution, which happened to be the two major roles of the market musical arrangement were typical from each(prenominal) other and that the market may non be strea mlined enough to perform both roles therefore, the involvement of the society is required to preen the inefficiencies (Evans & Phillips, 2006).The term classical economists, was first used by the father of communism, Karl Marx to even up out the group of economists that constituentd the same beliefs regarding the labor theories of economic revalue. At a time when capitalism was gaining grounds at the expense of feudalism, and when the industrial revolution was rapidly restructuring the society, it was necessary to re-examine and re-define the status quo by ensuring that the lands economic interests as a whole lies in and is determined by market forces instead of the autocratic and individualistic determinants that were formerly widespread (Evans & Phillips, 2006).Since then, several(a) classical economists, such as Samuelson Paul, Hollander Samuel, John Hicks, Kaldor Nicholas, and Luigi Pasinetti, have thoroughly studied how the wealth of a nation grows and how policies need to be implemented so that the nations wealth continually grows. In doing this, the aforementi stard economists (Samuelson et al. ) fundamentally presented various recognized models so as to define their own analysis of classical economic science.A major contribution of the classical economists was the development of the labor theories of value whereby the market values of commodities are associated to the various labor efforts that is needed to conjure up them. These theories of value were largely attributed to William Petty, Adam Smith, and David Ricardo who were acclaimed to have developed them so as to suitably look into economic dynamics.In ordain to properly make the representation of the regularities found in charges easy, the classical economists brought about a basic distinction between market price which is largely affected by many short-lived influences which are not easily put ahead at the theoretical level and natural prices of commodities which are responsible fo r taking into consideration, the continual forces that are operating at a precondition tier in time (Evans & Phillips, 2006).As far as the labor theories of value are concerned (as seen especially by Adam Smith), when an individual purchases a goodness, the real value of that commodity as far as the individual is concerned, is the practical sum total of the exertion that the individual underwent in buying the commodity. In other words, the actual value of a commodity (from the consumers angle) lies in the labor that is expended in the acquisition process of the commodity.Also, the value of a commodity from a makers angle is the total stress or trouble that has been bringd in order to arrive at the washed-up point of intersection. This to a fault implies that the actual value of a commodity (from the producers perspective) lies in the labor that is expended in the production process of the commodity. The labor described preceding(prenominal) depicts that which does not invo lve a pleasurable experience in the sense that the individual (consumer or producer) does not conveniently or pleasantly go through the experience of acquiring or manufacturing the commodity.In this case, labor is seen as opposing to value. As a result of this, the natural price of a commodity is determined by the summation of profits, wages and interests (from Adam Smiths proposition), although this view differs between the classical economic thinkers community because David Ricardo, John Stuart Mill, and Robert Thomas Malthus all had varying excogitations (though similar to an extent) about labor value of theory. The classical economic movement likewise communicate the issue of comparative advantage, especially David Ricardo.The principle of comparative advantage suggests that each nation should specialize in the production of the especial(a) commodities that it female genitals expeditiously produce (Evans & Phillips, 2006). It should then seek to import every other commodi ty it needs. The implication of this is that the total output of the nations of the world would be more than if the nations decided to be more self-sufficient. This theory served as the foundation of the theory of world-wide trade and immensely influenced the free-trade doctrine aspect of classical economic belief (Evans & Phillips, 2006).Classical economists also addressed the issue of the theory of distribution which proposed that the national product is divided between laborers, capital owners, and landlords. These three social classes share national products in the form of wages, profits, and rents, i. e. wages in the case of laborers, profits in the case of capital owners, and rents in the case of landlords (Evans & Phillips, 2006). It is therefore manageable for one of the above-mentioned social class to achieve a blue-ribbon(prenominal) allocation of the national product over the other social classes. in that location is hardly any common characteristic between the abo ve mentioned issues that were addressed by the classical economists. The theory of comparative advantage is not related to the theory of distribution as well as the labor theories of value. Therefore, the issues cannot be said to be overlapping. The analytical method utilized by classical economists involves the historic-deductive method (Evans & Phillips, 2006). The economists that belong to the classical economic movement actually honour real life situations and then from their observations, they propose solutions to economic problems.The solutions arrive largely as a result of the fact that the observer has noticed a pattern and can then deduce a likelihood of such pattern occurring again based on the head for the hillsency of the pattern to cite itself as had already been observed. A typical example of the historical-deductive analysis use by classical economists is the input-output analysis. The technique behind this method involves viewing the raw materials of a production process as an input age the semi-finished or finished product is seen as the output (Evans & Phillips, 2006).Such semi-finished or finished product may be used as an input to another(prenominal) process which will result in a different output. In other words, the output of one patience is the input if another industry and this happens over and again when the economy is concerned as a whole. classic Economics The Marginalist Revolution was responsible for the introduction of the classic economic movement. It was as a result of the theories of William Stanley Jevons, Carl Menger and Marie-Esprit-Leon Walras.Jevons reflected this theory in his 1871 publication titled supposition of Political Economy, Menger in his 1871 publication titled Principles of Economics, and Walras in his 1874 publication titled Elements of Pure Economics (Evans & Phillips, 2006). William Jevons concept of return program was largely influenced by the utilitarian principles of John Stuart Mill and that o f Jeremy Bentham because of the integration of their hedonic conception in his copious treatment (Evans & Phillips, 2006).However, his view was different from those of Mill and Bentham on the grounds that value depends on inferior among other things. He opined that the contentment or satisfaction derived from goods and work will always tend to reduce at the margin. For instance, the more cups ice cream an individual takes, the less pleasure such an individual derives from the blend in cup of ice cream until finally, the individual stops taking the ice cream. This principle is otherwise explained as the theory of diminishing returns.He also modeled his theories after mathematical principles found in mechanics thereby incorporating mathematics into economics. Carl Menger on the other hand, failed to agree with Jevons notion and did not wrap up the hedonic conception that Jevons added in his own works. Instead, he tried to explain diminishing borderline utility in terms of an in dividual prioritization of the possible usefulness or uses of a commodity (Evans & Phillips, 2006).In other words, Menger posits that consumers will always act in a way that ensures that their satisfaction is maximized in all inclinations. In other words, consumers will always apportion their silver in such a way that the become component of a good or service that they purchased generates no more satisfaction than the last component of another good or service that they purchased (Evans & Phillips, 2006). He also failed to embrace the incorporation of mathematics into economics as observed in the case of Jevons.Walras conversely was more focused on the market interactions inside an economy and also had similar views with Menger on the concept of diminishing marginal returns. He was of the opinion that as small as the change in a consumers orientation for a particular commodity capability be, it would always affect the producers predilection to adjust production of such a commodit y. For instance, a permutation in the consumers preference from land phones to mobile phones results in the reduction in the price of land phones and a corresponding increase in the price of mobile phones.The producer or manufacturer as the case may be would shift production to mobile phones which will lead to increase in market supply thereby specialiseting a new price balance between both commodities. Although the trio of Jevons, Menger, and Walras were responsible for the originating the Marginalist concept of economics which birthed neoclassical economics, their works were not so popular until it they were popularized by Francis Edgeworth, Alfred Marshall, Philip Henry Wicksteed and Lionel Robbins (Evans & Phillips, 2006).These set of economists were called the consolidators while Jevons, Menger, and Walras were known as the revolutionaries. Although not very common, a some economists have been referred to as the main(prenominal) proto-marginalists. These less-notable econom ists include Antoine Augustin Cournot (1838), Jules Dupuit (1844), Johann von Thunen (1850) and Heinrich Gossen (1854) (Evans & Phillips, 2006). Their era preceded that of the revolutionaries, but it was not until when Jevons, Menger and Walras published their own works that the Marginalist concept came into the economics public enlightenment.Also, the popularity of the Marginalist theory did not end with the consolidators there was this group of economists known as the Revivalists who besides incorporated the Marginalist theories into their own work, thereby leading to further popularization of the concept (Evans & Phillips, 2006). The economists that belong to the Revivalist movement include John Hicks (1939, 1934), Harold Hotelling (1938), Oskar Lange (1942), Maurice Allais (1943), and Paul Samuelson (1947) (Evans & Phillips, 2006). In one way or the other, all the above mentioned economists had a major role to play in the origin of the neoclassical economic movement. other pecu liarity of the neoclassical community of economics is that there appears to be factions or different schools of theme. This was as a result of the independent spirit of the pioneers. That is, Jevons was writing in England, Menger from Austria, and Walras from France. They were not aware of each other as at that time and as a result different schools of thought developed thereby presenting the neoclassical economic movement as an human body of different schools. These schools include the Lausanne School, Vienna School, Paretian School, Cambridge School, to mention but a fewer (Evans & Phillips, 2006).The neoclassical movement as a whole tends to address the issue of marginal utility. Marginal utility refers to the utility that is derived from an increase in the outlay of a particular good or service. It could also refer to the utility lost from a decrease in the consumption of a particular good or service. It results in the concept of diminishing marginal utility previously desc ribed, that is, more utility is obtained during the first consumption of the unit of a particular commodity than is obtained during the second consumption and this occurs in subsequent consumptions.It is basically what the Marginalist revolution was about. While consumers of a commodity strive to maximize the utility derived from the commodity, the producers or manufacturers of the community also tend to maximize profit in the process. Apart from maximizing utility and profits, the neoclassical economic movement also addressed the issue of able preferences. Every human behavior is control by a rational reasoning. This implies that an individual will always tend to select that which appears to be appropriate as far as straightforward his or her needs is concerned.As a result, such an individual develops a preference for that good or service that would suitably be of profit to them by canvass the costs and benefits of their actions. Another issue that was addressed by the neoclas sical economists was the question of how people act on the basis of full and relevant information (Evans & Phillips, 2006). It was proposed that an individual acted independently on this basis because the more relevant information such an individual had on a particular product, the better the chances of maximizing utility.From the mentioned issues, it is evident that there is a kind of overlap between them. For instance, an individual that has a relevant information on a particular good or service is then provided with the choice of comparison the costs and benefits of acquiring such product or service. After comparing the costs and benefits, the individual chooses to each develop a preference for that product or some other favorable product in order to maximize utility.The analytical method utilized by neoclassical economists involves the hypothetical-deductive methods (Evans & Phillips, 2006). This method is more mathematical in nature thus leading to the neoclassical economists being accused of mathematicalizing economics. In order to observe the economic system for the sake of analysis, neoclassical economists strive to develop various tools that will aid them in analyzing the system. These tools are developed with from mathematical models and are then used to hypothetically deduce an explanation or solution to the defined problem.A typical example of this method of analysis is the marginal revenue that is ordinarily used to calculate the extra income that will be gained from selling an superfluous unit of a particular commodity. Mathematically, it is described as the rate of change of total revenue per change in the number of units sold and can be expressed as From the relation above, TR is the total revenue, P is the price of the commodity and Q is the quantity demanded. When the price does not change with quantity, then convey that the marginal revenue is equal to the price of the commodity (Evans & Phillips, 2006).To address the main purpose of th is essay, which is to know whether neoclassical economics represents an evolution of economic theory from an early, flawed version (Classical Economics) to a more advanced, improved theory or rather represents the birth of a new discipline that decided to abandon many of the questions and issues that had troubled Classical Economics instead of trying to hug drug a better way to address them, it can be inferred from the above discussion of both economic theories that contrary to the popular views of people that neoclassical economic theory evolved from classical economic theory so as to amend its flaws, the opposite (not reverse) is the case, that is, the neoclassical economic theory actually evolved from the classical economic theory but it addressed a complete set of totally different issues. The reason for this assumption is evident. The classical economic theories as earlier discussed mainly addressed the issues concerning the labor theories of value, theories of distribution, a nd that of comparative advantage while the neoclassical economic theories essentially address the issue of marginal utility, rational preferences, and the predilection of individuals to act on the basis of full and relevant information.Placing these issues side-by-side, one would observe that they are quite different and do not expect to overlap. This means that as much as it is that the neoclassical economists evolved from the classical economists, their views are entirely different and do not seem to correlate. For instance, the theories of distribution which try that national the national product is divided between the laborer, capital owner and the landlord, is not in any way applicable to any of the issues accompanied to by the neoclassical economists. Similarly, the theory of marginal utility as an issue addressed by the neoclassical economists is not applicable in either the labor theory of value, comparative advantage principle or the theory of distribution.What this spel ls out is that the neoclassical economic movement represents the birth of an entirely new discipline that has decided to abandon many of the questions and issues that had troubled classical economics instead of trying to offer a better way to address them. Instead of improving on the issue of labor theory of value, it chose to dupe a totally new issue which it termed theory of marginal utility thereby creating difficulties when it comes to finding a correlation between both economic movements. Also, when considering the analytical tools employed by both economic movements, it is apparent that there are conflicting issues as well which further buttress the point that is being made here. While the neoclassical economists are hypothetically or mathematically inclined, the classical economists are historically inclined.Generally speaking, most scholars who have studied both methods of analyzing the economy would stick with the classical because it is believed that economics as a social science is more accurately gauged by the historical approach than mere mathematical models which failed to address the issues surrounding the great stamp in the 1920s when it occurred. Subjectively speaking therefore, the neoclassical economic movement does not improve on classical economics as claimed by many but instead, it addressed a brand new project. Finally, given the methods of economic analysis employed by both, it is evident that the neoclassical analytical method is not as effective at addressing its goals as much as the classical analytical method is at addressing its own goals which take over points out the point that has been made by this essay. References Evans, B. , & Phillips, S. (2006). Comprehensive History of Economics (4th ed. ). Pretoria Brayton Publishers.