Classical Economics

(redirected from Classic Economics)
Also found in: Financial.

Classical Economics


(classical bourgeois political economy), a school of bourgeois economic thought that arose in the 18th century, when the capitalist mode of production was being formed, before the class struggle of the proletariat was well advanced.

The classical economists were the first to investigate capitalist production; their work laid the foundation for political economy as a science. As Marx wrote, “By classical Political Economy, I understand that economy which, since the time of W. Petty, has investigated the real relations of production in bourgeois society” (K. Marx and F. Engels, Soch., 2nd ed., vol. 23, p. 91, note). V. I. Lenin called classical economics one of the sources of Marxism.

Classical economics expressed the interests of the industrial bourgeoisie, proclaiming capitalism to be the eternal and natural form of production; it alleged that capitalism was the only structure that corresponded to “human nature”—that is, the nature of the bourgeois himself and his guiding principle of “reasonable egotism.” The school criticized the parasitism and dissipation of the feudal class. It reexamined the theories of its predecessors, the mercantilists, who were the ideologists of commercial capital. In calling for “economic freedom,” it sought to limit the interference of the state in the activity of the bourgeoisie. Classical economics tried to show that objective “natural” laws rule over economic life and that their violation leads to calamity for all of society. The school strove to define these internal laws, but the limitations of the bourgeois outlook kept it from fully realizing the scientific nature of economics.

Classical economics developed in Great Britain and France, particularly in the former, where its proponents included W. Petty, who originated the labor theory of value and was the first to study wages and rents; A. Smith, whom K. Marx called the summarizing economist of the manufactory period; and D. Ricardo, whose work marked the culmination of the school in Great Britain during the industrial revolution. The founder of classical economics in France was P. Boisguillebert, whose teaching also contained the germ of the labor theory of value. Other classical economists in France were the Physiocrats F. Quesnay and A. R. J. Turgot, whom Marx called “the fathers of contemporary political economy” (ibid., vol. 26, part 1, p. 12). L. de Sismondi put the finishing touches on classical economics in France. Although he shared the hypotheses of the school with respect to the theory of value, profit, and rent, Sismondi was at the same time a proponent of small-scale production and the founder of the petit bourgeois school of economic thought called economic romanticism. Classical economists in France were characterized by feudal limitations in their outlook, manifest in their overriding concern for agriculture and support of small-scale production. These views are explained by the low level of development of capitalist relations in France in their day.

Classical economics used a method that was new for political economy at the time: analysis of the essence of phenomena with the help of scientific abstractions. However, Smith’s scientific analysis, for example, was laced with superficial generalizations. Ricardo also made insufficient use of scientific abstractions. Inherent in their method were metaphysics and ahistoricism. The economic categories of capitalism were seen by them as eternal and natural, subject only to quantitative change. They did not understand that the economic categories expressing social productive relations were historically transient.

Classical economics deserves credit for laying the basis for the labor theory of value and for making the first attempts to review the different forms of surplus value. Ricardo saw in the labor theory of value the point of departure for analyzing capitalism and tried to reduce its most important economic categories to fit this general basis. The school established that the value of goods is determined by the labor necessary for their production. Smith’s contribution was to proclaim that socially differentiated labor in all spheres of production is the source of value. Smith and Ricardo pointed to the distinction between use value and the value of the commodity. However, the contradiction between private and social labor and between concrete and abstract labor was not discovered. Classical economics did not provide the necessary analysis of the production relations reflected in value, limiting itself to quantifying the value. Smith and Ricardo believed that value cannot be determined by individual expenditures, but the notion of socially necessary labor as the basis of value remained beyond their grasp.

Ricardo went further than Smith in elaborating the theory of labor value. Marx noted that “David Ricardo, unlike Adam Smith, neatly sets forth the determination of the value of commodities by labor-time and demonstrates that this law governs even those bourgeois relations of production which apparently contradict it most decisively” (“A Contribution to the Critique of Political Economy,” ibid., vol. 13, p. 46). In distinguishing “absolute” value from “relative” or “comparative” value, Ricardo spoke of value as the labor embodied in goods and set this apart from exchange value, which expresses the value of goods in terms of other goods. Ricardo made an important contribution in establishing this distinction, but he did not clearly show that exchange value is a form of value. “It is one of the chief failings of classical economy,” wrote Marx, “that it has never succeeded by means of its analysis of commodities and, in particular, of their value, in discovering that form under which value becomes exchange-value. Even Adam Smith and David Ricardo, the best representatives of the school, treat the form of value as a thing of no importance, as having no connection with the inherent nature of commodities” (ibid., vol. 23, p. 91, note). Failing to explain the specific features of a form of value, Ricardo and the other classical economists understood neither the nature and functions of money nor the essence of capital.

Starting with the assumption that labor is the only source of value, the classical economists concluded that profit, interest, and rent are also the result of the labor of workers. Looking upon wages and profit as two parts of value created by labor, they virtually reduced profit to surplus value. They were the first economic theorists to note the inverse relationship between wages and profit and between profit and rent. They also noted the economic contradiction between the classes of bourgeois society in the sphere of distribution. But the classical economists went no further. They looked upon labor as a commodity and upon wages as the value of labor; thus, without noticing it, they contradicted their own labor theory of value and were unable to use the law of value to explain the appropriation of profit by capitalists. Classical economics missed the essence of surplus value and studied only its manifestations: profit, rent, and interest. Therefore, it could explain neither the essence nor the features of capitalist exploitation; it could not indicate the exploitative essence of the concrete forms of surplus value. Classical economics also could not explain the formation of absolute rent and denied its existence; it linked differential rent with the law of declining fertility of the soil.

Classical economics also laid the foundation for analysis of capital and reproduction. The Physiocrats were the first of the pre-Marxian economists to attempt to show in schematic form the process of reproduction and the circulation of the entire social product. Marx characterized the economic table of Quesnay as a brilliant attempt for its time to present the whole process of production of capital as a process of reproduction, with exchange only as a factor in the circulation of capital (ibid., vol. 26, part 1, p. 345). He also remarked that the table reflected the narrow-mindedness of the Physiocrats in their notion that agriculture was the only productive sphere of production, the sphere where a “pure product” is created. Smith and Ricardo identified capital with its material embodiments of money, the means of production, and goods. Therefore, they did not understand that during the circulation of capital a change occurs in the material forms that capital assumes. In looking at the structure of capital, classical economists noted the distinction between fixed capital and working capital. However, since they did not analyze the production of surplus value, they did not discover the division of capital into constant capital and variable capital. Classical economics erroneously supposed that the social product is divided entirely into incomes and that the accumulation of capital signifies use of all the capitalized surplus value for hire of additional workers; thus it was prevented from understanding the process of capitalist reproduction.

The classical economists pointed out several of the contradictions of capitalism. In particular, Ricardo noted the opposition of class interests in bourgeois society. But he considered this a natural law of social life and saw as inevitable the poverty of the toiling masses and the partial crises in overproduction under capitalism. Sismondi criticized capitalism from a petit bourgeois standpoint and dealt with the contradictions of capitalism; in particular he pointed to the impoverishment of workers and to the inevitability of economic crises under capitalism. However, he did not understand the basis of these contradictions and did not see the means of their resolution; hence he called for a return to small-scale production.

The scientific views of Ricardo were used in the 1820’s by the English Ricardian socialists T. Hodgskin, J. Bray, and W. Thompson for a critique of capitalism and an argument on behalf of socialism.

Classical economics reached its culmination in the works of Ricardo. Lenin summarized the importance of the classical school: “The classics sought and discovered a number of capitalism’s ‘natural laws,’ but they failed to understand its transitory character, failed to perceive the class struggle within it” (Poln. sobr. sock, 5th ed., vol. 25, p. 42).

As the bourgeoisie captured political power and the class struggle of the proletariat became aggravated, individual vulgarized elements of classical economics came to be used by bourgeois economists as an apology for capitalism. Several of the ideas of classical economics are reflected in the works of contemporary bourgeois economists, chiefly among the representatives of the neoclassical school.


Marx, K. Kapital, vols. 1–3. K. Marx and F. Engels, Soch., 2nd ed., vols. 23–25.
Marx, K. “K kritike politicheskoi ekonomii.” Ibid., vol. 13.
Marx, K. “Teorii pribavochnoi stoimosti” (vol. 4 of Kapital), parts 1–3. Ibid.., vol. 26, parts 1–3.
Marx, K. and F. Engels. “Manifest Kommunisticheskoi partii.” Ibid., vol. 4.
Engels, F. Anti-Dühring. Ibid., vol. 20.
Lenin, V. I. “K kharakteristike ekonomicheskogo romantizma.” Poln. sobr. soch., 5th ed., vol. 2.
Lenin, V. I. Razvitie kapitalizma v Rossii. Ibid., vol. 3, ch. 1.
Lenin, V. I. “Tri istochnika i tri sostavnykh chasti marksizma.” Ibid., vol. 23.
Petty, W. Ekonomicheskie i statisticheskie raboty, vols. 1–2. Moscow, 1940. (Translated from English.)
Quesnay, F. Izbrannye ekonomicheskie proizvedeniia. Moscow, 1960. (Translated from French.)
Turgot, A. R. J. Izbrannye ekonomicheskie proizvedeniia. Moscow, 1961. (Translated from French.)
Smith, A. Issledovanie oprirode iprichinakh bogatstva narodov. Moscow, 1962. (Translated from English.)
Ricardo, D. Nachala politicheskoi ekonomii i nalogovogo oblozheniia. In Soch., vol. 1. Moscow, 1955. (Translated from English.)
Sismondi, J. C. L. Novye nachala politicheskoi ekonomii. ili O bogatstve v ego otnoshenii k narodonaseleniiu, vols. 1–2. Moscow, 1937. (Translated from French.)
Zarrin, P. I. Klassicheskaia burzhuaznaia politicheskaia ekonomiia. Moscow, 1956.
Anikin, A. V. Iunost’ nauki: Zhizn’ i idei myslitelei-ekonomistov do Marksa. Moscow, 1971.


References in periodicals archive ?
If classic economics is an insufficient explanation of human behavior, it stands that a system predicated on rewards and punishments is an insufficient explanation of human motivation.
In terms of classic economics high inflation should fuel growth.
He says Gallup has the point of view that says that everything we come to know about classic economics - 'perfect markets, well informed investors and purchasers and sellers making totally rationale decisions' is really only partially correct.
Classic economics holds that, in a competitive industry, the motive of profit and the effects of competition ensure that businesses (hospitals in this case) become optimised by using 'best practice' technology; choosing the combination of inputs that minimises costs (e.
We have an interview with Nobel Prize winner Daniel Kahneman about the growing impact of behavioral economics, a field that challenges and sometimes upends classic economics.
Students of classic economics look at economic cycles and say after the Great Recession, there has to be a sustained up cycle in our future, while students of globalization say the worldwide economy is just too complex and impossible to forecast.
This freely negotiated environment allows prices to rise with higher demand and limited supply in classic economics fashion while the North American and European markets have a significant portion of their phenol volume moving on a formula basis with fixed margin that doesn't allow them to capitalize on tight market conditions.
The study questions the axiom of classic economics on "consumer sovereignty", saying that those who smoke do not do so because the pleasure of smoking is greater than its cost, but rather because of the addictive power of nicotine and their failure to understand its true cost.
Based on classic economics, the theory presupposes independent entities engaging in international relationships, exercising rational self-restraint, and building and maintaining law and order by maximizing self-interest and game playing.