Classical Vs. Neoclassical Theory

Are you Republican or Democrat? Maybe you are Conservative or Liberal? What do these terms mean and how did they begin? Classical Conservatism is defined as “a political philosophy emphasizing the need for the principles of natural law and transcendent moral order.”(Frohnen, Beer, and Nelson, 2006) Classical Liberalism is described as “a philosophy committed to the ideal of limited government and liberty of individuals including freedom of religion, speech, press, assembly, and free markets.” (Hudelson, 1999) These two ideas have shaped our philosophies and parties for centuries to come. These philosophies were made possible by many bright men of the time like Edmund Burke, John Adams, John

The Enlightenment, also known as Neoclassicism was notable as being a revival of classical elements and techniques. The Neo in Neoclassicalism means new. This movement started in the mid-1700s and lasted until the mid-1800s. During the Enlightenment people started to think in a different fashion than they used to by using science to challenge old ideas and philosophy to develop new ones creating a sense of depth and development of understanding to art of that time. The economy changed the audience in which artist were creating for, this changed what artists choose to depicted in there art. No longer where artist creating only art for the upper class but artists were painting for everyone to see, because of this most art painted during Neoclassicism

Economic system in the world is mostly productive in America this is due to the constant unlimited wants of its people and the fact that most people have high standards of living (Rosefielde, 2008). An individual has different wants and at any particular time an individual can satisfy his or her wants through purchasing these goods therefore there is an unlimited wants for goods and services. In recent times people consume goods that they don’t produce they sell or provide services then the income they gain from the services they purchase the goods that they want to consume. In this paper I will discuss the developed theories of the classical political economy developed theories and discuss on their different characteristics. These theories were mainly concerned with the changing aspects of economic growth in different centuries.

Twice used by the renowned author, Oscar Wilde, in his novel The Picture of Dorian Gray as well as in his drama Lady Windermere’s Fan, the cynical notion that “nowadays, people know the price of everything and the value of nothing" has pervaded our undeniably quantitatively-driven society. Certainly, the monetary view of things cannot replace aesthetic, moral or rational conscience. However, attempting to separate the pursuit of absolute truth from economic endeavors altogether is equally as detrimental as judging significance based on a price tag. Evidently, this discrepancy beckons drastic revisions of conventional economic notions resolving the major questions concerning the nature and origin of value. Marilynne Robinson in her piece, “Night Thoughts of Baffled Humanist,” supports the popular idea that value in the universe is created through sentient “mind to mind” human relations. Conversely, Mary Midgley in her article, “Duties Concerning Islands: Of Rights & Obligations,” finds fault with this convention suggesting that non-human entities have intrinsic value in themselves. Although these two seemingly differ in their respective conclusions, Midgley and Robinson can be harmonized by the fact that both their theories suggest that value genesis is designated by individuals in accordance to their personal moral context.

Neoclassical Economics is an attempt to restore some of the principles that Adam Smith, a pioneer for capitalist markets, advocated for in his Classical Economic theory. Smith suggested that minimal intervention should be required regarding government policy as the laws of supply and demand will be self-correcting. John Maynard Keynes was an important figure that worked to apply fiscal policy that would remedy an economic depression. Keynes’s idea of fiscal policy is the means by which government adjusts its spending levels and tax rates to monitor and influence the economy. Further, Keynes is known as the father of “Mixed Economy”, in which both the private sector (households and privately owned businesses) and public sector (government) have an active and important role in the economy. He argued that in a capitalist economy, the government would have a direct response to where in a business cycle the economy was at any particular time—Borrow to spend in a Recession or Bust, and spend only to the level of revenue collected during a period of growth or Booms. Milton Friedman, an American economist, believed strongly in a neoclassical, one-directional approach to monetary policy, where the Federal Reserve should limit monetary policy to increasing M1 (primary money supply) at a consistent rate, slightly higher than the birth rate, in order to keep economic growth at effective levels. Moreover, he believed the federal government should tax minimally in order to

Throughout history, economists and philosophers have theorized and implemented a multitude of different systems as an attempt to overcome scarcity. Most American children are taught from an early age to believe that capitalism corresponds to opportunity and democracy, and that it effectively battles scarcity. In this sense, many would argue that capitalism has been the most successful economic system in history. While this may be true, pure capitalism has fundamental flaws that lead to a variety of social issues. As society continues to evolve, it is imperative to improve our economic philosophy to defend against the elimination of competition and ensure equal opportunity for all. If the weaknesses of modern capitalism are addressed, it

These differences in levels of development may give the illusion of an historical emergence of money separate from, and subsequent to, the emergence of commodities. But in such cases what is at issue is the particular form of money, or the way in which value manifests itself in the particular society. Even transactions which are apparently barter transactions, in that the equivalents exchanged are both concrete commodities, may best be analyzed as degenerate monetary transactions, in which the parties estimate the abstract value of their respective products, and finding them equal, or nearly equal, are able to avoid transferring money itself.

In the Scottish Enlightenment, Hume and Smith agreed that “capital, not gold, is the wealth of nations”. Smith published in 1776 “The Wealth of Nations” which main subject, as we all hear a lot about, was the invisible hand

These forms of natural law laid the foundation for later economic principles and helped to shape and define the concepts of wealth and utility in later works. In this section, I will explore the different relationship of natural law with Classical thought, specifically in relation to wealth and utility. I assert that the division of labor acted as a form of natural law for this period. Beginning with Adam Smith, his work Wealth of Nations, this division of labor arises “Not due to human wisdom, but the necessary slow and gradual consequence of the propensity of human nature to barter and exchange one thing for another. It is by barter and treaty and purchase that we obtain from one another mutual goods that we are in need of (Smith, 175).

Adam Smith noted at the core of the mercantile system was the, “popular folly of confusing wealth with money," bullion was just same as other any commodity, so there was no reason to give it any special treatment. . More recently, scholars have discounted the accuracy of this critique. They believe Mun and Misselden were not making this mistake in the 1620s, and point to their followers Josiah Child and Charles Davenant, who, in 1699, wrote: "Gold and Silver are indeed the Measure of Trade, but that the Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say, what this Land or what this Labour and Industry Produces." The critique that mercantilism was a form of rent-seeking has also seen criticism, as scholars such Jacob Viner in the 1930s point out that merchant mercantilists such as Mun understood that they would not gain by higher prices for English wares abroad.

As discussed in the text (Dybvig, 2010), “value is not inherent in the commodity, good, or service to which it is ascribed. Rather, it is created in the minds of the individual who make up the market. The relationships that create value are complex, and values change when the factors that influence value change” (p. 2.1). There are a variety of factors that affect the

The classical theory was considered to be an era of rationality. Within the scope of crimes, evil consequences took place before and after the Enlightenment period. When the neoclassical came into effect, it brought about many changes. “Free will” was the primary difference between the classical and neoclassical theories. There is more emphasis on people who are mentally challenged in the neoclassical period.

Capitalists’ self-interest of profit is in conflict with workers self-interest of welfare, as capitalists’ drive for profit has negative repercussions for labour welfare. The Neoclassical school asserts that markets are able to reconcile this competing self-interest, as rational economic actors’ pursuit of their own self-interest within markets is said to result in a mutually beneficial outcome. However, the Marxian school concedes that this idea is redundant, as labour is still exploited by capital despite this apparently mediatory market mechanism (which focuses only on the exchange of commodities). This essay will acknowledge similarities between the two schools on the matter. It will explain the Neoclassical school’s pro-market

The 1930’s saw the neo-classical model of economics, championed by Walras and Mengers, crumble as rates of unemployment rose exponentially on a global scale. In the midst of this economic crisis Keynes offered solution to the crisis in his 1936 ‘General theory of Employment, Interests and Money’. He successfully argued that the state was alone capable of steering the economy to produce ‘social stability and social justice’ (Valentine, 2003) Thus the post-war consensus was formed and consequentially the centre ground of politics redefined, Keynesianism socialist model would hold sway for the quarter century following World War II.

A number of frameworks have been introduced by the economists regarding the concept of Quantity Theory of Money. Ajuzie Immanuel, et.al. (2008) opines as “The concept of the Quantity Theory of Money (QTM) was introduced in the economic theory in the 16th century. Jean Boldin in his book reprinted in 1924 argued that the reasons for the rise in French prices were abundance of gold and silver, monopolies, scarcity, the pleasure of princes, and devaluation of the currency. He asserted that prices had increased higher than they were fifty years back in France. He was primarily interested in determining the causes of the price rise in France. According to Boldin, gold and silver were used as currency in France and due to the over use of such items prices had increased. It was one of the first statements that linked price movement to movements in money stock (Klein, 1970). He noted that the increase in the supply of gold and silver used as money caused an increase in demand for French goods, resulting in the increase of prices at home abroad. In the 1690s, John Locke developed monetary theory and elaborated the discussion by examining the effects of money on trade, the role of the demand for money, and the importance of interest rate on the economy. He believed that money is a medium of exchange in trade (Klein, 1970) and that the amount needed depended on the “quickness of circulation”, which we today refer to as “velocity” of