Classical Economics (Capitalism)

The classical school was the first to define what economics was. One of the fathers of the classical thought was Adam Smith. He defined economics as the science of wealth. He equated the study of economic to merely the accumulation of wealth. Among other notable classical definitions include J.B. Say, who defined economics as “the study of laws which govern wealth”. J.B. Say was also the proponent of the Say’s Law (will get definition in a later post). As you can see from above; the classical school of thought was always centered on the generation of wealth. Although to be fair to Adam Smith, he was mostly talking about the accumulation of wealth of a nation and thereby enriching the inhabitants of that particular nation. But none the less, this was the beginning of era of capitalism. Capitalism is the brain child of the classical school of economics. So how does one define capitalism? One definition of capitalism sums it up for me: Capitalism is unbridled accumulation of wealth, the belief that the successful pursuit of wealth would result in it trickling down to the weaker section of the society.
Private ownership was celebrated and public works were given a back stage. It was believed that only private entities can increase the wealth of a nation. But this was a false assumption. Any every function of a country is taken under the public works. The building of effective transportation and easing of the functioning of the private entities were done by the public utilities. Even innovations that resulted in the finding of the internet were publicly funded military projects. Private ownership never gives onus to effective use of resources as claimed by the capitalists. Rather, short terms profits being the goal, complete depletions of natural resources is what takes place. There should be effective governance over the private enterprises in order to control the unscrupulous money making methods they adopt. What the classical economist failed to calculate is that, in theory the market is perfect; the reality is that the market is not a separate entity that is self-regulating and neither is it a highly capable artificial intelligence that can weigh the pros and cons. As long as private enterprise’s motive to enter the market remains to be the assimilation of wealth, the markets will remain imperfect and therefore needs to be regulated.


3 thoughts on “Classical Economics (Capitalism)”

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