8. Classical Economics
Denis P. O'Brien
History of Thought
Classical economics ruled economic thought for about 100 years. It focused on
macroeconomic issues and economic growth. Because the growth was taking place in an open
economy, with a currency that (except during 1797–1819) was convertible into gold, the
classical writers were necessarily concerned with the balance of payments, the money supply,
and the price level. Monetary theory occupied a central place, and their achievements in this
area were substantial and - with their trade theory - are still with us today. Those ideas
developed amid an international economy free from major wars. However, the French wars of
1793–1815 had a powerful influence on classical economics, leading to major problems with
public finance, and to a significant national debt. Because convertibility of the note issue into
gold was suspended, it was necessary to develop a theory of the operation of an inconvertible
The intellectual basis for virtually all classical economics is found in Adam Smith's
). Earlier work, including that by Smith himself (his
) and of David Hume (1711–76) can be seen in
the context of the research program that Smith established.
Apart from Adam Smith (1723–90), the most famous and influential figure was David
Ricardo (1772–1823). There are several views of Ricardo.
Ricardo's work as essentially a detour. The Sraffians regard it as the start of the only valid
tradition in economics, running from Ricardo to Marx and thence to Sraffa.
and Samuel Hollander (1979)
have interpreted Ricardo as a neoclassical economist.
Ricardo excelled in model building, but his restrictive type of model grafted uneasily on to the
main part of classical economics, and the work of later writers such as J. R. McCulloch
(1789–1864) and J. S. Mill (1806–73) owed much more to Smith than to Ricardo.
To interpret classical economics in terms of Smith and Ricardo alone is a mistake (
). Contemporary with Ricardo were T. R. Malthus (1766–1834), James Mill (1773–
1836), Nassau Senior (1770–1864), Robert Torrens (1780–1864), and numerous writers on
special topics, especially monetary theory.