[2] Its main thinkers are held to be Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John Stuart Mill.
These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange (famously captured by Adam Smith's metaphor of the invisible hand).
This income was in turn based on the labor of its inhabitants, organized efficiently by the division of labour and the use of accumulated capital, which became one of classical economics' central concepts.
[4] In terms of economic policy, the classical economists were pragmatic liberals, advocating the freedom of the market, though they saw a role for the state in providing for the common good.
The classical economists produced their "magnificent dynamics"[5] during a period in which capitalism was emerging from feudalism and in which the Industrial Revolution was leading to vast changes in society.
With property rights to land and capital held by individuals, the national income is divided up between labourers, landlords, and capitalists in the form of wages, rent, and interest or profits.
Adam Smith refuted Mercantilist thought with his most influential publication: An Inquiry into the Nature and Causes of the Wealth of Nations.
He elucidated that mercantilist policies would benefit domestic producers but not the country because it prevents consumers buying products at competitive prices, therefore directing cashflow ineffectively.
Smith believed that deviating from free trade costs society in a similar manner as to how monopolies negatively affect competition in a market.
During the classical era and after Adam Smith, David Ricardo became a prominent economist with thoughts on international trade.
John Stuart Mill’s contribution to Ricardo’s theory of comparative advantage came about when he introduced demand to the equation.
However, once Adam Smith, David Ricardo, and John Stuart Mill arrived with the classical wave of economics, international trade came to be viewed favorably and ultimately beneficial for all parties involved.
[10]: 592–96 John Hicks & Samuel Hollander,[11] Nicholas Kaldor,[12] Luigi L. Pasinetti[13][14] and Paul A. Samuelson[15][16] have presented formal models as part of their respective interpretations of classical political economy.
Natural prices, according to Petty, Smith, and Ricardo, for example, capture systematic and persistent forces operating at a point in time.
This parallels recent debates between proponents of the theory of endogeneous money, such as Nicholas Kaldor, and monetarists, such as Milton Friedman.
[19] Sraffians, who emphasize the discontinuity thesis, see classical economics as extending from Petty's work in the 17th century to the break-up of the Ricardian system around 1830.
Sraffians generally see Marx as having rediscovered and restated the logic of classical economics, albeit for his own purposes.
Even Samuel Hollander[20] has recently explained that there is a textual basis in the classical economists for Marx's reading, although he does argue that it is an extremely narrow set of texts.
This view can be found in W. Stanley Jevons, who referred to Ricardo as something like "that able, but wrong-headed man" who put economics on the "wrong track".
John Maynard Keynes thought of classical economics as starting with Ricardo and being ended by the publication of his own General Theory of Employment Interest and Money.
[19] One difficulty in these debates is that the participants are frequently arguing about whether there is a non-neoclassical theory that should be reconstructed and applied today to describe capitalist economies.