Classical Macroeconomics and Economic Growth

On Classical Economics

Classical economics was much more than a miscellaneous collection of theories and doctrines. Its particular theories and policy prescriptions revolved around a single central concept: economic growth. Unlike modern growth theory, classical economists were not primarily concerned with the adjustments of the economy to the growth process, but with how such a process could be generated and sustained. The full title of Adam Smith’s classical included the nature and causes of the wealth of nations.

Even the static Ricardian model was concerned, as a practical matter, with the progress of the economy toward the stationary sate, and with what this implied for the functional distribution of income “in different stages of society.” The static concept of Say’s Law became so entangled in growth theory as to confuse the issues involved in the “general glut” controversy and to cause that controversy to continue needlessly for years. Even such verbal disputes as that revolving around the difference between “productive” and “unproductive” labor (or consumption) turned on growth problems – in this case, the growth-promoting (“productive”) labor, spending, or consumption being distinguished from the non-growth-promoting (“unproductive”) counterpart by the indirect criterion of product materiality rather than the direct criterion of accumulability. Education, for example, can be accumulated, even though it is not physical matter…

…This concern for promoting growth had a very serious practical basis. Smith argued that it was not in the wealthiest, but in the fastest growing, countries that wages were the highest. Only the maintenance of growth kept wages above the subsistence levels.

References:

1. Sowell, Thomas. On Classical Economics. New Haven: Yale UP, 2006. Print. 22-23.

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