The classical theory of economics, which dominated in the 18th and early 19th centuries, laid the foundation for much of modern economics. Sometimes referred to as laissez faire economics, classical theory emphasized growth, free trade, and competition, as free from government regulation as possible. Under classical thought, when individuals pursue their own interest, society as a whole benefits.
Key classical economists include Adam Smith, author of the “The Wealth of Nations,” David Ricardo and John Stuart Mill.
Classical economic theory argues for the self-regulating market. Under this viewpoint, the concern for profit ensures that society’s resources are used in the most beneficial manner, without direction by government.
Under classical economics, the self-regulating market transforms a seemingly chaotic process of buying and selling among consumers and producers into an orderly system of transactions that meets individual needs and increases national wealth.
Role of Government
Under classical economics, the role of government is to provide national defense, a system of justice that includes enforcement of contracts and a system of public works, including infrastructure and education.
Classical economics gave rise to neoclassical economic thought in the late 19th century. Neoclassical built on Classical ideas, giving them greater mathematical support and precision.