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Recall that the start of the Quantity theory's mechanism is a helicopter drop of cash: an exogenous increase in the supply of money. Wicksell's theory claims, indeed, that increases in the supply of money leads to rises in price levels, but the original increase is endogenous, created by the relative conditions of the financial and real sectors.
The classical economists took the theory of the determinants of the level and growth of population as part of Political Economy. Since then, the theory of population has been seen as part of Demography. In contrast to the Classical theory, the following determinants of the neoclassical theory value are seen as exogenous to neoclassical economics:
Keynes believed the classical theory was a "special case" that applied only to the particular conditions present in the 19th century, his theory being the general one. Classical economists had believed in Say's law, which, simply put, states that "supply creates its demand", and that in a free-market workers would always be willing to lower ...
Classical economists had difficulty explaining involuntary unemployment and recessions because they applied Say's law to the labor market and expected that all those willing to work at the prevailing wage would be employed. [29] In Keynes's model, employment and output are driven by aggregate demand, the sum of consumption and investment.
John Hicks's 1937 paper Mr. Keynes and the "Classics"; a suggested interpretation is the most influential study of the views presented by J. M. Keynes in his General Theory of Employment, Interest, and Money of February 1936.
A notable current within classical economics was underconsumption theory, as advanced by the Birmingham School and Thomas Robert Malthus in the early 19th century. These argued for government action to mitigate unemployment and economic downturns, and were an intellectual predecessor of what later became Keynesian economics in the 1930s.
Classical economics focuses on the tendency of markets to move to equilibrium and on objective theories of value. Neo-classical economics differs from classical economics primarily in being utilitarian in its value theory and using marginal theory as the basis of its models and equations. Marxian economics also descends from classical theory.
As he says, "is a distinctive feature of the present theoretical scheme to begin by carrying out the whole analysis at a level of investigation which the Classical economists called ‘natural’, that is to say, at a level of investigation which is so fundamental as to be independent of the institutional set-up of society". [48]