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Classical economics, also known as the classical school of economics, [1] or classical political economy, is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. It includes both the Smithian and Ricardian schools. [2]
Transformation problem: The transformation problem is the problem specific to Marxist economics, and not to economics in general, of finding a general rule by which to transform the values of commodities based on socially necessary labour time into the competitive prices of the marketplace. The essential difficulty is how to reconcile profit in ...
The system of imperialism produced economic conditions particularly amenable to the movement of capital according to the assumptions of classical economics. Britain, for instance, was able to design, impose, and control the quality of institutions in its colonies to capitalize on the high returns to capital in the new world.
Keynes summarizes the view of classical economists that the economy should be self-adjusting if wages are fluid, and that they blame rigidity in wages for problems like unemployment. He disagrees with what he says is the orthodox view, based on the quantity theory of money , is that wage reductions have a small effect on aggregate demand, but ...
Sleeping Beauty problem: A probability problem that can be correctly answered as one half or one third depending on how the question is approached. Three Prisoners problem , also known as the Three Prisoners paradox: [ 3 ] A variation of the Monty Hall problem .
In the history of economic thought, ancient economic thought refers to the ideas from people before the Middle Ages. Economics in the classical age is defined in the modern analysis as a factor of ethics and politics, only becoming an object of study as a separate discipline during the 18th century. [1] [2] [3] [4]
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.
Like early classical economic models, RBC models assumed that markets clear and that business cycles are driven by changes in technology and supply, not demand. New Keynesians tried to address many of the criticisms leveled by Lucas and other new classical economists against Neo-Keynesians.