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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 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.
John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. Attempting to explain unemployment and recessions , he noticed the tendency for people and businesses to hoard cash and avoid investment during a ...
In The Nature of Rent (1815), Malthus had dealt with economic rent, a major concept in classical economics. Ricardo defined a theory of rent in his Principles of Political Economy and Taxation (1817): he regarded rent as value in excess of real production—something caused by ownership rather than by free trade.
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 ...
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.
Leijonhufvud's view that Hicks misrepresented Keynes's theory by reducing it to a static system was in turn rejected by many economists who considered much of the General Theory to be as static as Hicks portrayed it. James Tobin described the IS-LM model as: ... the tool of first resort.