(Neo-)Classical Theory - BeliefsClassical economists were not renowned for being a happy, optimistic bunch of economists (in terms of their economic thinking!). Some believed that population growth would be too rapid for the resources available (Malthus was a particular exponent of this view). If this wasn't enough to depress the rate of long-term growth (and the rest of the population along with it!)
then diminishing returns They believed that the government should not intervene to try to correct this as it would only make things worse and so the only way to encourage growth was to allow free trade and free markets. This approach is known as a 'laissez-faire' approach Much of Adam Smith's early work was on this theme, and he introduced the notion of an invisible hand The Victorian period of rapid expansion worldwide seemed to cheer the Classical economists up a little and they became a bit more optimistic, but still maintained their total faith in the role of markets. For some more detail on their theories, policies and Classical aggregate supply and demand analysis, follow the links below. Intro | Beliefs | Theories | AS & AD | Policies | VE Policies |
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