Compare And Contrast Classical And Classical Economics

Introduction The field of economics is among the most studied topics globally. This is mainly because of its significance to the society. According to Kagel and Roth (29), economics is a social science that examines how societies manage their scarce resources. Generally, economics studies the production, distribution as well as the consumption of goods and services. Economics also examines how people, firms, governments as well as countries make decisions on the allocation of resources for purposes of satisfying their wants and needs (Kagel and Roth 30). It also tries to establish how the different groups organize and coordinate their efforts for purposes of realization of maximum output. It is important to note that analyses in economics

The two individuals were renowned economists of their time and their played a significant role in the shaping the modern economics. Alfred Marshall is renowned as the founder of neoclassical economics while Adam smith is regarded as the founder of classical economics, which promotes modern free market and division of labor. However, the two types of economics are quite different. The classical economics refers to the main economic paradigm existing in the 18th and 19th centuries (Altman 54). Classical economics is believed to have reached maturity during the works of John Stuart Mill as well as David Ricardo. The primary focus of classical economics theories included economic freedom, economic growth, ideas on laissez-faire and free competition. Contrarily, the neoclassical economics is an economics approach whose focus is on the determination of outputs, goods as well as income distribution in markets via demand and supply (Zafirovski 79). This paper seeks to compare and Contrast classical and neo-classical economy of Adam smith and Alfred Marshall

It is important to understand the foundation of this critical branch of economics. According to Zafirovski (96), classical theory’s fundamental principle is that economy is self‐regulating. Based on this theory, economy always has the potential for realizing the natural GDP level of the real output, which is the level of real GDP achieved when the resources of an economy are fully utilized (Canto, Joines and Laffer 52). Even though there are issues that arise within a certain period forcing economies to exceed or even fall below the natural real GDP level, there exists self-regulatory techniques within the market systems that always work in bringing the economy back to the natural real GDP level (Keynes 109). It is important to note that the classical principle, which holds that the economy is at or close to the natural level of real GDP-is founded on two strong beliefs, which include the Say's Law as well as the belief that wages, prices as well as interest rates are