Without classical economists such as Adam Smith, Thomas Robert Malthus, and David Ricardo, modern economic theory would not be the same. Although differences of opinion were numerous among the classical economists in the time span between Smith’s Wealth of Nations (1776) and Ricardo’s Principles of Political Economy and Taxation (1817), they all mainly agreed on major principles. All believed in private property, free markets, and, in Smith’s words, “The individual pursuit of private gain to increase the public good.” They shared Smith’s strong suspicion of government and his enthusiastic confidence in the power of self-interest represented by his famous “invisible hand,” which portrayed public benefit with the personal quest of private gain. From Ricardo, economics derived the notion of diminishing returns, which held that as more labor and capital were applied to land, yields after a certain and not very advanced stage in the progress of agriculture steadily diminished.
The central thesis of The Wealth of Nations is that capital is best employed for the production and distribution of wealth under conditions of governmental noninterference, or laissez-faire, and free trade. In Smith’s view, the production and exchange of goods can be stimulated, and a rise in the general standard of living attained, only through the efficient operations of private industrial and commercial entrepreneurs acting with a minimum of regulation and control by the governments. To explain this concept of government maintaining a laissez-faire attitude toward commercial endeavors, Smith proclaimed the principle of the “invisible hand”: Every individual in pursuing his or her own good is led as if by an invisible hand, to achieve the best good for all. Therefore, any interference with free competition by the government is almost certain to be harmful.
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Although this view has undergone considerable modification by economists in the light of historical developments since Smith’s time, many sections of The Wealth of Nations, notably those relating to the sources of income and the nature of capital, have continued to form the basis of study in the field of political economy. The Wealth of Nations has also served as a guide to the formulation of governmental economic policies. Malthus, on the other hand, in his book An Essay on the Principle of Population (1798), set a tone of dreariness. Malthus’s main contribution to economics was his theory that a population tends to increase faster than the supply of food available for its needs. This theory contradicted the belief prevailing in the early 19th century that a society’s fertility would lead to economic progress. Malthus’s theory was often used as an argument against efforts to better the condition of the poor. Food, he believed, would increase in arithmetic ratio (2-4-6-8-10), but population tended to double in each generation (2-4-8-16-32) unless that doubling was ruled out by “natural selection”.
According to Malthus, nature’s checks and balances were positive: “The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race.” The forms it took included war, epidemics, pestilence and plague, human vices, and famine, all combining to level the world’s population with the world’s food supply. The only escape from over-population and the horrors of the so-called “positive check” was an involuntary limitation of population, not by contraception, rejected by Malthus’ religious beliefs, but by late marriage and, consequently smaller families. These pessimistic doctrines of classical economists earned for economics the nature of the “dismal science”.
The writings of Malthus encouraged the first systematic demographic studies. They also influenced subsequent economists, particularly David Ricardo, whose “iron law of wages” and theory of distribution of wealth contain some elements of Malthus’s theory. In his major work, Principles of Political Economy and Taxation, Ricardo offered several theories based on his studies of the long-range distribution of wealth. Ricardo feared increasing the population would lead to a shortage of productive land. He supported the classical theory of international trade, emphasizing national specialization of freedom of competition. Although economic theories have changed throughout time, the basis of economics rests in the developments of classical economists. In everyday life we live, breathe, and work in conditions that have been set forth previously by all three: Smith, Malthus, and Ricardo. It’s hard to imagine an economy, or for that matter, a world without these natural ways of being and diversity.
- The History of Economics Series by Adam Smith, Thomas Robert Malthus, David Ricardo, and John Stuart Mill
- This book is divided into four units which contain the originally published theories of four of the world’s greatest economists: Adam Smith, Thomas Robert Malthus, David Ricardo, and John Stuart Mill.