Classical Political Economy

Who called it "classical"?

The man who grouped Smith and Ricardo as "classical" was their sharpest critic, Marx. In a note to chapter 1 of Capital, volume I, he laid it down: "Once for all I may here state that by classical political economy I understand all economy since W. Petty that investigates the inner connection of bourgeois relations of production, as opposed to vulgar economy", which only moves within the apparent connection, endlessly rechews the material scientific economy has long supplied, and systematises the banal, self-satisfied notions of bourgeois agents of production about their own best of all worlds, proclaiming them eternal truths.

verstehe ich unter klassischer politischer Ökonomie alle Ökonomie seit W. Petty, die den innern Zusammenhang der bürgerlichen Produktionsverhältnisse erforscht im Gegensatz zur Vulgärökonomie

"Classical", then, is a compliment. In "The Three Sources and Three Component Parts of Marxism" (1913) Lenin wrote that classical political economy before Marx "took shape in England, the most developed capitalist country", and counted it with German philosophy and French socialism among the sources of Marx's teaching. That is why English political economy has its own column in this genealogy.

What did Adam Smith say?

Adam Smith's The Wealth of Nations (1776) is usually taken to mark the beginning of classical economics. Its basic message was that the wealth of a nation is determined not by the gold in the monarch's coffers but by its annual income, the produce of its people's labour, a view directed against the mercantilists who equated wealth with hoarded gold and silver.

Smith saw the division of labour as the key to raising the productive powers of labour. In his pin factory, the business of making a pin "is, in this manner, divided into about eighteen distinct operations", so that ten men could make vast numbers of pins a day. Of how people obtain what they need from one another he wrote: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." And he left the famous phrase that each person, intending only his own gain, is "led by an invisible hand to promote an end which was no part of his intention".

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Smith trusted the self-regulation of markets but repeatedly warned of the dangers of monopoly, and held that the costs of the common good should fall more heavily on those best able to bear them. The classical economists generally advocated free trade, which set them apart from the protectionist mercantilists.

What did Ricardo add?

In the preface to his Principles of Political Economy and Taxation (1817) David Ricardo framed the problem thus: the produce of the earth is divided among "three classes of the community", the landlord, the owner of the capital needed for cultivation and the labourers, under the names of rent, profit and wages. "To determine the laws which regulate this distribution, is the principal problem in Political Economy."

To determine the laws which regulate this distribution, is the principal problem in Political Economy

Marx called Ricardo the "last great representative" of classical political economy: Ricardo consciously made the antagonism of class interests, of wages and profit, of profit and rent, the starting point of his research, but he "naively took this antagonism for a social law of nature". Ricardo also held that, as society progresses, ever more labour is needed to obtain food, so that "the natural tendency of profits then is to fall", an idea often compared with Marx's law of the tendency of the rate of profit to fall.

Ihr letzter großer Repräsentant, Ricardo, macht endlich bewußt den Gegensatz der Klasseninteressen, des Arbeitslohns und des Profits, des Profits und der Grundrente, zum Springpunkt seiner Forschungen

Jean-Baptiste Say, Thomas Robert Malthus and John Stuart Mill are also counted among the main classical economists. After Ricardo and James Mill systematised Smith's theory, their ideas became economic orthodoxy from about 1815 to 1848.

Why did Marx say the classical school ended in 1830?

Marx found the condition under which classical political economy could remain a science in the fact that the class struggle was still latent. Sismondi criticised Ricardo in his lifetime, and the 1820s saw both the popularisation of Ricardo's theory and lively controversy against it. Then "in 1830 came the decisive crisis, once and for all." With the bourgeoisie in political power in France and England, the class struggle took ever more open and threatening forms in practice and in theory, and "it rang the death-knell of scientific bourgeois economy". The question was no longer whether this or that theorem was true but whether it was useful or harmful to capital; "in place of disinterested inquiry there came hired prize-fighting."

Er läutete die Totenglocke der wissenschaftlichen bürgerlichen Ökonomie.

General histories of economics date the end of the classical school later. When the "marginal revolution" of Jevons, Menger and Walras in the 1870s made neoclassical economics, which locates value in utility, the new orthodoxy, the torch of Ricardian economics passed mainly to Marxian economics.

What did Marx take from the classics, and what did he criticise?

Marx's main work, Capital, is subtitled "A Critique of Political Economy". He acknowledged the classics' achievement: political economy "has indeed analysed value and its magnitude, however incompletely, and discovered the content hidden in these forms". Ricardo's analysis of the magnitude of value was inadequate, he thought, "and yet it is the best". The labour theory of value and the theory of surplus value stand on this inheritance.

But the classics never asked one question: why labour takes the form of value at all, and its duration the form of the magnitude of value. "Even in its best representatives, such as A. Smith and Ricardo, it treats the form of value as something quite indifferent", which Marx put down to their taking the bourgeois mode of production for the eternal natural form of social production. Whether the mode of production is seen as a historically transient stage is the line that divides the classics from Marx.

Grade in ihren besten Repräsentanten, wie A. Smith und Ricardo, behandelt sie die Wertform als etwas ganz Gleichgültiges