Question

what is the difference between Classicals, Neo Classicals and Keynessians economic theories

Answer 1

Classical Economics

Classical economics which was earlier known to be the part of political section is a school of thought in economics that appeared primarily in Britain, in the 18th and 19th century. Its main thinkers were Adam Smith, J.B. Say, David Ricardo, Thomas Malthus, and J.S. Mill. These economists had given a theory of market economies as self-regulating in nature, governed by natural laws of production and exchange in the economy.

Adam Smith was the beginner of Classical thoughts his book 'The Wealth of Nations' was concerned with the national wealth calculation which according to his was estimated on the basis of National Income. We can sum up by saying that classical economics was the starting of economics as the subject to study, but it was like any infant so conservative. The assumptions given in the classical theory have became its criticism in the next generation.

Neoclassical Economics

The economists of the neoclassical economics were so much inclined towards the approach of J.B say's Law of Market which made them blind believer of market and its automatic forces. Their normative approach was appeared in this context which itself has been the reason for their decline. The theories were so toughened with the assumptions which can never be possible in the real life situation. According to the neoclassical approach of economics

- Markets can never crash

- Produced goods can never be left effectively unsupplied

- producer as well as consumer can never be in loss as

Most importantly the Noe - Classical theories can not be applied in the real world.

John Maynard Keynes

Adam Smith has became the father of Economics but it would not be wrong to say that Keynes was the Godfather of economics. The most relevant and applicable theories at that earlier time were of Keynes who has not just criticized but given the proper alignment to the other economic thinking. His every theory was based upon the most possible condition of real world.

' The General Theory of Employment, Interest and Money' written by Keynes gave the theoretical underpin to the New Deal of the Roosevelt's administration. It argued that there can be a shortage of demand, effectively banished Say’s Law of markets, and established the responsibility of government in Aggregate Demand management through the use of fiscal and monetary policies. Keynes argued that adjustment to a new full employment equilibrium is not automatic, and that wage cuts as the remedy for the problem of unemployment as advanced by the classical economic view was self-contradictory as this would in his view reduce aggregate demand, reinforcing deflationary pressures.

Regarding the most established and asked economist Keynes is the first preferred because of the realistic attitude of his writings.