Adam Smith, Thomas Malthus, and David Ricardo are classical economists whose discoveries in the late eighteenth and early nineteenth century made a great impact on economics to this day. Adam Smith is considered by many to be the father of modern economics. He is best known for his groundbreaking book, An Inquiry into the Nature and Causes of Wealth of Nations, published in 1776. In this book he described the workings of a market economy, the division of labor in production, the nature of wealth in relation to money, the inability of governments to manage money, and the difference between productive and nonproductive labor. Smith believed that economic regulations from the government were pointless because the market would take care of itself. The reason the market works is because there is competition between people looking out for their own best interests.
Competition results from supply and demand. If there is a demand for an item there will be people willing to produce (supply) it and therefore make a profit to feed their own self-interest. Competition is what regulates people from their self-interest, keeping prices low and consumers coming back. The law of the market not only regulates prices but the amount of items being produced, as well as the incomes of those contributing to their production.
Fundamentally, Adam Smith discovered in the mechanism of the market a self-regulating system which provides for society s orderly provision (Heilbroner 49).
Smith believed that the market had the ability to regulate itself and guide the system to its best advantage. This works only if it was left alone the formation of monopolies or government control would inevitably destroy it. Thomas Malthus, another classical economist, believed that if people are not first killed off by war, famine, or disease some must starve to death. This is because the population rises much faster than the supply of food (Bag 168).
DEMAND SCHEDULE A table that shows the relationship between the price of a good and the quantity demanded represents the amount of some good that a buyer is willing and able to purchase at various prices. In economics, it is a table of the quantity demanded of a good at different price levels. Thus, given the price level, it is easy to determine the expected quantity demanded. This demand schedule ...
Those which die of starvation will obviously be poor.
He believed that eventually the amount of people on the earth would strip out all the resources for food. This was not a very uplifting observation and because of Malthus, economics became to be known as the dismal science (Heilbroner 71).
David Ricardo s theories were not any more optimistic. He wrote about the world as it was then in Principles of Political Economy in 1817. The earth to him was a dreadful place were workers dipped just above or just below the starvation line. If wages were higher, population rose and wages fell until the cycle repeated itself.
Capitalists were only out to accumulate, so any profits acquired were promptly reinvested. The landlord was the only one who gained anything (although from the expense of others).
His income was not determined by population or competition, but by the power of his land. Thomas Malthus and David Ricardo succeeded in changing the world from an optimistic one to a pessimistic one. Aside from the fact that many would die due to overpopulation, the time spent here is a gloomy state where the worker just barely subsisted, where the capitalist was cheated of his efforts, and where the landlord gloated over his unearned and constantly growing spoil (Heilbroner 94).
All this came about after the hopeful prospects of Adam Smith and his Wealth of Nations.
Works Cited: Bagby, Wesley. Introduction to Social Science and Contemporary Issues. Chicago: Nelson Hall Publishers, 1995. Heilbroner, Robert L. The Worldly Philosophers.
New York: Simon and Schuster, 1953.