The End of a Classical Economics

In this chapter, we review some of the most important contributions of some of the remaining classical scholars. Many of these scholars began to diverge from fundamental classical thought laid down by Smith, Malthus, and Ricardo, and began to formulate ideologies that were not always in agreement with one another, especially with regard to value theories based on either labor or utility and also on what modifications were need to curb capitalism's adverse effects. Despite their differences, the contributions made by each of these scholars were significant in the development of future economic thought.

There were five main features of capitalism that most supporters agreed with. They are of sufficient importance that we will briefly review each of them.

First, atomistic individualism and egoistic self-interest were the basic nature of human beings that participated in capitalism. As division and specialization of labor tended to isolate producers from the whole production process, individuals would become disintegrated from society and become an isolated, independent, egoistic, and lonely human beings working in a very impersonal market and society.

Second, because human nature is largely competitive and egoistic, each human being sought to achieve pleasure and avoid pain. This belief was the basis for the utilitarian theory established by Jeremy Bentham.

Third, markets are universally beneficial social institutions that enabled everybody to be better off, providing markets functioned competitively and without intervention. Universal dependence on markets was unavoidable and a necessary condition for the establishment of the social harmony of all individuals' interests. In other words, as individuals increasingly depended on competitive markets, the "invisible hand" (Adam Smith's term) would guide self-interested action toward social harmony and solve any problems, including class conflicts.
Fourth, the creation and accumulation of capital and creation was a necessary prerequisite for the capitalism's survival. Productivity improvements made possible through the process of specialization promoted further capital accumulation. Some productive capacity should be devoted to producing new tools and machines, and the capitalist class should own those means of production so that capitalists can use increased profits to finance new capital accumulation.

Fifth, all human decisions were rational because each individual in a market intentionally made choices based on acquiring the highest benefits possible from those choices. In other words, all human beings participating in the market made an effort to calculate or predict the best outcome for themselves prior to making a decision.

This chapter has been organized by first presenting three economists, Bentham, Say, and Senior, who laid down the basic philosophy for neoclassical ideology. The next two scholars, William Thompson and Robert Owen, who also lived during the same period, made significant contributions to socialist ideology. We close the chapter by discussing contributions made by Thomas Hodgskin, Frederic Bastiat, and John Stuart Mill.