Handbook on the History of Economic Analysis Volume II

Handbook on the History of Economic Analysis Volume II

Schools of Thought in Economics

Edited by Gilbert Faccarello and Heinz D. Kurz

Volume II contains entries on the major schools of economic thought and analysis. These schools differ with regard to their 'vision' of the working of the economic system, the major forces and interactions that shape its path, and the policy recommendations proposed. At any moment of time, several such schools typically compete with one another, striving for dominance within the economic and political discourse. Each Handbook can be read individually and acts as a self-contained volume in its own right. It can be purchased separately or as part of a three-volume set.

Chapter 9: British classical political economy

Christian Gehrke

Subjects: economics and finance, history of economic thought


The notion of a “classical political economy” was first used by Karl Marx in A Contribution to the Critique of Political Economy, where he related it to “the research carried on for over a century and a half . . . beginning with William Petty in Britain and Boisguilbert in France, and ending with Ricardo in Britain and Sismondi in France” (1859 [1970]: 52). It was given a more precise meaning in Marx’s manuscript on Theories of Surplus Value (1861–63 [1988]: 358), and in vol. 1 of Capital, where he observed that “by classical Political Economy, I understand that economy which, since the time of W. Petty, has investigated the real relations of production in bourgeois society, in contradistinction to vulgar economy, which deals with appearances only” (1867 [1954]: 85 n.). Marx referred to David Ricardo as “the last great representative of classical economics” (1867 [1954]: 24) – a view that was endorsed also by Joseph A. Schumpeter (1912 [1954]: 62–7) – and from his discussion in Theories of Surplus Value it is clear that he associated such well-known figures as John Ramsay McCulloch and John Stuart Mill, often regarded as the British classical economists par excellence, with the decline of classical political economy. A different characterization of “classical economics” is frequently used in the secondary literature, and accordingly a different demarcation also of the “classical” period: the latter is associated with (roughly) 1776–1848, placing at the centre of classical economics Smith, Ricardo, and John Stuart Mill. This definition, introduced by authors such as Cannan (1893) and Bonar (1894), and employed more recently, for instance, by Blaug (1987 [2008]) and O’Brien (1975, 2004), is based on an understanding of “classical economics” as an early and rude type of supply and demand analysis, with the demand side still in its infancy. However, this “Marshallian” interpretation of classical economic theory does not stand up to close scrutiny. As the reconstruction of the surplus approach to value and distribution, initiated by Piero Sraffa (1951, 1960), and then followed up in numerous contributions including, inter alia, Dobb (1972), Walsh and Gram (1980), Garegnani (1983, 1984, 1987), De Vivo (1984), Bharadwaj (1978), Aspromourgos (1996, 2009), and Kurz and Salvadori (1995), has clearly shown, there has been a distinctive alternative approach to the theory of value and distribution. Characteristic features of the classical approach are the determination of relative prices and income distribution from the following set of data: (1) the size and composition of the social product; (2) a given real wage rate; and (3) the available methods of production from which costminimizing producers can choose (see Kurz and Salvadori 1995: ch. 1)

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