Classical Vs Neo Classical Economics Essay

I. Write a short essay on any Two of the following

1. What are the differences between Classical Political economy and Neo classical Economics?

Answer: Classical Economics refers to work done by economists during the 18th and

19th centuries. Most of the work was done around the concept of how market economics worked and then later on further work was done on the classical economics and the concepts were updated and altered to answer the critics of the classical school of thought and this was called as the Neo Classical Economics, the word Neo means New. Adam Smith in his book “An Enquiry into the Wealth of Nations” – 1776 provided the start for this modern school of thought around economics which was termed as Classical Political Economics.

According to Adam Smith division of labour and specialization are sources of development which is process of dividing economic activity into different act so the factor of process dividing by skill, ability and knowledge. Smith believed specialization leads to invention and innovation, it gives authority to speak about deal, specialization therefore increase the efficiency of doing thing so thus productivity increase which leads to development, which also leads to

Adam Smith was the first economist to support this approach in a very strong way. He said that if individuals are left to themselves they will naturally tend to act in a way that is for the good of the society as a whole. This he said was led by an invisible hand, which he believed the interests of an individual coincided with the interests of the society. Adam Smith believed that government always spent money always more than necessary and hence they should have minimum role in economic affairs. He said the state should perform only 3