Classical Political Economy And Neo-Classical Economics

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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.
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In classical economics, equilibrium occurs when savings are equal to investment. In neoclassical economics, equilibrium occurs at the intersection point of the supply and demand curves or in macroeconomics, aggregate supply and aggregate demand curves.
Classical economics is not rational where as Neo Classical economy is Rational and Individuals have rational preferences that guide their purchasing and selling behaviour.
Classical economics define profit as that which is accumulated by the firms which are the wages for workers, economic benefits brought on by the invisible hand of the free market.
2. Theory of Value and Surplus Value
Answer: Theory of Value: The major thinkers and writers on the topic of theory of value are Adam Smith, David Ricardo and Karl Marx. The three of them had very similar ideologies on the theory of value, and based value on
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Adam Smith did not say that this was an absolute rule but rather a principle. He accepted legal control over interest rates, state administration of Post office, control over the issue of paper money by bankers, compulsory elementary education and so on.
The critic of the laissez-faire is that it leads to inequality within a society as with the increase in population and increase in demand for food the rent would increase. This would leave the landlords with the freedom to keep increasing the rent and thus the resource of land becomes something unequally distributed.

Malthus theory of Population
Malthus in his book “Essay on the Principles of Population” for the first time proposed a systematic theory around growth of

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