Friday: Economics
Which economic theory argues that, in the long run, markets tend to naturally adjust to full employment without the need for government intervention?
Make Your Pick!
Hint: This school of thought draws from Adam Smith's "invisible hand" idea and was dominant before the Great Depression.
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Classical economics is a school of thought that emerged in the 18th and 19th centuries, primarily associated with economists like Adam Smith, David Ricardo, and John Stuart Mill.
It argues that markets are self-regulating and that prices, wages, and interest rates adjust naturally to restore equilibrium in the face of economic shocks. A core belief is that supply creates its own demand—a principle known as Say’s Law. Classical economists assume that in the long run, full employment will be achieved without government intervention. This contrasts sharply with Keynesian economics, which holds that active policy measures may be necessary to manage demand, especially during recessions.
The classical view lost prominence after the Great Depression, when massive unemployment persisted despite no market correction. That paved the way for Keynesian ideas to gain traction. However, classical concepts still underpin many modern economic models and debates around the role of government in the economy.
