Explain the main idea of the Classical school of economic th

Explain the main idea of the Classical school of economic thought

Solution

The central idea of the Classical school was that markets work best when they are left alone, and that there is nothing but the least role for government. The concept is firmly one of laissez-faire and there is a firm belief in the efficiency of free markets to do economic development. Markets should be left to work as the price mechanism acts as a powerful \'invisible hand\' to allocate resources to where they are best employed.

In terms of explaining value, the focus of classical thinking was that it was determined primarily by scarcity and costs of production.

In macro-economic terms, these economists assumed that the economy would always return to the full-employment level of real output by an automatic self-adjustment mechanism.