Classical Political Economy

Economic Approaches:

Key assumptions and aspects:

  • Main concern: The wealth of nations
  • Economies are made up of: Classes
  • Human beings are: Selfish (in class terms), but also have moral sentiments
  • Economies change through: Capital accumulation and the division of labour
  • Favoured methods: Abstraction and reason
  • Typical policy recommendations: Free markets and free trade

With the rise of capitalism, classical political economy arose at the end of the 18th century to understand how it was possible that through private ownership and markets, goods and services were provided to people. Classical political economists systematically analysed the economy by looking at the tendency of markets to move towards equilibrium and the power struggles between landowners, capitalists and workers. They argued that labour is the source of all value in opposition to physiocracy, with its focus on agriculture, and mercantilism, with its focus on exports, money and extraction. Based on the labour theory of value, most classical political economists argued for free trade and free markets. After being highly influential during the 19th century, classical political economic thought moved to the background of economic thinking in the 20th century.


  • Economics: The User’s Guide by Ha-Joon Chang, 2014, chapter 4.
  • A Companion to the History of Economic Thought by Warren J. Samuels, Jeff. E. Biddle & John B. Davis, from 2003, chapters 7-9 & 11. 
  • Understanding ‘Classical’ Economics: Studies in Long Period Theory By Heinz D. Kurz & Neri Salvadori, from 1998.
  • Classical Political Economy: A Survey of Recent Literature by William O. Thweatt, from 1988.