Political Economy

Political economy was a term widely used from the late 18th century to the end of the 19th to designate the comprehensive study of economic activity in its relationship to public policy, custom, and law. With the great 19th-century advances in economics (including partial and general equilibrium theory and marginal utility theory) came considerable specialization and formalization, and by the early 20th century, the more general field of political economy had split into economics on the one hand and political science on the other.

The term classical political economy refers to a (predominantly British) subset of the works of political economy. Classical political economy was social theory at its grandest. The classical political economists combined comprehensive views of economic progress—and all its attendant complications and discontents—with arguments about the legitimacy and role of government and about the basis of individual and social morality. They were the last great generalists in the Western tradition.

Exactly whose work is properly placed within the classical school is a subject for much academic debate, but its core figures certainly include its widely acknowledged founder, Adam Smith (1723–1790); its greatest and most influential theorist, David Ricardo (1772–1823); and its consolidator and clarifier, John Stuart Mill (1806–1873), who came to believe late in [Page 1606]his life in the consistency of classical economics with socialist policies. Karl Marx (1818–1883), who coined the term classical political economy, regarded himself as both an inheritor and a critical reformer of this great tradition. That the classical political economists are sometimes referred to as “Ricardians” or “classical Ricardians” speaks to the centrality of Ricardo's thought to the school.

Precursors to the classical system include the French physiocrats Richard Cantillon (1680–1734), François Quesnay (1694–1774), and A. R. J. Turgot (1727–1781), from all of whom Smith borrowed extensively, and Smith's friend, the Scottish philosopher and historian David Hume (1711–1776), whose essays “On Money” and “On the Balance of Trade” informed classical monetary policy. Ricardo's closest disciples, who continued to advance his doctrine after his death, were James Mill (1773–1836), J. R. McCulloch (1789–1864), and Thomas de Quincey (1785–1859). Jean-Baptiste Say (1776–1832), J. C. L. Simonde de Sismondi (1773–1842), and T. Robert Malthus (1766–1834) were, in different ways, both in competition with and in the orbit of the classicals. Henry Fawcett (1833–1884), John E. Cairnes (1823–1875), and the great moral philosopher Henry Sidgwick (1838–1900) continued to promote the classical doctrine to the end of the 19th century—even as the “marginal revolution” and other economic advances were beginning to consign it to the pages of history.