I. Introduction

The distinction between New Classical Economics and the traditional Classical Economics is a profound one that spans centuries of economic thought. While New Classical Economics seeks to reframe economic value creation, Classical Economics maintains a traditional hierarchy in value generation. This article explores the historical context, key figures, and philosophical underpinnings of these two economic theories to elucidate their differences and implications.

II. Classical Economics: The Foundational Framework

Classical Economics, famously championed by Adam Smith, Thomas Malthus, David Ricardo, and others, laid the groundwork for modern economic thought. According to classical economists, true value creation lies in agricultural and industrial sectors (primary and secondary economies). The tertiary sector, often seen as parasitic, was deemed to create value indirectly through service jobs that rely on the prosperity of the primary and secondary sectors.

Before the rise of classical economists, Physiocratism (often associated with economists such as Fran?ois Quesnay) posited that agriculture was the sole source of value. The idea was that natural elements such as sunlight and soil, which were divinely bestowed, created wealth. This view was a significant departure from the medieval belief that gold and silver were the only sources of value.

III. The Emergence of New Classical Economics

New Classical Economics, as a contrast to the classical tradition, challenges the traditional hierarchy by emphasizing the role of knowledge, creativity, and the tertiary sector. Advocates of New Classical Economics argue that value is created where added value is added. This includes services and intangible assets, which are central to modern economies. The rise of New Classical Economics can be traced to the 20th century thinkers like John Stuart Mill and Henry Carey, who criticized the traditional view of the tertiary sector.

The Classical School viewed protectionism and human creativity with suspicion. Figures like Richard Cobden and Joshua Gee were instrumental in organizing the repeal of the corn laws, which had significant socioeconomic impacts. Their actions, however, were rooted in a belief that free trade would benefit the British economy at the expense of other nations.

IV. Critiquing the New School and Classical School

Today, New Classical Economists often use environmental and return on investment (ROI) metrics to determine the viability of economic activities. This modern approach lacks the historical and cultural depth of the classical tradition. On the other hand, the Classical School recognized the potential of human creativity and innovation, a factor that is often overlooked in contemporary economic theory.

Key figures like Adam Smith, who advocated for open trade, and Henry Carey, who critiqued the New School, understood the complex interplay between economic policies and societal well-being. The New School often fails to engage with the nuanced arguments of the Classical School, instead resorting to simplified economic models that undermine the rich tapestry of classical economic thought.

V. Conclusion

The Classical School and New Classical School represent two distinct approaches to economic thought. While the New Classical School focuses on modern metrics and added value, the Classical School emphasizes human creativity, innovation, and the interconnectedness of economies. Understanding these differences is vital for developing comprehensive economic policies that respect the complex dynamics of modern economies.

Key Points to Remember:

Classical Economics: Agricultural and industrial value creation New Classical Economics: Emphasis on knowledge, creativity, and added value Key Figures: Adam Smith, Richard Cobden, Henry Carey, John Stuart Mill Key Concepts: Protectionism, Human Creativity, Added Value