Classical Vs. Neoclassical Theory - 1846 Words

Value is a concept that has played a major role in the development of political economy and mainstream economics, however, in today’s context it is not often discussed. This being true, the debate surrounding value and how to define it remains an important one for today’s society. The debate when looked at from the classical and neoclassical perspective centres on whether value is inherent or whether it is an outcome of human desires, comparing Ricardo’s labour theory of value and Smith’s adding up theory with the neoclassical school’s focus on demand and supply, marginal utility and equilibrium price given maximising individuals. The classical model, especially with its focus on scarcity is strong, however, it is the neoclassical argument that is most relevant today as it complements the highly globalised and technological economy of the present day. Classical Political Economic theory can be traced back to the late seventeenth century, when demand for commodity production was rapidly increasing. Following 1670, Sir William Perry came close to defining the â€Å"exchange value of a commodity by the amount of labour needed to produce it.† Richard Cantillon went beyond this by separating the intrinsic value of a commodity, being the labour and land needed to produce it from its market price. This resulted in the foundation for Adam Smith’s Wealth of Nations where he developed three distinct methods for determining a commodity’s true value. The First, reflected Petty’sShow MoreRelatedThe Loving and Caring Manager: A Neoclassical Approach to Management581 Words   |  2 Pagesdrive progress through an internal satisfaction of accomplishment. 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