capitalism

Classical Economics 71
attorney in New York and Los Angeles, opposed the Vietnam
War while remaining a Republican, but when President
Richard Nixon imposed wage and price controls in 1972, he
joined the Libertarian Party and quickly became a member of
its national committee and California State Chair. In 1978, he
stood as the Libertarian candidate for governor of California,
winning 377,960 votes, or about 5.5% of the total cast. That
success led to his selection as the party’s 1980 presidential
nominee. Along with running mate David Koch, a businessman
who made large contributions to the campaign, he
appeared on all 50 state ballots and that of the District of
Columbia, an unprecedented achievement for a third-party
campaign. A close election between Jimmy Carter and
Ronald Reagan and the presence on the ballot of independent
John Anderson may have depressed the party’s chances, and
Clark received 920,000 votes (about 1.1%). Although the
campaign was successful in some ways—it had gained
respectful, if not plentiful, media attention, inspired some
300 Students for Clark organizations, distributed hundreds of
thousands of copies of its campaign book, and placed no less
than 47 five-minute ads on national television—the results
were disappointing. Following the 1980 campaign, many of
Clark’s key supporters appear to have lost interest in the
party, and a number of them drifted away. Clark remains an
active Libertarian, and his wife, Alicia, served as national
chairman from 1981 to 1983.
See also Conscription; MacBride, Roger Lea; Peace and Pacifism;
Price Controls
Further Readings
Clark, Ed. A New Beginning. Ottawa, IL: Caroline House, 1980.
Doherty, Brian. Radicals for Capitalism: A Freewheeling History
of the Modern Libertarian Movement. New York: Public
Affairs, 2007.
Kelley, John L. Bringing the Market Back in: The Political
Revitalization of Market Liberalism. New York: New York
University Press, 1997.
CLASSICAL ECONOMICS
DB
Classical economics refers to a school of economics, the
most famous proponents of which were Adam Smith, Jean-
Baptiste Say, David Ricardo, and John Stuart Mill. Writing
from the end of the 18th to the middle of the 19th centuries,
they shared an approach to economic questions that
embraced market-oriented principles that were to revolutionize
and transform Western civilization. The classical model
of free trade, limited government, balanced budgets, the
gold standard, and laissez-faire shaped orthodox economic
thinking and was accepted by all nonsocialist economists
until the Keynesian revolution of the 1930s. Today, the economic
model put forward by these thinkers is again gaining
popularity.
Adam Smith (1723–1790), one of the most important
figures of the Scottish Enlightenment, is considered the
founder of the classical model. He dubbed it “the system
of natural liberty” in his magnum opus, The Wealth of
Nations. Published in 1776, The Wealth of Nations was a
declaration of economic independence against the prevailing
doctrines of protectionism and state interventionism.
Little progress had been achieved over the centuries
because of the entrenched system known as mercantilism.
The commercial and political powers believed that one
nation gained only at the expense of another and therefore
favored government-authorized monopolies at home and
supported colonialism abroad, sending agents and soldiers
into poorer countries to seize gold and other precious commodities.
Smith carefully delineated the host of high tariffs,
duties, quotas, and regulations that aimed at restraining
imports, production, and employment.
Smith denounced high tariffs and other trade restraints
as counterproductive. Trade barriers hurt the ability of both
countries to produce, he maintained. For example, by
expanding trade between Britain and France, traditional
enemies, both nations would gain: “If a foreign country can
supply us with a commodity cheaper than we ourselves can
make it, better buy it of them.” Smith’s solution to the economic
nationalism and isolationism that then prevailed was
regarded as particularly controversial. It involved the free
movement of labor, capital, money, and goods. Milton
Friedman has noted that “Adam Smith was a radical and a
revolutionary in his time—just as those of us who preach
laissez faire are in our time.” Critics contended that Smith’s
radical suggestions would lead to economic disaster and
instability. To the contrary, Smith promised that the dismantling
of the state regulation of trade, prices, and
employment would lead to “universal opulence which
extends itself to the lowest ranks of the people.”
His eloquent advocacy of natural liberty fired the minds
of a rising generation. The Wealth of Nations literally
changed the course of politics, dismantling the old mercantilist
doctrines of protectionism and poverty. This revolution
in economic policy was a fitting companion to the
American Revolution of 1776 and accelerated the industrialization
of Britain, then in its infancy.
The invisible hand, a term first used by Smith, best
exemplifies his model of economic freedom. In The Wealth
of Nations, Smith argued that if individuals were left to
their own devices, pursuing their own self-interests, they
would generate a self-regulating and highly prosperous
society. George Stigler calls Smith’s invisible-hand doctrine
the “crown jewel” of economics. “Smith had one
overwhelmingly important triumph,” Stigler continued.