- noun economic theories about the role of labour in an economy which see the market as essential a means of distributing wealth between capitalists, landowners and labour. These theories did not see any possibility of recession or unemployment because it would be corrected by market forces. They theories are typified in the writings of Adam Smith, David Ricardo and John Stuart Mill.
- (written as Classical Economics)A view (model) of the economy in which all equilibrating variables like prices, wages, rents and interest rates are perfectly flexible, all resources are perfectly mobile and fully employed. No (sane) economist believes in the descriptive accuracy of such a state of affairs so the challenge (for sane economists), given the analytical tractability of these assumptions, is to exercise judgment wisely in deciding whether any particular instance can be helpfully modelled using such an abstraction. It is contrasted with the Keynesian approach, in which one or more of these assumptions is not maintained and the possibility arises that the economy can settle in an equilibrium state with high levels of resource (especially labour) unemployment.