Weekly essay 9. The classical political economy was developed between the 17th and 19th centuries.

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Weekly essay 9
The classical political economy was developed between the 17th and 19th centuries. It involved the study of economic forces in a particular state. It was mainly concerned with the changes in economic growth and tried to explain how people create wealth and destroy it. Moreover, it stressed the importance of unrestricted trade, laissez-faire, and free competition (Coy, 11). The classical liberty economy enhanced high productivity levels, which increased more employment opportunities that led to increased wages. Classical political economy was doing well in the 19th century, but at the start of the 20th century, it started to decline, and a new theory emerged known as neoclassical economics.
Neoclassical economics emphasized on the importance of cultural development. Neoclassical economists believed that human beings tend to be coherent utility-maximizing creatures by nature. Additionally, neoclassical economics was mostly used to describe how individuals tend to maximize their profits at the lowest costs possible (Coy, 7). Keynesian economics argues that the main driving force to the country's economy is the aggregated demand. Aggregated demand involves the total amount used to purchase goods and services by both the private and government sector (Fukuyama, 21). The spending process starts with production to the employment rates. Furthermore, the model argues that the total amount of spending determines the economic outcomes of a particular state. Thus decline in demand leads to an economic decrease in a country.
There are some differences between classical political economy and neoclassical economics. Firstly, classical economics believes that wages, prices, and rates are always flexible, and their markets are always clear. Thus, this indicates that this model assumes that the economy of a particular country is self-regulating (Lefeber, 39). Economists of this model believe that there is no unemployment since the growth of any business depends on the supply of production elements. On the other hand, neoclassical economics believes that individuals have rational expectations, and they work...