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Classical political economy is the phase of economics from the late eighteenth century to the second half of the nineteenth century since Adam Smith. In addition to Smith, as the founder, its other key members include David Ricardo, Jean-Baptiste Say, William Senior, John S. Mill, Karl Marx and John Cairnes. Classical political economy is defined as the science of the production, distribution, exchange and consumption of wealth. It is divided into two intertwined branches: pure economics as the theory of the market economy and social economics or economic sociology as an analysis of the social-institutional conditions of the economy, including markets.
Classical political economy’s perspective on economic sociology examines the influence of social conditions on economic life. In particular, it emphasizes that social institutions greatly affect the economy. Smith identifies certain political and legal institutions that ameliorate the ”public welfare,” such as civil government tending either to ”promote or to disturb the happiness both of the individual and of the society.” Say proposes the state can supply a ”powerful stimulus” to individual economic activities and well-being. Senior recognizes that the ”peculiar institutions of particular Countries,” including slavery, legal monopolies, and poor laws, condition wealth distribution. Mill considers wealth distribution a ”matter of human institution only” in virtue of its dependence on the ”laws and customs of society,” while characterizing private property as the ”primary and fundamental” institution which underpins the ”economic arrangements of society.” Both Smith and Mill recognize that prices and markets are subject to institutional and political influences, including the ”influence of fixed customs.”
Classical political economy also analyzes the class structure of the economy. Smith identifies ”different ranks and conditions of men in society,” specifically ”three great, original, and constituent orders of every civilised society” such as landowners, workers, and capitalists. He finds that ”whenever the legislature attempts to regulate the difference between masters and their workmen, its counselors are always the masters.” Ricardo regards wealth as distributed among ”three classes of the community” and discovering the laws of its distribution as the ”main problem” of political economy. For Marx, class – property relations form the ”economic structure of society – the real foundation, on which legal and political superstructures arise and to which definite forms of social consciousness correspond.”
Classical political economy also examines the social conditions of production and consumption, such as the impact of the division of labor on economic productivity. In a famous statement, Smith states that the division of labor generates the ”greatest improvements” in productivity and individuals are ”at all times in the need of cooperation” in civilized society. Generally, Cairnes acknowledges that social (and natural) conditions operate as the causes of the production and distribution of wealth. Further, Marx defines material production as a ”social relationship” between workers and owners establishing ”definite social and political relations” and showing that a certain ”mode of production” relates to a certain ”social stage.” In particular, Marx redefines economic capital as a ”social relation of production,” such as ”a relation of production of bourgeois society.” Some classical economists also recognize the social and cultural conditions of human preferences or tastes and wants and their variety and change. Mill suggests that ”a plurality of motives,” not just the ”mere desire of wealth,” motivates economic actors and their actions. Cairnes identifies both the variety of motives and their social conditions in that the ”desires, passions and propensities” motivating actors in their pursuit of wealth are ”almost infinite” and ”may be developed in the progress of society” (invoking the effect of customs on ”modifying human conduct”). Marx traces human wants and pleasures to the process of societal formation and historical evolution in that they have their sources in society endowing them with a social nature.
- Marx, K. (1967)  Capital. International Publishers, New York.
- Mill, J. S. (1884)  Principles of Political Economy. Appleton, New York.
- Ricardo, D. (1975)  Principles of Political Economy and Taxation. Cambridge University Press, Cambridge.
- Say, J. (1964)  A Treatise on Political Economy. Kelley, New York.
- Smith, A (1976)  An Inquiry into the Nature and Causes of the Wealth of Nations. Clarendon Press, Oxford.