Definition

Present-day dominant school of economic thought built on the foundation laid by the 18th century (classical) theories of Adam Smith (1723-90) and David Ricardo (1772-1823) refined by the 19th and 20th century theories of Alfred Marshall (1842-1924), Vilfredo Pareto (1848-1923), John Clark (1847-1938), and Irving Fisher (1867-1947). It is 'classical' in the sense that it believes competition leads to an efficient allocation of resources and regulates economic activity that establishes equilibrium between demand and supply through the operation of market forces. It is 'neo' in the sense that it departs sharply from the classical viewpoint in its analytic approach that places great emphasis on mathematical techniques. In opposition to Keynesian economics this school states that savings determine investment (not the other way round), and is concerned primarily with market equilibrium and growth at full employment instead of with the under-employment of resources. Not to be confused with new classical economics.

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