Difference between classical theory and modern theory

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Offline Shah Alam Kabir Pramanik

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Difference between classical theory and modern theory
« on: April 11, 2017, 10:03:02 AM »
Modern theory is basically an improvement over classical theory. There are some difference between classical theory and modern theory those theory identify modern theory as a superior position over classical theory. These differences are given as follows:
1. Basis of theory: modern theory seeks to explain the phenomenon of international terms of general theory of value. On the other hand, the classical theory seeks to explain the phenomenon of international terms of labour theory of value.
2. Necessity of a separate theory: The classical theory asserts that there is a need for a separate theory of international trade. On the other hand, the modern theory asserts that there is no need for a separate theory of international trade.
3. Realistic: The modern theory is more realistic than the highly abstract classical theory. Because, the modern theory is the multiple market theory of pricing.
4. Existence of factors of production: The modern theory recognizes the existence of all factors of production (land, labour, capital, organization). But the classical theory takes into account only one factor of production that is labour.
5. Part of the economics: The modern theory can be said as the part of positive economics. On the other hand, the classical theory can be said as the part of welfare economics.
6. Acceptability: The modern theory is more acceptable than the classical theory because the modern theory laid emphasis on all the factor of production whereas the classical theory laid emphasis on the quality of a single factor labour.