Classical Economic theory was developed shortly after the birth of western capitalism. It is based on the idea that the market is self-regulating and the government should only intervene in times of crisis. Classical economics is also based on the belief that there are four classical parameters that determine economic growth, namely, land, labor, capital, and entrepreneurship. Just as important is the idea that the economy is made up of two sectors, namely, the production sector and the distribution sector. The production sector is where goods and services are actually produced. The distribution sector is where the goods and services are distributed for sale.The basic idea of classical economic theory is that people act rationally within the economic system in pursuit of their material self-interest. It also assumes that if there are problems, they can be corrected within the context of the same economic system.
The classical parameters may be valid in a world of scarcity, but they are irrelevant in a world
of abundance.The laws that govern land and labor still apply. However, the laws that govern capital and entrepreneurship do not necessarily apply. In a world of abundance, namely, a world where technology has created new possibilities for production that did not exist in a world of scarcity, the role of capital and entrepreneurship becomes less important.The concept of profits falls into disrepute in a world of abundance. In a world of abundance, one person's profits do not come at the expense of another's losses. And the idea of capital as a scarce resource that must be invested becomes less important.An economic system based on scarcity is a negative sum game. One person's gain is another's loss. Therefore, the classical economic theory of profit exists in a negative sum game.In a world of abundance, however, an economic system based on abundance is a positive sum game. One person's gain does not come at the expense of another's loss. Therefore, the classical economic theory of profit does not necessarily exist in a positive sum game.
