Classical
economics, usually thought to date from the publication of Adam Smith’s “The
Wealth of Nations” in 1776 and extending through about 1870, is the first modern
theory of economics. Like modern, or {neoclassical economics}, it uses the
principles of supply and demand to explain the price of goods, the level of
output and the distribution of income in markets. Classical economists
determined that national income could be measured using three variables: wages,
rent and interest. According to this view, the interconnection between those
variables determines the natural price of goods and services.