The below mentioned article provides an overview on the Classical Welfare Economics.

The classical economists did not develop any specific theory of economic welfare. The classical welfare economics relates to the sketchy ideas of Smith, Ricardo and J.S. Mill about increasing the wealth of a nation According to Prof. Hla Myint, the classical view about welfare is largely confined to the production of material wealth.

Smith explains real national income of a nation in terms of its physical output which is an index of its economic welfare. The real value of a commodity is its labour price being irksome and disagreeable. It is the division of labour which motivates labour to produce more. Smith associates increase in welfare with a reduction in the sacrifices required to produce more commodities.

A person’s wealth is measured by the value of a commodity produced by his own labour or his purchasing power over other men’s labour. The more labour the larger, the total product or the increase in real income leading to improvement in welfare. Thus welfare is a positive function of population growth. According to Smith, the most positive mark of prosperity in any country is the increase in the number of its inhabitants.


Smith believes in the working of the ‘invisible hand’, i.e., the automatic working of the market. Since every person maximises his own satisfactions due to the automatic working of the economic system, the satisfactions of the whole community are maximised.

Thus the motive of self interest embodied in the free market system maximises economic welfare by increasing the physical productivity of labour by adopting new techniques of production.

To maximise social welfare, Smith favours the increase in expenditure on such public works as highways, canals, bridges, harbours, etc. But he wanted that the greater part of expenditure on public works should benefit through toll taxes on their users and the remaining out of local revenue and general revenue.

According to Ricardo, a reduction in human effort per unit of output constitutes an improvement in welfare. Man-hours per unit of output are regarded as the measure of net national income. His idea about welfare is based on the terms ‘value’ and ‘riches’. By riches he means the size of physical output, more the riches, and more the real income.


On the other hand, ‘value’ varies inversely with the labour time required per unit of output. It is, therefore, an inverse index of the average productivity of labour and hence of economic welfare. Thus for Ricardo, welfare is a matter of minimising human effort per unit of output.

JS Mill does not also specify about economic welfare. However, economists have interpreted his view on the basis of his objections to the Factory Acts. To Mill, a reduction in working hours, keeping wages constant would inevitably reduce output per man and lead to unemployment.

He did not approve of Ten Hours Bill of 1842 This Bill excluded working women from factories, although women were free agents like men. Despite this opposition to the Bill, he argued for the need of giving legal assistance by affording every individual (businessman) a guarantee that his competitors will pursue the same course without which he cannot safely adopt it himself.