Why did Classical economists assume full employment situation in the economy?

Question

In classical theory, full employment implies that all persons willing to work at the preaviling wage rate will find employment, and the only possible state of unemployment would be frictional displacement, that happens between two jobs. Basically, they were assuming that in the long-run, there was full employment of resources. I understand that assumptions are important in economics, and this particular statement is the basis for many theories. My question is.. It must have been very obvious to these economists that full employment was NOT preavailing in the economy. YET they chose to disregard the truth, and build their thoeries on unreal assumptions, thus creating models that are useless and irrelevant in the real world. What were the implications of this assumption on classical theory? What justifies, if anything does at all, the attempt to create a body of knowledge that has very limited applacation?

Answer 1

Full employment of labor was assumed because of another assumption - full employment of all resources. This was part of the stipulation of a market economy, that in a market all resources are used and nothing is wasted.

This has been qualified SIGNIFICANTLY in the past 150 years - Walrus, Keynes, then Stiglitz. The understanding now is that, in a pure market with full information and zero transaction costs, all factors of production (including labor) are employed at their marginal product.

Which also means there should be some unemployment, but you already know that.

Like the first answer said, economics theories (and most other theories, for that matter) start out with assumptions which are then built upon and amended as one needs to illustrate specific points, or simply create a more accurate example.

Answer 2

Many theories in economics are initially built on unreal truths. Economist tend to start with keeping all variables at an optimal level, in this case full employment, and run models to test their theory. Then they begin to relax one variable at a time and test the outcomes. Many times they find that the initial model was crap and they move on and sometimes they find some use in the model and they build from there.

Answer 3

Because that was the reality they saw. In 1700s and 1800s, economies responded to downturns by declining wages, not by increasing unemployment. This began to change, first in England around 1840, then in other countries. Classical econoimies turned Keynesian one by one...

Answer 4

we learn the simple theories and then they start complicating things..your right it has nothing to do with reality..but yet in reality there are thousands of assumptions...if we wanna build the model..it would be impossible!!!
However, whenever u come to learn something new u learn the very simple theories..and then u start to "grow up"!!
u won't study at university if didn't learn the basic of 1st to 12th grade!!