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The basis for classical economics forms Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776. Smith criticized mercantilism, advocating a system of free trade with division of labour. He postulated an "invisible hand" that regulated economic systems made up of actors guided only by self-interest. Karl Marx developed an alternative economic theory, called Marxian economics. Marxian economics is based on the labor theory of value and assumes the value of good to be based on the amount of labor required to produce it. Under this assumption, capitalism was based on employers not paying the full value of workers labor to create profit. The Austrian school responded to Marxian economics by viewing entrepreneurship as driving force of economic development. This replaced the labor theory of value by a system of supply and demand.

What idea did Adam Smith propose?
an "invisible hand"