They were aware that their theories didn't make sense after a certain point. But they were a damn sight better than the theories before them, which is generally the point.

In fact, as a rule, the greats knew perfectly well the limits of what they were doing. It's the second class idiots that followed on that extrapolated beyond the limits of the theory to get nonsensical results. The originators were often addressing a particular problem: zero-sum thinking being a key one.

Not exactly. I have been meaning to write a diary about it but 1) I don't have my Adam Smith handy; and 2) I have had trouble pinpointing nice quotable paragraphs by J S Mill. But, in fact, J S Mill did envision ways out of the bleak "end state of capitalism" mostly involving population control and universal education. You see, they were all Malthusian, and they had a lot of common sense and little math, unlike the marginalists that came immediately after J S Mill (and not to speak of the neoclassical twats we got after WWII).

Think also of an analogy with the "heat death of the universe". That was a late 19th-century obsession that I don't think necessarily follows from modern understanding. But that is not to say that the thermodynamics of Boltzmann was wrong: it's the rest of his physics and cosmology that was incomplete. Similarly, I don't think a lot of what the classical economists were saying about the way an economy works was wrong. They just imagined a limited number of possible social/political/economic organisations consistent with liberalism, and except for J S Mill I think none of them saw much hope. In addition, their writings (especially those of Smith and Ricardo) were descriptive, not prescriptive. J S Mill was concerned with ethics and so he read completely differently.

"It's the statue, man, The Statue."

Sounds like the ultraviolet catastrophe or the instability of atoms in 1890's physics. The Deus ex machina came from quantum mechanics. By this I mean that sure, economic theories, like any good model, have a limited domain of applicability. There are three reactions to the "bleak end state of capitalism". One is to postulate a Deus ex machina [the cornucopian view that the market will provide], another is to accept the conclusion and do nothing, and a third is to accept the conclusion but try to imagine changing the premises, which in the case of economics is easier than in the case of physics since human organisation is not a law of nature (though it does operate within them).

"It's the statue, man, The Statue."