Table of contents:
- Smith’s most famous theory is his “The Wealth of Nations” entitled “The Wealth of Nations”, but his first major treatise, “The Theory of Moral Sentiments,” released in 1759 created many of the ideas that are still practiced today. . Some may be surprised to learn that in this book, Smith, known as the “Father of Capitalism,” discusses charity and human ethics extensively in this first book. While much of the philosophy behind Smith’s work is based on self-interest and maximizing returns, “Moral Sentiment Theory,” is a treatise on how human communication depends on sympathy. This book extensively explores ideas such as morality and human sympathy. In the book,
- The Wealth of Nations
- In short, Smith argued that division of labor and specialization produced wealth. “This is a great multiplication of the production of all different arts, as a consequence of the division of labor, which is sometimes, in well-governed societies, universal luxuries that extend to the lowest ranks of the people,” states Smith in “The Wealth of Nations”.
Adam Smith was an 18th-century philosopher who is well known as the father of modern economics, and was a major proponent of laissez-faire economic policies. In his first book, “Moral Sentiment Theory,” Smith proposed the idea of the invisible hand – the tendency of free markets to organize themselves through competition, supply and demand, and self-interest. Smith is also known for his theory of differential wage compensation, meaning that dangerous or unwanted jobs tend to pay higher wages to attract workers to these positions, but he is best known for his 1776 book: “The Demand for Nature and the Causes of the Wealth of Nations . ”
The recorded history of Smith’s life begins on June 5, 1723, at his baptism in Scotland; However, the exact date of birth is undocumented. Smith attended the University of Glasgow at the age of 14, then attended the prestigious Balliol College at the University of Oxford. He spent years teaching and tutoring, publishing some of his lectures in the 1759 book, “The Theory of Moral Sentiments.” The material was well received and laid the groundwork for the publication of “An Inquiry into Nature and the Causes of the Wealth of Nations,” (1776), which would ultimately solidify its place in history.
Smith’s most famous theory is his “The Wealth of Nations” entitled “The Wealth of Nations”, but his first major treatise, “The Theory of Moral Sentiments,” released in 1759 created many of the ideas that are still practiced today. . Some may be surprised to learn that in this book, Smith, known as the “Father of Capitalism,” discusses charity and human ethics extensively in this first book. While much of the philosophy behind Smith’s work is based on self-interest and maximizing returns, “Moral Sentiment Theory,” is a treatise on how human communication depends on sympathy. This book extensively explores ideas such as morality and human sympathy. In the book,
While this seems to contradict his economic view of the individual seeking to better himself by disregarding the common good, the idea of an invisible hand helping everyone through centered self-centered work makes up for this apparent contradiction.
The Wealth of Nations
Smith’s 1776 work, “A Inquiry into Nature and the Cause of the Wealth of Nations,” also abbreviated as “The Wealth of Nations,” documents the development of industry in Europe. While critics note that Smith did not come up with many of the ideas he wrote, he was the first to compile and publish them in a format designed to explain them to the average reader of the day. As a result, he was responsible for popularizing many of the ideas that supported the later school of thought. known as classical economics.
Other economists built on Smith’s work to reinforce classical economic theory, which would become the dominant school of economic thought through the Great Depression. Laissez-faire philosophies, such as minimizing the role of government intervention and taxation in the free market, and the idea that the “invisible hand” guides supply and demand are among the main ideas Smith had to promote. These ideas reflect the concept that each person, by looking out for himself, is inadvertently helping to create the best possible outcome for all. “It is not from the kindness of the butcher, the brewer, or the baker, that we can expect from our dinner, but from their desire for their own benefit,” wrote Smith.
By selling the products people wanted to buy, butchers, beer and bakers hoped to make money. If they are effective in meeting the needs of their customers, they will enjoy financial rewards. While they are involved in their endeavor to earn money, they also provide products that people want. Such a system, Smith argues, creates wealth not only for butchers, beers, and bakers, but also for the nation as a whole when it is populated by citizens who work productively to improve themselves and meet their financial needs. Likewise, Smith notes that a man will invest his wealth in the company that is most likely to help him obtain the highest rate of return for a given level of risk. Currently,
“The Wealth of Nations” is a large work consisting of two volumes divided into five books. The idea being promoted generated international attention and helped drive the movement from land-based wealth to wealth created by division-driven methods of assembly production. One example Smith cited involved the work required to make a pin. One person doing the 18 steps it takes to complete a task can be done except for a handful of pins each week, but if 18 tasks are completed in assembly mode by ten people, production will shift to thousands of pins per week.
In short, Smith argued that division of labor and specialization produced wealth. “This is a great multiplication of the production of all different arts, as a consequence of the division of labor, which is sometimes, in well-governed societies, universal luxuries that extend to the lowest ranks of the people,” states Smith in “The Wealth of Nations”.
Adam Smith Invented the Concept of GDP
Finally, through the ideas presented in “The Wealth of Nations,” Smith transformed the import / export business, created the concept of what is now known as gross domestic product (GDP) and argued for free exchange.
Prior to the release of “The Wealth of Nations”, countries declared their wealth based on the value of their gold and silver deposits. However, Smith’s work was critical of mercantilism; He argued instead that countries should be evaluated based on their levels of production and trade. This sentiment creates the basis for measuring a country’s prosperity based on a metric called GDP.
Prior to Smith’s book, countries were hesitant to trade with other countries, unless in their favor. However, Smith argues that free exchange must be created, because the two sides are trading better off. This led to an increase in imports and exports and the country judged its value accordingly. Smith also debated limited government. He wants to see government hands off and conducive laws opening up free markets. Smith does see government as responsible for several sectors, however, including education and defense.
Base Line
The ideas attributed to Smith became the foundation of the classical school of economics and earned him a place in history as the father of economics. Smith’s concepts that he pioneered, such as the invisible hand and the division of labor, are now classical economic theories. Smith died on July 19, 1790, at the age of 67 but the ideas he promoted took place in the form of contemporary economic research and institutes such as the Adam Smith Institute. In 2007, the Bank of England put its image at £ 20.
