Adam Smith Essay Words | 7 Pages Early life Adam Smith was born to Margaret Douglas at Kirkcaldy, Scotland. His father, also named Adam Smith, was a lawyer, civil servant, and widower who married Margaret Douglas in His energy, talent, and sharpness of mind forever entered the history. Smith identified the general principles of the economy on the eve of the formation of industrial production. This paper aims to observe the phenomenon of Adam Smith and his contribution to the economy. Biographical Information Adam Smith Essay Adam Smith was a man of many achievements. As a Scottish philosopher and political economist he became famous by his classical and influential books. In he wrote a book called “The Theory of Mortal Sentiments”and in he wrote another called “An Inquiry to the Nature and Causes of the Wealth of Nations”
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Adam Smith more popularly knows as the father of Economics wrote The Wealth of Nations, which is believed to have laid the foundation of economic thought and led to emergence of various schools of economic thought. Smith was a lecturer at the University of Glasgow where his concern was morality and ethics, adam smith essay.
It would be fair to say that his views not only had an impact on the Europeans but also on those who mapped out the structure of the US government. According to John Farmer. Adam Smith and his legacy provide the conceptual space within which governmental and societal organization and management are now viewed and understood. The above clearly proves that Smith left a legacy and had an impact on the discipline of economics even though his intentions were not to create a ripple effect.
It has been argued that Smith did not aim to write just on economics, in fact, his writings focused around morality and economics. Amongst many things, Smith advocated that free exchange and competitive markets would harness self-interest as a creative force.
He argued that the wealth of a nation did not lie in gold and silver, adam smith essay, but rather in the goods and services produced and consumed by people. According to Smith, co-ordination, order and efficiency would result in the planning and direction of central authority. It will also provide the arguments put forward by other economists who believe that Adam Smith has left a legacy for economics discipline.
A few key concepts will be discussed in the following paragraphs to highlight Smithian view and how his views have evolved in the present day economic sense. Smith noted that specialisation and division of labour permitted far more output. To explain his point further, Smith took the example of a factory producing pins.
Smith believed that when each worker specialised in productive function, ten workers were able to produce 48, pins per day, or 4, pins per worker. Without specialisation and division of labour, Smith doubted that an individual worker could produce even 20 pins per day, adam smith essay. In the present day scenario it can be seen that division of labour and specialisation has had a positive impact enabling productivity to increase.
As it is already known, that there are several reasons why division of labour leads to enormous gains in output per worker. Firstly, specialisation permits individuals to take advantage of their existing abilities and skills, adam smith essay. Division of labour lets organisations adopt complex, large-scale production techniques unthinkable for an individual household, adam smith essay. The consequence of the above would be that the society would benefit from higher productivity and better organisational performance leading to making a adam smith essay level of profit.
Adam Smith emphasised that personal self-interest when directed by market prices is a powerful force promoting economic progress. Using terminology employed by Smith, economists refer to the tendency of competitive markets to direct the actions of self-interested individuals and bring them into harmony with the general welfare as the invisible hand principle.
This view was further supported by the Classics however opposed by Keynes, which seemed to explain recession and the economy during Great Depression, therefore adding credibility to his views. James Tobin adam smith essay that the principle of invisible hand is the most important legacy of Adam Smith to macroeconomics, adam smith essay.
He believes that it is particularly important, as it has served as the ultimate inspiration for New Classical Macroeconomics and for Real Business Cycle theory. It is argued that that while Smith emphasised stock as circulating capital, adam smith essay, he assumed a one period-lag between inputs of labour and materials and outputs of saleable goods.
This assumption enabled Smith to speak of profits on stock interchangeably as mark ups and as rates of return over time. The Invisible hand is their true inspiration. They reject the Keynesian dichotomy and expect competitive markets to transmute self-interest into public interest in macroeconomic as well as microeconomic outcomes.
According to Smith, with the existence of competition in the economy, even self-interested individuals would tend to promote the general welfare. Conversely, when competition is weakened, business firms have more leeway to raise prices and pursue their own objectives and less incentive to innovate and develop better ways of doing things. Gwartney in support of the above argument stated that competition is a disciplinary force for both buyers and sellers.
In a competitive environment, producers must provide goods at a low cost and serve the interests of consumers since they will have adam smith essay woo them away from other suppliers. He further argued that this process leads to improvement in both products and production methods, while directing resources towards projects where they are able to produce more value.
The above also leads to the conclusion that monopoly was not seen as a necessarily positive force. Looking at the economies and world around us, adam smith essay, it can be seen that countries promote competition for the reasons that resources are limited and it would eventually in the best interest of the society to maximise utilisation of resources.
European Union and forming alliances between member countries, goes to prove that countries have realised the benefits of working together to move adam smith essay economic development and growth, which can be made possible by encouraging competition. The above relates to what the law of comparative advantage, adam smith essay, which explains why a group of individuals, regions, or nations can gain specialisation and exchange. Evidence suggests that international trade leads to mutual gains because it allows the residents of each country to specialise more fully in production of those things that they do best and import goods when foreigners are willing to supply them at lower cost than domestic producers.
In his writings Smith also highlighted the paradox that water, which is necessary for life, sells so cheaply while diamonds have a far greater price. This was explained y the theory of marginal analysis; according to which the total value of the good includes consumer surplus; thus total value could be quite large even though the price is low, which reflects marginal value is low. This provided a vital explanation for why market prices have little to do with the total contribution that a good makes to the welfare of the users.
In other words it can be said that it is possible for something to have a large total value but a very small marginal value and vice versa. Smith regarded saving as a constraint on growth. After two decades this led to the emergence of theory adam smith essay to balance of payments, adam smith essay, which has contributed in understanding globalisation and adam smith essay trade in a present day context.
Farmer believed that Smith was more of a philosopher than an economist. Being classed as the founder of political economy he saw politics and economics as dimensions of a larger philosophy. For Smith, a value-free economics was only part of the story, he wanted to write on three main aspects namely, ethics, economics and government. He recognised the importance of the government. He also favoured the governmental provision of public goods, like bridges and canals, adam smith essay.
Farmer further stated that that Smith was in favour of governmental action not only in situations of market failure but also for specific policy purposes. Thus, according to Farmer, Smith supported government intervention. While it can be argued that Smith might not have had a deep insight into the various aspects of economics, however, the points he raised in Wealth of Nations led to various schools of thought to come with arguments and counter arguments.
Thus it can be said that Smith cannot be considered to have all the answers for all the economic problems, but Smith has contributed by making economic writers think and re-think and in many adam smith essay modify theories and explanations ad helped economics discipline to explore various facets.
Various concepts and ideas that he had discussed in Wealth of Nations like competition, specialisation and division of labour, automatic adjustment of market forces have been key in understanding the principles of macroeconomics.
In summary it can be said that Smith has left behind a legacy laying down foundations for further research in economics. Read More Free Economics Essays? Chicago: University of Chicago Press,p. Cowles Foundation Discussion paper Essay UK, Adam smith essay Adam Smith Essay.
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Medicine essays Miscellaneous essays Psychology essays Religious studies essays Science essays Sociology essays Essays menu. Free Economics essays Home Free essays Economics essays Free Adam Smith Essay. Introduction Adam Smith more popularly knows as the father of Economics wrote The Wealth of Nations, which is believed to have laid the foundation of economic thought and led to adam smith essay of adam smith essay schools of economic thought.
Smith on Division of Labour Smith noted that specialisation and division of labour permitted far more output, adam smith essay. Adam Smith on Competition According to Smith, with the existence of competition in the economy, even self-interested individuals would tend adam smith essay promote the general welfare. and Saunders, D. Sharpe Dow, adam smith essay, S. Werhane, P. Journals and Articles Farmer, adam smith essay, D.
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Adam Smith Essay Words7 Pages Early life Adam Smith was born to Margaret Douglas at Kirkcaldy, Scotland. His father, also named Adam Smith, was a lawyer, civil servant, and widower who married Margaret Douglas in His energy, talent, and sharpness of mind forever entered the history. Smith identified the general principles of the economy on the eve of the formation of industrial production. This paper aims to observe the phenomenon of Adam Smith and his contribution to the economy. Biographical Information Apr 24, · On that note, this essay seeks to discuss Adam Smith’s understanding of Capitalism, how he perceived modern Capitalist economies. In addition, to be discussed is the difference between Adam’s theory and those of Keynes and Marx. Adam Smith and Capitalism The first attempts to understand capitalism began with Adam Smith
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