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adam smith and his contribution to economics
adam smith and his contribution to economics
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Economics is an ever-changing field of study. Within that area of interest, there are many people who have influenced the world with their individual economic point of view. Some of those people have made a fundamental impact upon not only the United States of America, but also upon the world. Adam Smith, David Ricardo, John Maynard Keynes, Friedrich Von Hayek, Milton Friedman, and Fengbo Zhang are six men who have accomplished just that. Their opinions, actions, and words have forever changed the world of economics.
Adam Smith
The “father of economics” was born in Scotland. His birth occurred during the year of 1723. Adam Smith’s renowned book The Wealth of Nations examined the idea of capital and money, the progress of industry, and the results of European trade and commerce. The Wealth of Nations was written in 1776. Even though it has been more than two-hundred years since the book was released, it is still a relevant example of how to create and run a prosperous market. In this book, Smith introduced land, labor, and capital and how these things, also known as the factors of production, can produce the nation’s wealth.
Adam Smith explored the innovative idea that individuals should focus on self-interest, or their own personal gain, until they breach the fundamental principles of justice. He felt that, in the end, when an individual chases after riches, their quest will not lead to satisfaction. Their personal quests feeding their greed and self-interest coupled with the market’s competition would ideally regulate the market. This occurrence is known as “the invisible hand” of the market. The consumers get the things they want at reasonable prices and it all happens with no central plan.
Smith also was an advocate ...
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...not only took-off in Britain, but also in the United States of America. Hayek began to equate himself as “the world’s leading classical liberal”. He is known as a market liberal in today’s society.
Works Cited
http://www.econlib.org/library/Enc/bios/Smith.html
http://www.economyprofessor.com/theorists/adamsmith.php
plus.maths.org/issue14/features/smith/
http://www.economictheories.org/2008/06/adam-smith-biography-economic-theory.html
http://www.econlib.org/library/Enc/bios/Ricardo.html
http://www.economyprofessor.com/theorists/davidricardo.php
http://www.economyprofessor.com/theorists/johnmaynardkeynes.php
http://www.econlib.org/library/Enc/bios/Hayek.html
http://www.economyprofessor.com/theorists/friedrichhayek.php
http://www.economyprofessor.com/theorists/miltonfriedman.php
http://www.econlib.org/library/Enc/bios/Friedman.html
Adam Smith often called the “founder of modern economics,” utilizes his observational assumptions to construct his own rationale for society, economics, and human nature. His observations are based on sentiments regarding issues that are far ranging. Within the Wealth of Nations Smith makes claims regarding human nature, such as “self-love” is inherent, the faculties of reason and speech, and the nature of humans to “truck and barter.” Smith examines the notion of a free market economy that is based upon reason rather than belief. This poignant observation on human nature has its bias and facts, with regards to Smith’s examination of society.
Adam Smith wrote The Wealth of Nations as a guide why economics should be catered to benefit both the business as well as the consumer. While Smith stresses the importance of d...
Even though Adam Smith lived in a different century then us, he fully understood how wealth can be accumulated. His concepts of capitalism and free market are still the root of many nations and still bring much wealth to these nations. With all these accomplishments, we can, with no doubt, say Adam Smith is the father of economics.
Papola, John. “Fight of the Century: Keynes vs. Hayek Round Two” – YouTube. YouTube –
Adam Smith, David Ricardo and Thomas Malthus have all greatly influenced how people thought about modern economics, especially in areas relating to markets, in terms of the economy and whether certain things affected population rates. In this essay I will cover each of the three topic areas and how each economist interpreted these areas in order to explain why certain phenomena occur within British economics, most of which are still widely accepted today.
Adam Smith is widely regarded as the father of modern economics and one of the greatest economists throughout the course of history. He is mainly famous for a two books that he wrote, these two books are considered thee base and infrastructure of the world of economics. The two books he wrote were, “The Theory of Moral Sentimental” and “The Wealth of Nations”. But although Adam Smith was such a great economic philosopher, he wasn’t a very good foreteller or future predictor. The economic scenario now is very different from the economic landscape of the 1700’s. Giant super-corporations can now govern the flow of the market, unlike Smith’s time’s. Even though elements of Smith’s ideas have changed over time, some of his beliefs remain important factors in economics to this day. One of those truly unique philosophies is the “Invisible Hand”.
If any 20th century economist was a Renaissance man, it was Friedrich Hayek, who made fundamental contributions in political science, psychology, and socio-economics. In a field where the relevance of ideas often is eclipsed by expansions on an initial theory, many of his contributions are so remarkable that people still read and follow them more than 50 years after they were written. Many undergraduate and graduate economics students today, for example, study his articles from the 1930s and 1940s related to economical policies and knowledge, make them so knowledgeable that some of their seniors in the economics area still do not totally understand. In the publication “Commanding Heights”, Daniel Yergin called Hayek the best economist of the last half of the 20th century. Hayek did job in First World War and told that his wish to help the war affected inclined him to choose economics as career. Hayek spent his life im various European and American countries. He spent most of his life as academic researcher at the London School of Economics (LSE), the University of Chicago, and the University of Freiburg.
Adam Smith is considered as one of the most influential economists in the 18th century. Although his theories have been criticized by several socialist economists, however, his idea of capitalism still has great impact to the rest of the economists during classical, neo classical periods and the structure of today’s economy. Even the former Prime Minister of Britain, Margaret Thatcher had praised on Smith’s contribution on today’s capitalism market. She commented “Adam Smith, in fact, heralded the end of the strait-jacket of feudalism and released all the innate energy of private initiative and enterprise which enable wealth to be created on a scale never before contemplated” (Copley and Sutherland 1995, 2). Smith is also being recognized as the father of classical political economy and he has two famous published works that laid out the reasons to support his ultimate idea of capitalism.
Economists Thomas Robert Malthus and David Ricardo. Although differences of opinion were numerous among the classical economists in the time span between Smith’s Wealth of Nations (1776) and Ricardo’s Principles of Political Economy and Taxation (1817), they all mainly agreed on major principles. All believed in private property, free markets, and, in Smith’s words, “ The individual pursuit of private gain to increase the public good.” They shared Smith’s strong suspicion of government and his enthusiastic confidence in the power of self-interest represented by his famous “invisible hand,” which reconciled public benefit with personal quest of private gain. From Ricardo, classicists derived the notion of diminishing returns, which held that as more labor and capital were applied to land yields after a certain and not very advanced stage in the progress of agriculture steadily diminished.
Adam Smith had some particular views that helped shape the economy today. He believed in an environment with free competition that functioned in unity with the common natural laws. All of Smith’s work in the “Wealth of Nations” became an ideal lead for the economic world hundreds of years ago. It is still today looked at by numerous scholars and taught by many. Even though many people believe that Smith thought that no government was the best government, however he did have a few areas where he believed there should be government intervention.
Adam Smith's Wealth of Nations was published in 1776, coincidently the same year as the Declaration of Independence, is considered by many economic scholars to be the early framework of capitalism. Smith’s “invisible hand” metaphor explains how the motivation of the individual, a strong workforce and a decentralized market are the driving forces for economic prosperity. According to Dr. Crowley:
An economic system based on private ownership and its main motive is to earn profit.
Adam Smith’s The Wealth of Nations argues for a system of political economy that separates economy – the creation and distribution of wealth – from governmental interference. In Smith’s view, the economy of a nation grows as a direct consequence of private business ventures in the interest of each individual owner. Regulation by the government hurts the economy, and the progress of society is derived from the flow of the market. Things should be left in their natural states, thus maintaining a “natural order” of society. The basis of Smith’s thesis is that this natural order is driven by Man’s self-interest.
Adam smith believed that one of the most powerful forces promoting economic progress was self-interest directed by market prices. His invisible hand theory suggested that market prices organized the actions of self-interested individuals and directs them toward activities that promote the general welfare. From his book, The Wealth of Nations, he states "Every individual is continually exerting himself to find out the most advantageous employment for whatever income he can command. It is his own advantage, indeed, and not that of the society which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to society...He intends only his own gain, and he is in this, as in many other places, led by an invisible hand to promote an end which was not part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it"(Lowe).
Adam Smith (1723-1790) defines economics as the science of wealth. He is known as THE FATHER OF ECONOMICS because he was the first who put all the economic ideas in a systematic way. It is only after him we study economics as a systematic