Economic History - Research Paper Example

Most of his works were drafted in the late eighteenth century, when economics was not even properly regarded as a separate subject. Astonishingly enough, Adam Smith’s works are still very useful and many of the modern researches in economics are based on the theories and principals proposed by him. Thesis Statement: Adam Smith’s economic theories and principals have drawn and remained at the focus for more than two hundred years. The basic framework of contemporary economy can be considerably attributed to his works and philosophy.

Discussion on the Different Economic Principals and Theories of Adam Smith The two most important works of Adam Smith are “The Wealth of Nations” and “The Theory of Moral Sentiments”. The Wealth of Nations can be considered as a precursor to today’s academic discipline of the subject economics. There are certain principals and theories that can be spotted in The Wealth of Nations. It attributes to the basis of resource-allocation theory, which states that in competitive environment, resource owners would utilize them to maximize profits.

This would result into equal rates of returns in equilibrium related to all utilizations, suited for the apparent diversities arising from the factors like unemployment, hardship, trust, and training (Smith, A., 1776). The General Equilibrium Modeling derived by Walras almost a century later is also based on Smith’s resource-allocation theory. Moreover, Smith’s labor theories provide the basis of the modern industrial relations. Labor theory of value further elucidates the relation between labor and the cost of the product produced, which affects the allocation of outputs and the distribution of earnings.

Further, in his work The Theory of Moral Sentiments, Adam Smith finds out relationship between the ethical behavior of an individual and the economic structure of the society. His concept of “homo economicus” (economic man) defines that how a sensible citizen can make economic contributions to the well being of our society (Klein, D.B., 2009). Why Adam Smith is Important? Adam Smith is important because this Scottish economist worked during the days when the very subject “economical science” or economics was in a nascent state.

Adam Smith, to some extent, decided the course of the evolution of economics as a separate subject. He deeply analyzed the concepts of taxation, market, labor, training, unemployment, infrastructure, etc., which are critical in today’s economic environment and related public administration. It is due to Adam Smith that we are sometimes compelled to think about capitalism as a moral system, where profits are not the only pursuit. Hence, his legacy deserves special importance today (Brown, V.

et al, 1993). Further, in Smith’s works, we get the glimpses of the emerging industrial society in the late eighteenth century Britain, wherefrom the modern industrial revolution actually began. Why are his Theories Important? Critics of Adam Smith try to find out limitations of his economic philosophy. According to J. Schumpeter (1994), “Had he (Adam Smith) dug more deeply, had he unearthed more recondite truth, had he used more difficult and ingenious methods, he would not have been understood.

” However, this criticism still testifies that Adam Smith’s theories have a simplistic approach, which make them understandable in the context of common people, and hence, are important. His theories