Adam Smiths Contributions to Economics - Term Paper Example

?Running Head: ADAM SMITH Inserts His/Her Inserts Grade Inserts Adam Smith Economics has been a prominent subject and a school of thought in practical as well as theoretical viewpoint. The subject is the field of social science which pertains to the analysis of the distribution, production and consumption of services and goods. The behaviour of the economy and its interaction with the agents and actors of the economic system of a particular country has been noted and studied by various economists. This paper shall discuss one of the most noted and prominent economists, along with his contribution, background, and school of thought for the subject. Adam Smith Adam Smith has been one of the most prominent and noted economists of his time. He was born in Kirkcaldy Scotland in 1723, and, later, went to Oxford at the age of 17. In the year 1951, Smith was appointed at Glasgow as a professor of Logic, and within one year, he was made the Chair of Moral Philosophy. Besides being a Scottish social philosopher, Smith was also the founder of the political economy. He had proven to be one of the chief personalities of the Scottish Enlightenment, and had also authored some major academic works including An Inquiry into the Nature, The Theory of Moral Sentiments, 1759, and Causes of the Wealth of Nations, 1776. His special achievement, The Wealth of Nations, is generally regarded as the very first of the modern works in the contemporary economic society these days (Butler, Eamonn, 2007). Through this work, Adam Smith has attained huge respect and reputation, this works has been ranked the most prominent, and significant works ever published in the field of economics. Smith is broadly known as the father of capitalism and modern economics. Later, in the year 2009, the Scottish television channel (STV) ran votes and the economist and writer, Adam Smith, was ranked as the 'Greatest Scots' of all time. School of Thought There are various challenging and competing schools of thoughts commanding different opinions and viewpoints of the economic philosophies. The chief division in the classes of schools of thoughts includes the Classical and Neoclassical schools. Adam Smith was the pioneer of the Classical school of thought, which fundamentally stressed upon the notion of creating economic value and distributing the wealth of the economy between various classes including the capitalists, landlords, and the workers. One of the prominent branches of the Classical school is the Marxist school of thought. Economic Theories Just like all other economists, Adam Smith also held his own viewpoints and perceptions regarding the economic cycle that moves the world around. Due to his emerging thoughts on the subject of economic, he introduced the economic theories which included one of the significant economic theories, the Invisible hand theory. The Invisible Hand Theory Adam Smith believed that there was an “invisible hand’ in the marketplace which has always operated in order to make the markets of a self-regulating nature. This metaphor stated that all the consumers have a free will to select what to purchase and each manufacturer is free to decide what to produce and sell. Such a marketplace sets the distribution of the products and the prices which are of benefit to the individuals in the community and to the community in a collective manner. This is the involvement of self-interest which forces the actors to behave in a beneficial way. The profits are maximized using efficient methods of production. Revenues are maximized through charging lower prices and the returns are maximized by investing in the urgently required industries. Thus, all the effects in the markets occur automatically and dynamically, and this occurrence, Adam Smith has mentioned, exists due to the ‘benevolent invisible hand’. All these effects take place dynamically and automatically (Helen, 2001). Contribution to Economics Adam Smith gave major contributions in the field of economics through his economic thoughts, publications and theories. The major contribution of the economist was given in the year 1776 in the form of his most prominent book, The Wealth of Nations’. This work established the economic dimensions of the Industrial Revolution and has converted economics into the characteristics of social sciences. The Wealth of Nations The book ‘The Wealth of Nations’, also known as ‘An Inquiry into the Nature and Causes of the Wealth of Nations’, is one of the major works that have revolutionized the economics in every manner. This work features and discusses the causes of the division of labor, the improvement in the productive capacity and powers of labor, explains the origin and use of money, and discusses various features of the stocks and political economy. The work of Smith has introduced liberalism and the theory of invisible hand. The major development to the economy was introduced by the Wealth of Nations which brought in the concept of an open economy, which is exposed to the foreign trade and attainment of absolute and comparative advantages. The concept of specialization, cooperation and economy of scale are established in the markets. Besides this, the book gave rise to his economic views including the market price, labor theory of values, the perfect competition market and the law of one price and arbitrage. Moreover, the ‘Indivisible Hand Mechanism, has established the mechanism of price which is often utilized in the markets of economic doctrine in the contemporary world (Ismail, 2011). The Theory of Moral Sentiments Besides the other publications, “The Theory of Moral Sentiments’ is one of the other major works of Adam Smith in the field of Economics. In this book, Smith presented the argument that it is the ability of people to imagine what situations other are going through, and the possess all the capability to stress upon and empathize with their bad situations. Therefore, when we feel others’ experiences as our own experience, we automatically pursue the interests of the people around us. Thus, according to Smith, it is possible and correct to believe that the human beings are generous towards others and pursue others’ self-interest just like their own. Conclusion Adam Smith is one of the noted economists and writers of his time. He has contributed to the field of economics through his theories and academic works. Smith is considered to be the founder of many prominent theories such as the ‘invisible hand theory’. His published works such as The Wealth of Nation and The Theory of Moral Sentiments have given significant contributions in the field of Economics. Work Cited Butler, Eamonn, Adam Smith – A Primer, Institute of Economic Affairs, 2007, Print. Helen Joyce, Adam Smith and the invisible hand, Plus Magazine, 2001, Print. Ismail Kucukaksoy, Adam Smith’s conceptual contributions to international economics: Based on the Wealth of Nations, Business and Economic Horizons, Volume 4, Issue 1, 2011, Print. Read More