Economics in general can be defined as a social science concerned with allocation of resources among competing users in the society (Lipsey & Chrystal, 2011). Productive resources are scarce as they do not exist in a sufficient quantity to satisfy human wants…
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Economic Theories of Adam Smith
This report will discuss different economic theories by Adam Smith, a Scottish philosopher. Adam Smith is the founder of a free-market capitalism. He is also the father of modern classical economics and a proponent of laissez faire economic policies. His arguments against mercantilism made him the father of modern economics. The Scottish philosopher spent many years teaching and publishing some of his lectures in the “Theory of Moral Sentiments” in 1759. The material gained ground and laid the foundation for the publication of “The Wealth of Nations” in 1776 which cemented Smith’s place in history. However, many critics note that in his time Smith did not ‘invent’ the ideas he wrote about. He only popularized the ideas that became known as classical economy. Using his work other economists solidified the theories of classical economy which became dominant during the time of great depression or the global economic crisis. The report will also compare the current economic system with Smith’s and conclude whether he would agree with current policies of today if he was alive. Production Theory From the economists’ point of view, production simply means the creation of goods and services which consumers will buy. Companies are the units of production, and they convert input into output through a transformation process (Kurz & Salvadori, 1995). The theory of production then consists of how a company chooses and combines various inputs to produce an output at a given level in the most efficient manner. The assumption is that decision making is done with the view of maximizing profits. Production is all about creation of wealth which in turn adds to the society’s welfare. Resources are limited and must be efficiently utilized to create the maximum possible welfare. There are different inputs or resources of the society used in the production process. These inputs or resources are the factors of production. Adam Smith identified three factors of production which are land, labor and capital. In the economics the definition of land refers to all the natural resources which are used in production. The land notion includes farming and building land, forests, rivers, lakes, and mineral deposits. Therefore, land does not mean a piece of earth. Labor attributes to both mental and physical efforts used in the production of goods and services. Labor is distinct in that it is the services of labor that are bought and sold. Labor is also unique because it is the reason why economic activity takes place. The supply of labor is measured by the number of hours of work which is offered at a given wage rate over a given period of time (Kurz & Salvadori, 1995). Capital is a man-made input and can be classified as working or circulating capital referring to stocks of raw materials, partly finished goods, and finished goods held by producers. Alternatively, it can be classified as fixed capital which consists of all the equipment used in production. The aspect of specialization is important in the production process. It refers to the concentration of activity in those lines of production where the company or an individual has some natural or acquired advantage. Adam Smith drew attention to the importance of the labor division in his book “The Wealth of Nations”. He was fundamentally concerned with the division of labor of a particular industry
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Particularly, the western economies like USA, UK, and EU have created an economic network on the foundations of the global market system world wide. Therefore, the paper would reflect on global economy and the modern capitalist system with reference to the contributions of Adam Smith.
Adam Smith: The Relevance of “Smithian Theory” in our Present World Economy Introduction During the Scottish enlightenment, the birth of classical economics marked the revolutionary attempt to identify the underlying principles on how society interacts based on the platform of market economy and dynamics of economic growth.
Outline Introduction The purpose of this assignment is to reflect upon the roles of the government in a particular nation and how government can help in the success of the nation. These roles were suggested by Adam Smith in his writing named as Wealth of the Nation.
Introduction Economic deals with study of human nature hence most theories in economic are based on the nature of humans. Adam Smith and Karl Marx are considered as the greatest economists of their time, in fact Smith is regarded as the father of modern economics (Skousen, 3).
Adam Smith’s economic theories According to some classical economists the most important economic factors are capital accumulation and growth, and this concept has originated from Adam Smith’s Nature and Causes of the Wealth of Nations. In his book, Smith has argued that it is the interaction between various economic forces that is responsible for the dynamic progress of economic system in a nation.
Moreover, the important things in the free market is the different types of free market philosophy which include the concept of unrestricted free market philosophy, and the competitive free market philosophy. The Philosophy of the unrestricted free market means that the market of the goods does not need permissions of importations from other parties even from the ministry of the commerce.
Economic growth results from the increased production and consumption of a country’s goods and services. Should these goods and services be of the right kind, they benefit the people and thus improve their quality of life and economy. However, economic growth does not necessarily lead to economic development
3 Pages(750 words)Research Paper
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