Development Economics: From the Poverty to the Wealth of Nations - Assignment Example

Smith says the wealth of a nation does not consist of only the amount of gold and silver in its value as many believe but rather a total of production and commerce.Hayami and Yoshihisa (10) assert that Smith considers the division of labor as an important factor for industrial improvement in a country. Smith also considers that the gluttony of the rich is unproductive labor. Smith argues that the limitation to a division of labor is the extent of the market. There is limited opportunity for exchange which discourages the division of labor.

During this ancient time, different commodities had served as a common medium of exchange. With time people resorted to a durable and divisible medium of exchange. Hence the use of money was introduced which could make it possible to price the labor. Another theme is the free market. According to Hayami and Yoshihisa, the distribution and cost of goods and services are coordinated by supply and demand in a market structure and not regulated by the government policies. In the case of the government policy intervening in the setting of prices, it is no longer a free market but a controlled market.

The free market economy was proposed by Smith since it promotes the development of a country’s economy. In production, Smith advocated for the freedom of every individual in order to realize development. Government economic regulations are counterproductive to an individual. Nature is being fundamentally important and for sound productivity of an individual then the human society needs to be free from any interference.