Adam Smith`s The Wealth of Nations - Essay Example

s s Adam Smith`s The Wealth of Nations is indeed a masterpiece and one of the most important documents published in America. The central arguments presented in the book changed the entire outlook of economists and their approach to conducting business. For this reason, an analysis into the arguments is necessary. The author has undertaken a deductive approach in his study where the father of economics has based his central argument on various assumptions which tend to deduce the conclusion over which Adam Smith rests his theory on. The central argument is the presence of an invisible hand in the state economy which is further explained by virtue of self interest, limited government and a free market economy; an overview of which would further be presented in the paper. Though the arguments have been presented impressively, counterarguments can also be posed as readily with strong sub-arguments to prove the point. Therefore, again, a deductive approach would be utilized to present assumptions to conclude the theory, which would also be explicated in the paper in detail. In this context, the paper would counter-argue that a free market economy would favor the strong segment in the society and thus, self interest would lead to bias against the labor class of the state. In this context, the ‘visible hand’ affecting the state economy would be that of the power elite of the state which negates the concept of invisible hand. The paper would, thus, touch upon the arguments of the book as well as the counterarguments which can be presented to discard the propositions of Adam Smith. The central thesis of Adam Smith rests on the proposition of self-interests which tends to argue that all individuals are rational and thus they know how to protect their profits. In other words, it is certain that a butcher doesn’t weight meat based on good will, rather he bases his decisions on profits. Therefore, he is aware that in the long-run, selling good meat at a good price would favor him as he would be able to attract more customers (Birzneaks 2004). Furthermore, he argued that investment would lead to innovation and increased capital would raise the standards of living. Secondly, Adam Smith spoke of limited government to oversee the laws on defense, education, legal rights and criminal behavior detention; however strong bureaucratic governments must be halted and it must stay away from economy as it may prove to be futile to self interest factor. Thirdly, he backed a free market economy globally where he hoped that government`s capacity to depreciate currency via extravagant expenditures would be halted. In other words, he argued that the taxes must be kept low and tariffs be eliminated so that free trade must be encouraged. In this context, all these three propositions are interconnected and well argued since self interest would only lead towards innovation when government intrusion would be minimal. Therefore, a systematic proposal to free market economy based on the inherent capacity of humans towards self interest is what has been argued for in the book. Based on the three propositions, Adam Smith was able to produce the central argument which relates to the invisible hand in market economy. In other words, once everyone has the freedom to supply and produce the goods (in the desired quantity), they would be exchanging this goods and the currency according to their will which would encourage trade. This would inherently open up all markets to compete (both internationally as well as locally) and thus, people`s self interest would be triggered to induce supply and demand at an accurate rate to reach an equilibrium. Therefore, going by this logic, the world would see natural wealth amounting with enough profits (Schweicark 1993). However, government intrusion should be minimal as any involvement of government would alter the course of supply or demand which would be detrimental to the natural competition which must sustain. In this context, it can be well analyzed how the arguments are deductive and quite impressive in character since the supporting arguments tend to produce situational evidence for the central arguments. Also, given the premises which have been given in the book, no other conclusion can be made, and thus, the invisible hand seems to be the most perfect portrayal of global happiness (Albert 1993). However, the theory of Adam Smith can very well be counter-argued deductively by producing counter-argumentative supporting arguments. It must be argued here that humans are not as rational as argued by Adam Smith. Had that been the case, virtue had been prevailed since justice and morality are the only recipes for global success. However, corruption and injustice practices prevail in societies which tend to undermine self interest of various individual. In such a scenario, if free market economy is prevailed, an asymmetry would arise in the global world order or even locally. That is, a power elite would be formed, which would be controlling the economy and wealth (also capital) and thus the strong government bureaucracy would naturally be replaced by the power elite. Also, if government doesn`t intervene to ensure the dispensing of justice and circulation of wealth, the society would go rogue. Therefore, an invisible hand is just a myth as the aforementioned situation would be the product of minimal government intervention and an overreliance on self interests of individuals. In contrast, the above arguments lead to the proposition that there is and there must indeed be a visible hand, in the form of government intervention, to put taxes where necessary and introduce tariffs to protect their markets and the world from asymmetry and thus anarchy (Basu 2010). Therefore, central government control being the only solution to economic imbalance in the world can be counter-argued deductively to convincingly build a case against the theory propagated by Adam Smith. Conclusively, Adam Smith will indeed always be regarded as the father of economics and his theory proposed in the wealth of nations is also a convincing portrayal of the global political economy. He deduces accurately how various factors lead to the invisible hand which must prevail in the market to increase profits. He bases his arguments on self interest, minimal government intervention and free economy. In other words, he is of the view that all these three variables are interconnected where he argues that since self interest would only lead towards innovation when government intrusion would be minimal. Therefore, a systematic proposal to free market economy based on the inherent capacity of humans towards self interest is what has been argued for in the book. However, a counterargument can be proposed here as well, where visible hand as the ultimate truth and invisible hand as a myth can be argued for. In other words, central government control being the only solution to economic imbalance in the world can be counter-argued deductively to convincingly build a case against the theory propagated by Adam Smith. Since free market economy paves way for power elite which is detrimental to collective justice, government intervention to ensure fair circulation of wealth can be argued. Therefore, though Adam Smith has argued well for his case, yet a deductive counter argument can be produced to convince the readers otherwise. Works Cited: Albert, M. (1993). Capitalism against capitalism. London: Whurr. Basu, K. (2010). Beyond the invisible hand: Groundwork for a new economics. Princeton, NJ: Princeton University Press. Birznieks, Ilmars. (2004). The Invisible Hand. Booksurge Llc. Schweickart, D., & Schweickart, D. (1993). Against capitalism. Cambridge [England: Cambridge University Press. Read More