How Adam Smith's Writings Help Us to Grasp One or More Specific Issues - Essay Example

? Explain how Adam Smith’s writings help us to grasp one or more specific issues in contemporary politics Born in Scotland in the year 1723, Adam Smith is a Scottish key literary figure of political and moral importance. He is the author of books like Theory of Moral Sentiments, (TMS) published in 1779, and the 1776 publication, Inquiry into the Nature and Causes of the Wealth of Nations (WN) (Otteson 3). Smith’s works were primarily dedicated to the study of political economy that included investigations of the political, economic, and social aspects that affected human prosperity (Otteson 74). The essence of the 1776 work was to describe how individuals developed moral codes and what led communities to develop shared moral conducts (Otteson 75). In the book Wealth of Nations, Smith argued that wealth does not only mean possessing metal but also included the ability to satisfy one’s needs and desires (Otteson 7). He stated that prosperity can be increased if the division of labor is increased, which he demonstrated by using the example of pins. He established logical insights like equality of returns, which was explained by the relation between wage rate and the type of the work. In short, economic and political theories of Adam Smith provided the guidelines that help to understand the wealth of nations and throw light on the political scenario and policy making (“Adam Smith”). Theories of Adam Smith - Theory of Invisible Hand at Work and Division of Labor In his book Wealth of Nations, Smith has focused on the fact that market forces ensured the production of the goods and services in quality and volume. This was coined as the metaphor of invisible hand at work. People should be allowed to regulate the markets on their own. He was of the idea that if people are given the liberty to control the market, they will utilize the resources in the best possible ways with the welfare of the public as the byproduct. This will be possible when producers prefer making profits by supplying the products or services. This will increase competition, and thus the public life will be influenced in a better way. Smith suggested that this can be achieved only without the intervention of the government, thus devising a ‘laissez faire’ form of economy (Smith). Another theory proposed by Smith was division of labor in the book Wealth of Nations. He suggested that, with proper division of work, there would be an increase in productivity. With proper allocation of work, there is an increase in the efficiency of the worker as regards one specific kind of work. Assembly line made it necessary for the workers to focus on minute details, as any mistake in one part can make the entire assembly line non functional. Smith proposed that a worker can perform best if he or she is assigned the work he or she is best at. He said that the division of labor would lead to producing tangible objects and in surplus amounts (Dhamee). The political environment during the time of Adam Smith was more capitalistic in nature. Mercantilism was present that dictated almost the society in its entirety. Adam Smith was the severe opponent against mercantilism. In mercantilism, the only beneficiaries were the producers and the monopolists. This was done at the cost of the interests of the consumers. The government had no policies to address the needs of the common man. Also, there was no proper division of work. Further, after the industrial revolution and the American Revolution, the western world flourished considerably. But it was only a section of the people who were receiving the benefits, while the condition of the average common man degraded (Skousen 6). The book The Big Three in Economics: Adam Smith, Karl Marx and John Maynard Keynes by Mark Skousen in 2007 explained how Wealth of Nations dismissed the traditional economic outlook where mercantilists controlled the commercial and political interests of the society. This book reported that mercantilist policies benefited only the producers and the monopolists and not the consumers. Also, during his time, prosperity of a nation was counted only in terms of the stocks of gold and silver in the treasuries (“Introduction”). Trade barriers present during his time were also criticized by Smith. He argued that, if trade barriers were lifted between countries, it would lead both the nations to be benefited equally. This would also lead to reduction in the costs (Skousen 9). Through this, it is understood that the political system before the publication of Wealth of Nations was very distracted and chaotic in nature. On the one hand, it granted capitalistic power to the people, which in turn favored mercantilism, and, on the other hand, the basic fact of Smith’s theory, which was to provide liberty to the people for public wellness, was lost. The American Health Debate A political debate on the American health reforms system has been going on for a long time in the US. In spite of being the world’s most developed nation, the country has a healthcare system that lags behind those of other countries (Davis).The issue behind the health reforms system in the US is that every American has to buy insurance or face penalty for not buying it (Crowley). The point of debate is if the healthcare reforms were for providing benefits in public interest or special interest and if it is justifiable to have uninsured citizens in a nation as per their wish. The healthcare debate, which was propagated by the present US president Barrack Obama, has attracted negative sentiments of the people of the US lately. The US health debate has also earned significance as to whether it supports or rejects the theories of invisible hand at work of Adam Smith. If the theory is applied to the US healthcare debate, which votes for a free system and, consequently, no interference from the US government in health care delivery, it will be seen that the debate is in agreement with the free system opinion, on the one hand. This is so, because under a free care system, the not-for-profit US organizations providing health care will have to focus highly on attaining self interest, which would in turn be beneficent for the US economy as a whole (Zismer). There are flipsides of the invisible hand metaphor in the context of the health reforms, too. In most of the developed economies, the funds for healthcare facilities are generated from the public in the form of tax exemptions or from the public directly. Government regulations play an important role in guiding the behavior in these private sectors. Now, if the theory of invisible hand is allowed to exist in the healthcare market, it will be difficult to determine which institutional design is better in allocating the healthcare resources to the public uniformly (Culyer 57). Also, in the absence of government intervention, there will be a distribution of healthcare facilities between those who have the capacity to pay and those to whom healthcare services will be provided according to the market demands. This will create a confusing situation for the market to operate properly. There are other flaws with the application of the invisible hand theory in the healthcare debate. In the absence of proper regulation, there will be an increase in the time of procuring and receiving the service by the consumers (Davis). There can also be chances of biasness and injustice. Therefore, though Adam Smith advocated for free markets for the betterment of the society, the application of his theory in the context of the contemporary issues remains debatable. Thus, in violation with the invisible hand theory of Smith, intervention from the government is essential in order to provide quality health care in the right proportion, lowering the price and expanding the number of people who can afford to pay for the health care facilities (Korves). The theory of division of labor, which states that each worker should specialize in certain activity and this should be included in the works of the others, does not provide a single definite conclusion for the healthcare debate in America (Surles, Donovan, and Docherty 33). Philosophers can only highlight the details of a proper healthcare system, devising the proper division of work; however, in practice there is specific theory that can explain the appropriate division of labor between the private and public entities to get access to equal form of healthcare facility at a particular time (Mathis). The division of labor theory can help implement some features of the health reforms program, such as increasing productivity, reducing cost, increasing efficiency, and so on. But this will not be possible fully in the absence of government regulations. Besides, in the absence of government intervention, there are high chances that the quality of the health care services offered by the free market would be substandard. There can also be instances of discrimination in the work field. In a recent report, it has been found that the US healthcare system lags behind in terms of health management of chronic diseases (Davis). There is poor access to the medical facilities, and also the cost of facilities is exceedingly high. These facts form a clear picture of an improper division of labor in the US healthcare system. Therefore, it can be said that in the context of the two theories mentioned above, the health debate of the US does not have a clear significant conclusion about whether insurance should be made mandatory for every American, whether this move would benefit the US society as a whole, whether there will be prosperity in the absence of the government intervention, and so on. The division of labor theory can provide a solution to the current problems, but this cannot be achieved without the intervention of the government. Conclusion The focus of Adam Smith’s theories was on satisfying personal interests of individuals, primarily those which would eventually result in the betterment of the society. The theories of the invisible hand at work and the division of labor justify the above statement. In the context of the debate on health reforms in America, the invisible hand theory does not provide a clear solution – on the one hand, the not-for-profit organizations will be benefited; on the other hand, it will not be clear if the betterment is directed to the public or only to a specific section. Secondly, the invisible hand theory says that an individual will do only that which satisfies his or her interests and is most beneficial for him or her. So, in relevance to this, an individual can have the choice to accept or deny a health insurance policy. But the debate continued, because the US government wished to make it mandatory for the Americans to get themselves insured. In fact, in March 21, 2010, the US parliament had upheld the reform which Barrack Obama had been propagating for long before his winning the presidential elections (“US Supreme Court Upholds Healthcare Reform Law”). Still, even if it was a constitutional decision, it is not exactly in conformation with the Smith’s law. Similarly, the division of labor theory has not found any significant application in this regard. This was so, because the US healthcare reform has many inherent problems like ineffective administration, high costs, inaccessibility to facilities, and so on, as mentioned in the previous sections. From these statements, it can be concluded that though the theories of Adam Smith have helped reshape economies, their application in the context of contemporary issues remains debatable. This can be resolved by forming some new flexible measures fusing the present mindset and practices together with the established theories and beliefs. Works Cited “Adam Smith”. Library of Economics and Liberty. n.d. Web. 28 June 2012. “Introduction”. Adam Smith Institute. n.d. Web. 28 June 2012. Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 5th ed. N.d. Web. 29 June 29, 2012. Culyer, Anthony J. Handbook of Health Economics, Part 1. Elsevier, 2000. Print. Dhamee, Yousuf. “Adam Smith and the Division of Labor”. The VictorianWeb.org. 1995. Web. 28 June 2012. Davis, Mirror. “Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update”. Commonwealthfund.org. 23 June 2010. Web. 28 June 2012. Surles, Richard, Catherine Donovan, and John Docherty. “Organizational Theory”. 2001. Web. 30 June 2012. PDF file. Crowley, Stephen. “Health Care Reform and the Supreme Court (Affordable Care Act)”. The New York Times. The New Your Times newspaper, 29 June 2012. Web. 29 June 2012. Korves, Ross C. “Health care policy reform - in the public interest or for the special interests?” Business Economics. 1993. Web. 29 June 2012. Mathis, Rick. “Health Care and Philosophy: Adding Justice to the Debate”. HealthAffairs.org. n.d. Web. 2012. 29 June 2012. Otteson, James R. Adam Smith. Continuum International Publishing Group, 2011. Print. Skousen, Mark. The Big Three in Economics: Adam Smith, Karl Marx and John Maynard Keynes. Black stone Audiobooks, 2007. Audio book. Tribe, Keith, “Adam Smith: Critical Theorist?” Journal of Economic Literature, (1999) XXXVII, pp.609-632, June 30, 2012 from: http://murschhauser.net/documents/wirtschaft/Adam_Smith.pdf “US Supreme Court upholds healthcare reform law”. BBC. 28 June 2012. Web. 30 June 2012. Zismer, Daniel K. “Will the “Invisible Hand” Work in U.S. Healthcare?” The Governance Institute.com. 2009. Web. 29 June 2012. Read More