Adam Smith Classical Views on Economics:- Adam Smith was born in Kircaldy, Scotland in 1723. He was among the most important philosophers of his time. In the college Glasgow and then Oxford, Smith gave lectures on natural theology, ethics, jurisprudence and political economy. He was a disciple of Frances Hutcheson, friend of David Hume and acquaintance of Quesnay.
Classical Views of Adam Smith
The Theory of Moral Sentiments and its problems attracted the fame and immediate interest in their Author. Informed opinion tends to consider The Wealth of Nations as a logical extension of The Theory of Moral Sentiments, although this is far from a judgment eBay.
The nature of Smith’s Economic System
Today Adam Smith is considered as the father of the economy because I was first and foremost the constructor by a system, which, according to evidence, begins to build two decades before the publication of the wealth of Nations. Your system characterized the activities of agriculture, manufacturing, and trade. On your system the Exchange is facilitated by the use of the money and the production is characterized by the division of labor. The three main features of its central analysis are the division of labor, the analysis of the price and allocation, and the nature of economic growth.
More from Business Study Notes:- Classical vs Neoclassical Economics Views
Their achievements marked the beginning of which is called classical period of economic thought that extends from the appearance of the wealth of Nations in 1776 until the death of John Stuart Mill in 1873. The classical school in general held principles that included the laissez faire and the importance of economic growth as a means to improve the condition of the existence of man.
Natural Law and Property rights
The main economic and political problem posed by Smith was the relationship of the individual with the State and the appropriate functions of the State with its members.
The physiocrats had extolled a natural order based on natural law, as opposed to positive law. For them the natural law reflected the mind of the creator, inferred by human reason. Positive law was inferior, and there is much less positive law, better. They were clearly on the verge of laissez faire as a wrapper of natural law. Both the physiocrats and Adam Smith argued this feature.
“Natural law” implies a restriction of the functions of the Government, in the interest of the “freedom of the individual”. Along the wealth of Nations, Smith explained how the divine Government of the universe acts on our immediate economic and political problems. An example is the famous passage from Smith about the “invisible hand”.
Another passage fustigates the futility of central planning and the ineptitude of the bureaucrat and the politician.
Smith was convinced that in the world economy there is a natural harmony that makes that Government interference is unnecessary and undesirable in most of the materials. The invisible hand, the doctrine of the natural freedom and God’s wisdom are part of that argument. There is another empirical argument in which Smith also relied, which accuses the Government of incompetent in fact and underscores the brazen impertinence of the bureaucrat. In this view there is a very clear influence between Adam Smith and Milton Friedman.
Smith was a realistic practical that took people as he saw it and based its analysis of the society on an unchanging human nature. According to Smith, there were two innate characteristics of human psychology. The first is that the humans we are interested primarily in things closer to us and much less in those found at some distance, thus, all consider ourselves we same as of the utmost importance.
The second feature is the overwhelming desire that every man experiences to improve their situation.
The “economic” man of Smith, in the wealth of Nations, is not different from its “moral” man in The Theory of Moral Sentiments. In the wealth of Nations competition is the economic faculty which limits the egoism. Competition ensures that in the pursuit of selfishness will improve the economic well-being of society. Monopoly represents unbridled selfishness and the consequent destruction of economic well-being. Competition will force all retailers to reduce their prices to attract more customers and the natural result of such action is the lower prices to consumers and improves economic welfare.
Selfishness and Economic Growth
The conceptual history of civilization, in Smith, identified four evolutionary stages. The first two were the Hunter period and the pastoral nomadic cultures prefeudales period. Then the trade remained the stage agricultural and finally. Each stage is characterized by a somewhat different from property rights structure.