Father of Economics---Adam Smith
Father of Economics---Adam Smith
In the history, there exists a lot of economists who make a great contribution to our social economy. In this report, I would like to introduce to you an economist, whose name is Adam Smith. He is a famous economist and considered to be the father of economics. I will discuss some of his famous economic theories and analyze the application of them in the modern society. Almost of all the information, I’ve found is in his book called The Wealth of Nations.
The Economic Approach of Adam Smith
In the book The Wealth of Nations, the economist puts forward the theory of free market. He thinks that the government should have less centralized control to the market. It should be the local to take the role of managing the economy. “Even though public works which are of such a nature that they cannot afford any revenue for maintaining themselves…are always better maintained by a local or provincial revenue, under the management of a local & provincial administration than by the general revenue of the state” (Adam 18). The government needs to enforce contracts and regulate banks to protect the businesses. It should pay attention to the construction of infrastructure, such as roads, bridges, canals and so on. He also holds the view that invention should be protected by patent. “The Wealth of Nations could justify the Food and Drug Administration, the Consumer Product Safety Commission, mandatory employer health benefits, environmentalism, and discriminatory taxation to deter improper or luxurious behavior” (Stein 22). At the same time, he supported to invest in more money on education. He thinks that self-interest generated food needs in the free market will benefit the whole society, both on the price of the products and on the variety of the goods. “The cost of labor, it must be observed, cannot be ascertained very accurately anywhere, different prices being often paid at the same place and for the same sort of labor, not only according to the different abilities of the workmen but according to the easiness or hardness of the masters” (Martin 21).
The Analysis of Adam Smith’s Theories
Alfred Marshall criticized his economic theory that just wealth is not realizable and when it comes to the monopoly, “the invisible hands” will be less effective. Joseph E. Stiglitz thinks that it is hard to achieve “invisible hand”, and it is just a conception.
Although criticized by some other economists, the contribution of Adam Smith’s economic theories to our society is enormous. During the Industrial Revolution, British implemented this theory, and it even spreads around the whole world. “Britain embraced free trade and Smith's laissez-faire economics, and via the British Empire, used its power to spread a broadly liberal economic model around the world, characterized by open markets, and relatively barrier free domestic and international trade” (L 15). The application of this theory is beneficial to the whole society on one hand but causes problems on the other side. And some economists also show their supports to him and his theories. George Stigler holds the view that the resources can be better utilized under competition, and the profit will be maximized.
The Influence of Adam Smith’s Theories in Modern Society
The influence of “the invisible hand” theory and Adam’s other economic theories is far-reaching. His famous book The Wealth of Nations which included most of his economic theories affect his descendant. A lot of prominent economists are affected by his ideas. In modern society, there still exists the application of economic theories in the economic fields. We are now live in a competitive world and the competition between the businesses propels the new invent of products, and the social economy will also be developed.
Conclusion and Recommendations
All in all, Adam Smith’s economic theories have a profound influence on the later generations. Some part of his theories are still in use in 21 century. Although some critic provides us some negative influence of his theories, we still need to hold an objective perspective to them. In general, the advantages of his theories brings more benefits to us than that of the disadvantages. By studying his theories, we can get some illumination in the economic field. Some of his theories are still of great importance in the modern society and at the same time, those theories prove to be absolutely true.