...ANALYTICAL ESSAY 1: How Adam Smith Has Shaped Our Economy For The Better Jose Arguello University of Redlands July 25, 2013 Introduction The purpose of this paper is to analyze and discuss how Adam Smith’s economic theories have shaped our economy for the better. This paper will define Adam Smith’s major economic theories and relate them to today’s economy. This paper will conclude with recommendations on how some of these theories can be improved. Discussion When people think of Adam Smith they think of Adam Smith “the economist.” In fact, many don’t realize that Adam Smith was a philosopher at heart. From that critical thinking space as a philosopher, Adam Smith developed his economic theories. Adam Smith obtained a professorship at Glasgow teaching moral philosophy. “Here, Smith developed his passion for liberty, reason, and free speech. In 1740 Smith was awarded the Snell exhibition and left to attend Balliol College, Oxford.” (Buchanan, 2006) These are important facts about Adam Smith because it gives us an insight to his philosophy and eventually into his economic theories. Furthermore, before Adam Smith wrote his well-known work, The Wealth of Nations, he wrote The Theory of Moral Sentiments. It is important to note that in writing The Theory of Moral Sentiment, Adam Smith’s goal “was to explain the source of mankind's ability to form moral judgments, in spite of man's natural inclinations towards self-interest. Smith proposes a theory of sympathy...
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...Adam Smith Adam Smith is known for his vast knowledge of economics, he is considered to be the father. We may recognize him from his book The Wealth of Nations. The Wealth of Nations informs us that if we maximize the markets behavior than a free trade environment could be made available. In this essay I will discuss the importance of Smith’s theory, along with how he would develop plans to help the economy. Adam Smith grew up in a market environment in which Mercantilism was thought to be the best theory to help build a countries capital. Mercantilism “is a system in which a country attempts to amass wealth through trade with other countries, exporting more than it imports and increasing stores of gold and precious metals. It is often considered an outdated system.”(Vocabulary .com Retrieved April 13, 2013) Smith expressed his thoughts about the mercantile system, he thought the system had inconsistencies, and a countries wealth was not based upon its prosperity. He also thought that production should increase in the free market. The division of labor was a suggested policy. The division of labor theory is the “separation of manufacturing process into distinct and simple operations which are then delegated to specific hands or machines to perform”(Division of Labor Retrieved on April 13, 2013). He thought that this would increase the number of productive workers against the number of unproductive workers. Smith was...
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...Adam Smith and The role of Government To what extent should Government play a role in economy and society is hotly contested . The opinions vary wildly , from one extreme of anarchism who believe in no government to another extreme of socialist totalitarian , who argue for full and complete control by state of the society and the economy . Vast majority of people though have a view which lies somewhere between the aforementioned extremes , even so these "moderate " can and indeed often do vary greatly . Up until the late 1800s the government role in society of developed countries was minor . Government expenditures, revenue from taxation compared to total economic output was very small, and regulation were unheard of . All this began to change in late 1800s , when Germany enacted the laws relating to what we now call welfare state . Since then, even nations that stayed away from the extremes of fascism and communism have embraced the more widened role for the government . In almost all of the developed western democracies , national governments have expanded the welfare state by enacting various welfare programs such as state pension , universal health care, free education unemployment benefits etc. The Government expenditure as well as taxation revenue compared to total economic output have risen dramatically and regulations of private sector is commonplace and complex. In this paper , we do not argue to what extent should state be involved the economy and society...
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...Adam Smith And The Invisible Hand In the 18th century Adam Smith came up with a concept called the invisible hand theory. This concept shaped the way we use the free market today. What the invisible hand theory consist of is the fact that people in general are looking out for their own personal self-interest and that alone will create a higher demand for goods and services. This concept will generate profit and resources will be made available throughout the economy. It creates a profit motivation of individuals that drive an economy. With the book; The Wealth of Nations Adam Smith installed himself as the leading expositor of economic thought. Adam Smith was born in Kirkcaldy, Scotland. His widowed mother raised him. When he was fourteen he entered the University of Glasgow on scholarship. During this time period this was usual practice. After that he attended Balliol College at Oxford. He graduated with knowledge of European literature and ongoing contemnor for English schools. When he returned home he delivered a series of well received lectures. He left the academy in 1764 to be a tutor for young dukes of Buccleuch. This is where he began to travel for more than two years throughout France and into Switzerland. They describe it as an experience that brought Smith into contact with his contemporaries Voltaire. Since he received a life pension from the service of the duke he retired to his homeland and that’s when The Wealth of Nations was written. The same year the American...
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...“Adam Smith Meets Climate Change How the theory of moral sentiments could be applied to cap-and-trade greenhouse-gas emissions.” By Ian Ayres and Doug Kysar Slate, Posted Thursday, Sept. 25, 2008, at 11:53 AM ET Despite all the attention to domestic oil drilling, Obama and McCain are not that far apart on climate change—both candidates support a cap-and-trade system to limit U.S. greenhouse-gas emissions. And neither candidate has told us much about how they will get the rest of the world on the cap-and-trade bandwagon. That challenge deserves more focus—unless we can entice fast-growing emitters like China, India, and Brazil ! into a climate change treaty as full participants, even complete energ y independence in this country will be little consolation in a warming world. We think Adam Smith may have had a suggestion for how to think about this problem—and it's more than just an invisible hand. For 30 years now, officials have been groping toward a system in which greenhouse-gas emitters all around the world can trade permits. GHG reductions achieve the same global atmospheric benefit regardless of where they occur, but because industries and firms have different costs of reduction, it makes economic sense to allow them to trade permits. That way we can lower emissions for less money. But a crucial sticking point is figuring out how to initially allocate emissions permits among the various countries of the world. [PROPOSAL ONE:] Generally speaking, richer nations...
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...Adam Smith: A Scottish philosopher and economist, who was born in 1723. In his early years he studied philosophy in a university. In this university he learned the Greek. He was greatly influenced by a philosophy teacher named Francis. He graduated at seventeen with a scholarship that facilitated him to continue studying in Oxford University's Balliol College. Adam was a reserved individual and had the opportunity to meet with influential people along his life. He also enjoyed reading books in his free time and learn many things. He became the first political economist the world had known. He later became a professor of Logic; his students loved him and his work. As of today in the U.S economy Adam Smith would be deeply troubled about financial sectors and consolidation. He differed in many ways from an economist nowadays. At those times he didn’t earn a PhD because it didn’t exist. He wasn’t a trained economist either but he studied and had what it took him to become who he now is. Adam Smith would be happy to see the livings standards that we are living today. The rapid industrialization in many parts of the world would also be important for him since years ago workers would work many hours a day and earning way less than they deserved. In those years the working conditions weren’t as they are now. The places were industrial workers were unsafe and had few protections that put their lives at risk. He believed in a system that encourages individuals to pursue...
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...Adam Smith was born to Margaret Douglas in Scotland during the year 1723. Interestingly enough, his father was also named Adam Smith, but died two months before the birth of his son. His father’s occupation was as a lawyer. A strange fact about Adam Smith is that his exact date of birth was never recorded. It is known, however, that Smith was baptized on the 5th of June 1723 (Buchan, 2006). Very few happenings of Adam Smith’s childhood have been documented, but a biographer of Smith’s noted one story. It was written that when Adam Smith was only four years old gypsies abducted him (Rae, 1895). Thankfully, Smith was safely returned to his family where he was allowed to grow into a great philosopher and economist. Growing up, Smith was very close to his mother and was encouraged to follow scholarly aspirations. In Scotland, he attended one of the nicest secondary schools before entering the University of Glasgow at age 14. While at Glasgow Smith studied moral philosophy and developed his thinking in a way that resulted in his reasoning later in life. He later moved on to study political science at Balliol College, Oxford. Smith actually believed that the teaching at Glasgow was superior to that at Oxford, because Oxford was found to be intellectually stifling (Bussing-Burks, 2003). Smith left Oxford to return home and eventually he wound up giving lectures at Edinburgh in Scotland. Once established back in his native Scotland, Smith earned a spot at Glasgow University as a professor...
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...Adam Smith was a Scottish political economist and moral philosopher, who studied moral philosophy at Oxford University and University of Glasgow. Smith is considered by many to be the founding father of economics and the first free-market capitalist. In fact, in many ways his philosophies and theories have helped shape our country and our economy into what it is today. Smith introduced us to the invisible hand theory which referred to the free markets. The invisible hand theory stated that ultimately when people were left able to pursue their best interests, meaning that they were able to pursue work that made them happy and that enabled them to command the highest wage for themselves or when entrepreneurs were able to provide good and services for profit, this promoted the growth and prosperity of the nation. In simpler terms, each individual while looking out for himself or herself will inadvertently help improve the lives of others around them Adam Smith’s theories were a precursor to the free market system that we call capitalism. Smith’s theories held that the extent of government involvement should be limited and that the consumers would keep the markets at equilibrium. Smith’s theories held that in pursuing their best interests, consumer were able to choose the best prices and in doing so would weed out unfair competition, a process of elimination of sorts. These principles encouraged entrepreneurism and competition, which in itself is instrumental to the growth...
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...Adam Smith was one of the most well known economists and philosophers of all time. The first record of Adam Smith was when he was baptized on June 5, 1723 in Kirkcaldy, Scotland. He then was a student at the Burgh School, University of Glasgow, and then proceeded to attend Oxford at the ripe old age of 14. Adam Smith was obviously a very bright individual, and it showed when he published his first book in 1759 called The Theory of Moral Sentiments; though this book focused more on human morality rather than economics. A few years later, Adam Smith published his most famous work, The Wealth of Nations. This book was the first insight into looking at a fully political economy. As opposed to just looking at an economy by using gold and silver, Smith argued that an economy should be measured by Gross National Product. This idea of GDP was a revolutionary idea at the time because most economists believed that a nation should just use gold and silver to measure the strength of their economy. In his book, he also theorized with an idea of division of labor. The idea of division of labor is that if you were to specialize labor forces, the overall productivity, or GDP, of an economy would bolster greatly. These ideas, though very well known, are probably not as well known as the idea of the Invisible Hand. The idea of the Invisible Hand really has two different ways of thinking, first, Smith argued that the reason that we would get the items we needed (food, materials, etc.) is because...
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...STUDY QUESTIONS “ADAM SMITH’S INVISIBLE HAND ARGUMENT> JOHN D. BISHOP 1. Briefly state the “invisible hand” theory in your own words. The “invisible hand” is a term used by Adam Smith to describe the natural force that guides free market capitalism through competition for scarce resources. The theory of the Invisible Hand states that if each consumer is allowed to choose freely what to buy and each producer is allowed to choose freely what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all the individual members of a community. 2. Two advocates of the “invisible hand” theory who are quoted in the article encourage a “deliberate amorality” in the executive suite. How do they justify this? They contend that this results in systemic morality due to the action of the invisible hand. 3. What does Milton Friedman see as the social responsibility of corporations? Milton Friedman is quoted saying, "There is one and only one social responsibility of business -- to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." Friedman argues that corporations have no social responsibility, only a responsibility toward their customers and shareholders to maximize profits. 4. According to Bishop, what does Adam Smith say about laws or regulations proposed by...
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...During the 18th century, when Adam Smith lived, the most important social, moral, and technological presumptions had matured. These assumptions have helped to shape the market system as the publicly accepted and entrenched economic lifestyle, and the basis for cultural and even ethical relationships. The presumptions were market intensification and the spread of money operations, as well as the need for accounting and technical production, not the seizure of new lands or colonial conquest, as it used to be, but the accumulation of wealth became the source of vitality for many nations. At the same times, the type for economic man, the one who is absorbed with resource realization, was formed. The history led Smith to become one of the most authoritative of there new global manifestation of life and theoretical trends approvers. He wrote to works called The Moral Sentiments and The Wealth of Nations (Ross) In these works he analyzed two the most important social and individual areas of life, spiritual and materialistic, he tried to philosophically justify the already mentioned era changes as the ones that are best fitting humanity, the spiritual being of nations and ensuring the material well-being. The book called The Wealth of Nations earned the title of the “father of economics” title for Adam Smith (Say). The goal of this paper is to review and analyze the economical achievements of Adam Smith for world history and the world today. Smith was born on June 5th, 1723 in Kirkcaldy...
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...Textual Analysis of the Adam Smith Problem Sympathy and self-interest, when examined superficially, seem like conflicting notions. For this reason, Adam Smith is often criticized for writing two philosophical books – one about the human nature to exhibit sympathy, and one about the market’s reliance on our self-interest – that contradict each other. Through careful examination of Smith’s explanations, however, these two apparently separate forces that drive human behavior become not only interwoven, but symbiotic. In his first work, Theory of Moral Sentiments, Smith seems to argue that sympathy is the guiding force that produces most human behavior. He writes that it is human nature to be concerned with both the wellbeing and misfortunes of others, and that this concern for others is felt so deeply in us that we modify all our behavior in order to act in its accordance. Because we feel the pain and happiness of the others, we generally act in such a way as to extend the happiness and minimize the pain of those around us – especially those closest to our hearts, like loved ones and heroes. With this in mind, sympathy looks like a very altruistic principle, quite void of any self-interest at all. This view of sympathy, however, is not the view that Smith sustains throughout Theory of Moral Sentiments. In fact, as Smith continues to dissect the causes and effects of our sympathetic nature, it begins to look more and more as if sympathy is based in concern for oneself. This...
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...to economics of Adam Smith and John Maynard Keynes Adam Smith and John Maynard Keynes both have had a major effect on economic thought and many of their ideas are still influential today. This essay will look at the contribution that both men made to economic thought. According to Adam Smith Institute (2012), Adam Smith was born in 1723 in Scotland and is popularly known as the father of economics. His best known work is called “An Inquiry into the Nature and Causes of the Wealth of Nations” which is more commonly known as the Wealth of Nations. It was published in 1776 and in it; Adam Smith outlines his main economic ideas. Many ideas in the book were not ground breaking or original but Smith was the first to put them all together. In the Wealth of Nations (1776) Smith begins with an example of a factory that produces pins which he uses to explain the benefits of specialisation and division of labour. Smith explains how: “One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head” And so on until the pin is finished. Splitting the production of the pins into different operations, would result in more pins being created. Smith believed that 10 workers could produce 48,000 pins a day using specialisation and division of labour. If the workers were to produce pins individually then Smith believed that they would only produce 20 or less pins a day. It was Smiths argument that a...
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...Adam Smith emphasizes the profound benefits humanity has received from their ability to collaborate in the pursuit of self-interest. Every deal and transaction is made possible because each party feels that they they’re gaining something by cooperating. Self-interest creates intense competition and rewards innovation, further advancing the development of human society. Adam Smith believes that it is through this ideal that all economic innovations are developed. From the implementation of the division of labor to globalized trade to the development of money, these ideas emerged not because it made the lives of the common man better, but because they offered the opportunity for men to increase their own stock. This is the essence of Capitalism. Smith continually harkens back to selfishness as the driving factor in all aspects of his theory of capitalism. Take for example the development of larger, more efficient maritime trade routes. Merchants of this era did not intend to greatly improve the quality of life for everybody in Europe, but to reap profits in emerging markets. As a result of this monetary incentive, better maritime navigation was developed and better ships were built, eventually allowing Europe and the rest of the world to access the vast resources of North America. Interestingly, self-interest even balances the economy, what Smith calls the “invisible hand.” People will find the place where they can be most profitable. As a result, people are evenly dispersed as...
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...An inquiry into Adam Smiths: The rise and fall of the Wealth of Nations What was the most important document published in 1776? The Declaration of Independence is the easy answer for Americans, but many would argue that Adam Smith's "The Wealth of Nations" had a more important global impact. In this article, we will look at Smith's masterpiece and its contributions to modern economics. (For background reading, see Adam Smith: The Father Of Economics.) In Opposition to Mercantilism On March 9, 1776, "An Inquiry into the Nature and Causes of the Wealth of Nations" (commonly referred to as simply "The Wealth of Nations") was published. Smith, a Scottish philosopher by trade, wrote the book to upend the mercantilist system. Mercantilism held that wealth was fixed and finite, and that the only way to prosper was to hoard gold and tariff products from abroad. This meant that nations should sell their goods to other countries while buying nothing in return. Predictably, nations fell into rounds of retaliatory tariffs that choked off international trade. (For related reading, see The Basics Of Tariffs And Trade Barriers.) The Invisible Hand The core of Smith's thesis was that man's natural tendency toward self-interest - in modern terms, looking out for No.1 - results in prosperity. By giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening all markets to competition (international as well as domestic - Smith lived in the age of government...
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