Facts and information about the founder of modern economics, Adam Smith, and his famous economic theory, The Wealth of Nations, that laid the foundation for free trade and open market.
Adam Smith is credited as the father of modern economics and who laid the foundation of free trade. He was a Scot who studied moral philosophy at the University of Glasgow, a creative thinker and an economist. While others had written on the subject of economic theory before him, Smith is widely acknowledged with his philosophical and inventive ideas of economics as a subject for academic study.
Brief biography of Adam Smith
Born during the Classical period, Adam Smith (1723-1790), was a Scottish economist and philosopher. He went to Glasgow University at 14 and then later to Oxford. In 1748, he returned to Scotland to lecture at Edinburgh, where he formed a close friendship with another prominent philosopher, David Hume. He was appointed professor of moral philosophy at Glasgow University in 1752.
In 1763, Smith left academia and worked as tutor, a position that took him through France and Switzerland, where he brought himself in contact with the works of French philosophers Voltaire, Rousseau and others.
He began writing about his theory of economics, An Enquiry into the Nature and Causes of the Wealth of Nations in 1776, more popularly known as The Wealth of Nations. In his economic treatise now famous as Wealth of the Nations he advocated for “an open and free market.” Smith argued that a laissez-faire economy and free trade would stimulate production and act in the interests of the public, at the same time recognizing the necessity for legal and moral restrictions.
Adam Smith’s The Wealth of Nations
The modern free economies of the world owe a debt of gratitude to Adam Smith, who laid the foundation for free enterprise. The central idea of The Wealth of Nations which was a call for “an open and free market” was written at a time when trade was heavily taxed and licensed. Historically, this was 1776, the dawn of the Industrial Revolution.
Smith believed that self-interest is inherent to human nature. His combination of philosophy and economics supported free trade and competitive markets. He claimed the best interests of the majority would be served if the free market was given free rein. He held the idea that the role of government in the economy should be to ensure robust competition, and that the prosperity of the society as a whole would follow, a principle known as “The Invisible Hand.”
The Principle of the Invisible Hand
Smith believed that competition would encourage businesses to strive for more wealth, and that seeking maximum profit becomes the guiding factor for business. This is the so-called “Principle of the Invisible Hand” – that stipulates more good will be done for the people. Although many people assume that it refers to the influence of the laws of supply and demand, actually it refers to the way individuals who follow their own ends are naturally guided towards the public good, achieved automatically, by relying on the free market.
Significance of Adam Smith’s The Wealth of Nations
The publication of Smith’s masterpiece that philosophizes on the wealth of nations is seen as the foundation that launched the discipline of economics. He is known as the father or founder of modern economics. To this day, Smith’s economic philosophy continues to be used by free-market capitalism in arguments against government regulation of trade.
While the study of economics has led to innumerable advances, the nature of economics has no single solution to the challenges that face the leaders and top economists the world over. International trade agreements were forged in the early 1990.
Image Courtesy: First Page, The Wealth of Nations by Adam Smith, Wiki Creative Commons
Stokes, Philip. Philosophy: The Great Thinkers. London: Arcturus Publishing, 2007.