Adam Smith

Examples of Adam Smith in the following topics:

• Classical Theory

  • Notable classical economists include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus, and John Stuart Mill .
  • Adam Smith referred to the market's ability to self-regulate as the "invisible hand" because markets move towards their natural equilibrium without outside intervention.
  • Adam Smith was one of the individuals who helped establish classical economic theory.

• Key Differences

  • Stemming from Adam Smith's seminal book, The Wealth of Nations, microeconomic and macroeconomics both focus on the allocation of scarce resources .
  • Adam Smith's book, Wealth of Nations, was the basis of both microeconomic and macroeconomic study.

• Classical Liberalism

  • Classical liberalism developed over the course of the 1800s in the United States and Britain and drew upon Enlightenment sources (particularly the works of John Locke, Thomas Hobbes, and Adam Smith).
  • Classical liberals agreed with Adam Smith that government had only three essential functions: protection against foreign invaders, protection of citizens from wrongs committed against them by other citizens, and the building and maintaining of public institutions and public works that the private sector could not profitably provide.
  • Adam Smith was a Scottish moral philosopher, pioneer of political economy, and a key figure in the Scottish Enlightenment.

• Introduction to Microeconomics

  • Adam Smith [1723-1791], Thomas Malthus [1766-1834] and David Ricardo [1772-1823]), economics was treated as part of philosophy, religion and/or moral philosophy.

• Competition-Based Pricing

  • Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. " It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly-valued uses and encouraging efficiency.
  • Smith and other classical economists before Cournot were referring to price and non-price rivalry among producers to sell their goods on best terms by the bidding of buyers, and not necessarily to a large number of sellers or to a market in final equilibrium.

• Individuals and Community

  • Adam Smith (1723-1790) points out that markets are subject to abuse:
  • But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary (Smith WN, p 128).
  • It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it (Smith WN, p 250).

• Laissez-Faire Versus Government Intervention

  • Historically, the U.S. government policy toward business was summed up by the French term laissez-faire -- "leave it alone. " The concept came from the economic theories of Adam Smith, the 18th-century Scot whose writings greatly influenced the growth of American capitalism.
  • Smith believed that private interests should have a free rein.
  • Smith did favor some forms of government intervention, mainly to establish the ground rules for free enterprise.

• The Rights of Englishmen

  • Adam Smith, a Scottish political economist, extended on some of Locke's arguments by theorizing a relationship between government and trade.
  • In "The Wealth of Nations", Smith argued that, rather than directing and controlling a nation's economy, the best kind of governments encouraged the development of free markets--in which trade with other nations was unfettered by mercantile policies.
  • According to Smith, government should be limited to defense, public works, and the administration of justice, financed by taxes based on income.
  • Essentially, Smith envisioned the government's role in the economy as a minimized (even nonexistent) presence, with the "invisible hand" of supply and demand determining economic policy.
  • Smith saw self-interest, rather than altruism, as the motivation for the production of goods and services.

• Morality, Justice and a Stable Society

  • Adam Smith (1723-1790) is used to express these ideas here since he is generally regarded as one of the first writers to advocate a system based on morality, markets and law.
  • On the first page of Theory of Moral Sentiments, Smith writes:
  • Smith continues on the role of society in the formation of individual values:
  • Smith recognizes that beneficence and morality cannot be the only mechanism that creates order in society.
  • Smith is not the only writer to argue the importance of justice and morality in the proper functioning of society.

• The Election of 1796

  • Paradoxically, Hamilton himself opposed Adams and worked to undermine his election.
  • In the election, Federalist John Adams defeated Democratic-Republican Thomas Jefferson by a narrow margin of only three electoral votes.
  • It caused much discord between Adams and Jefferson, with Jefferson leveraging his position as vice president to attack President Adams' policies and Adams alienating Jefferson from all cabinet and policy decisions.
  • Smith of South Carolina presented a resolution on the floor of the House of Representatives for an amendment that would allow the presidential electors to designate which candidate would be president and which would be vice president.
  • The majority of votes for Jefferson came from the southern states and Pennsylvania, while the majority of votes for Adams came from the northern states.