Abstract
Adam Smith is the founder of Economics whose ideas have drawn a lot of attention among other economist. Being also a philosopher his famous works ' The Wealth of Nations' and ' The Theory of Moral Sentiments' describes the theory of price formation, relationship between market outcomes and the public interest, the role of the state and the sources of economic growth. This has shown path to many economist. Some of them agreed with him while some disagreed. His theories are also considered in modern economics as his models also relates to how people should treat themselves and others. Though there are many criticism, but we still consider him as a pioneer of classical economics and try to apply his theories in our modern economics. In this paper we discuss about his theories in detail, the criticism he faced from other economist and application of his work on modern life.Economic Theorist Adam Smith
We will discuss about the life and the theories of the father of social philosopher and political Economist, Adam Smith. He wrote the famous book" An inquiry into the Nature and Causes of the Wealth of Nations" in 1776.
Life of Adam Smith
Adam Smith was born on June 5, 1723 in Scotland. He went to Burgh School, where he studied Latin, mathematics, history and writing. He entered the University of Glasgow when he was 14 years old and then in 1740 he attended Oxford. He had given series of lectures in the University of Edinburgh and was appointed as professor to the Glasgow University in 1751. He died at the age of 67 on July 17, 1790.
Adam Smith's View on Wealth and price
The first book published by Adam Smith was 'The theory of Moral Sentiments' where the main focus was on the human mortality that depends on sympathy between the individual and other members of the society .Then in 1776 Smith Published 'The Wealth of Nations' where he makes it clear that his main concern is economic development and the long term forces that govern the growth of economy is the wealth of nations. By wealth, he meant not merely gold and precious metal nor the stock of capital of the economy at any moment of time, but the flow of income produced in the economy during a period of time. He also described the market mechanism or the price system as the 'Invisible Hand'. It happens because individuals take their private decisions in response to publicly known signals such as prices, while these signals respond to the collective actions of all individual decisions. Because of the importance of prices in market economies it is known as price system. He was the one who founded the classical free market economic theory and known as the' Father of Economics'.
Criticism of Adam Smith's work
At that time when British society was a religious society he was criticized by two social reformers Carlyle and Ruskin about economics and termed it as "dismal science'. The work of Smith which saw harmony and growth, which was criticized by Karl Marx, who had another view towards capitalism. He saw instability, struggle and decline. According to Marx a capitalist's profit comes from the exploitation of labor, which means giving less payment to the workers for the value they are creating. There were others who criticized him for putting too much emphasis on wealth, ignored human welfare, economic planning and the idea of his division of labor was revolutionary.
Application of Smith's theories
In today's world, many economists agree to his theory of capitalism and the 'invisible hand' is presented as a guide for the free markets and the capitalism provides the direction of efficiency through supply and demand, competition for scarce resources that results in the better-off of the individuals. His theory of international trade that connects with the division of labor and the concept of absolute advantage is used asan approach towards international trade.
References
Economic history: Smith's word (2013, November 1st) . Retrieved from www.economist.com/blogs/freeexchange/2013/11/economic-history
Adam Smith: The Concise Encyclopedia of Economics. Retrieved from www.econlib.org/library/Enc/bios/Smith.html
Marx's Critique of classical economics-Marxists internet Archive. Retrieved from https://www.marxists.org/archive/pilling/works/capital/geoff1.htm
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