Economics

Adam Smith is one of the most important figures of modern history. He was a philosopher, a lecturer, a professor, an author, and an economist. He wrote two very important books that have since been used both in the study of philosophy and economics today. Adam Smith is regarded as the father of modern economics.

His first published work was The Theory of Moral Sentiments, released in 1759. The book explores the ability of man to tap into his moral compass. It focuses on the importance of sympathy and its role in human desires (Asaraf, Camerer,  Loewestein, 2005). In the book Smith emphasized the relationship of passion-driven behavior and empathy for another person (Asaraf, Camerer,  Loewestein, 2005). While The Theory of Moral Sentiments is only considered as Smiths second most popular work, he described it as his most valuable work (Ross, 1995).

The book that brought Smith much success is An Inquiry into the Nature and Causes of the Wealth of Nations that he wrote in 1776. Smith introduced many of the modern takes on economics in this masterpiece. So viable are the precepts that he presented in this book that they remain the fundamental backbone of the study of modern economics.

It is in this book that Smith expounded on his invisible hand (Smith, Ed. 1909). He also explained the strength of labor in economic growth. The book, more popularly referred to as The Wealth of Nations (Ross, 1995), essentially shifted the study of economics from mercantilism, the widely accepted view, to free trade (Hirst, 1904). Smith challenged the popular notion of his time and presented a more progressive point of view. Smiths concepts presented in the book became the standard by which most economists interpret market growth today.

Adam Smith was born in Scotland in July 5, 1723 (Hirst, 1904). He first studied at University of Glasgow then transferred to Oxford University. He completed a degree in Moral Philosophy. He preferred the instruction of Glasgow and later on in 1751 earned a professorship in the university. He first taught logic courses. Smith was a professor for 13 years. He described his experience in teaching as by far the most useful and therefore the happiest (Ross, 1995). It was during his time of teaching that Smith began to develop his own concept of economics. His numerous lectures will soon resonate into his writings.

Adam Smith essentially shaped the way economics is studied today. It was in his book The Wealth of Nations that the concept of free trade (Smith, Ed. 1909) was first considered a factor in economic growth. During his time, colonial movements were happening around the world. Smith thought it logical that free trade be a common market practice (Ross, 1995). He proposed that for countries to survive intense competition around the world, they should be able to assimilate themselves with the changing times and be open to other ways of conducting business.

One of the most significant arguments Smith made in this book is on division of labor (Smith, Ed. 1909). When at that time economics was explained by capitalism, Smith stepped in and illustrated how labor is the stronger force in growth. He proved that success of markets is determined by the potency of labor. Division of labor therefore establishes the viability of markets. Smith put forth a definitive case against common understanding of that time. When his fellow economists accepted that stability of markets is determined by the amount of gold and silver in reserve, Smith showed otherwise. He determined that economics is not about the amount of gold and silver a country has, it is about the power of its labor force to continue producing and increasing.

Smith offered another revolutionary concept in the book by presenting the idea of the invisible hand (Ed. 1909). In this proposition, he emphasized the ability of markets to be self-regulating. He believed that distribution and pricing are reliant on the freedom of buyers to decide what to buy and freedom of sellers to choose what to sell. Thus in this uncomplicated notion of Smith, he outlined what is better known as supply and demand. He explained how the invisible hand can have a controlling effect on where a market goes.

Smiths invisible hand stirred up so much controversy during his time. It continues to generate different reviews until today. It only shows the intensity of Smiths influence in the study of economics.

One of the most outstanding points Smith raised is in the concept of self-interest (Ed. 1909). He determined that economic behavior is motivated by selfish desires (Arasaf, Camerer,  Loewestein, 2005). Many say this is in contrast to what Smith supposed in his first book, that men are driven by their sympathy towards others (Ed. 2004). However as Smith further explained self-interest, it is in fact congruent to his former conjecture.

In The Wealth of Nations Smith showed how self-interest plays a major role in social consciousness. His idea of self-interest goes together with the invisible hand. He suggested that while self-interest is initially the motivation that makes people move, it consequently leads to the advancement of society.

This is the biggest contribution of Adam Smith to economics. He introduced the flow of economics by fusing together old principles with his new ideas. He boldly altered the view of the study entirely. This is the reason why Adam Smith is considered as the pioneer of contemporary economics.