Father of Economics

Father of Economics: Let us know about Father of Economics. Adam Smith was an 18th-century philosopher noted as the father of modern economics, and a leading proponent of laissez-faire economic policies. In his first book, “The Theory of Moral Sentiments,” Smith offered the idea of ​​invisible hands—free market tendencies, regulating themselves through proposed competition, supply and demand, and self-interest. Smith is also known for his theories of equal wages, implying that hazardous or undesirable jobs pay higher wages to attract workers to these positions, but he is most famous for his 1776 book: “A Inquiring into the nature and causes of the wealth of nations.” Read on to learn about how this Scottish philosopher argued against mercantilism to become the father of modern free trade and the creator of what is now known as GDP.

early life

The recorded history of Smith’s life begins at his baptism in Scotland on June 5, 1723; However, his exact date of birth is undocumented. Smith attended the University of Glasgow at the age of 14, later attending the prestigious Balliol College at the University of Oxford. He spent many years teaching and tutoring, publishing some of his lectures in his 1759 book, “Theory of Moral Principles”. The material was well received and laid the foundation for the publication of “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776), which could eventually find its place in history.

theory of moral feelings

Smith is most famous for his 1776 piece, “The Wealth of Nations”, but his first major treatise, “The Theory of Moral Sentients”, released in 1759, used many of the ideas today.

Some may be surprised that in this book, Smith, known as the “father of capitalism”, discusses charity and human morality extensively in this first book. Much of the philosophy behind Smith’s work based on self-interest and maximization was “The Theory of Ethics,” a treatise on how human communication depends on empathy. The book explored larger ideas such as morality and human empathy. In the book, Smith argued that people are self-interested but naturally prefer to help others.

While this appears to be at odds with the economic views of the common people, it bears no better relation to the common abbey, the idea of ​​the invisible hand helping everyone through its own labor, the centered individual to offset this glaring paradox. does. (Father of Economics)

nation’s wealth

Smith’s 1776 work, “An Inquiry into the Nature and Causes of the Wealth of Nations”, also shortened as “The Wealth of Nations”, documents industrial development in Europe. Critics note that Smith did not invent many of the ideas that he wrote down, he was the first to compile and publish them in a format that would convince him of the average reader of the day. Responsible for popularizing the ideas that lead to the lore of thought known as classical economics.

Other economists built on Smith’s work to strengthen classical economic theory, which would become the dominant school of economic thought through the Great Depression.

Laissez-Faris philosophies, such as reducing the role of government intervention and taxation in free markets, and an “invisible hand” to guide supply and demand are among the key ideas Smith’s writings are responsible for promoting. These ideas reflect the concept that each person, by looking out for him, unknowingly helps create the best outcome for all. “It is not the benevolence of the butcher, brewer or baker from whom we might expect our supper, but for their own interest in relation to them,” Smith wrote.

By selling products that people want to buy, the butcher, brewer, and baker hope to make money. If they are effective in meeting the needs of their customers, they will enjoy financial rewards. While they engage in their enterprises for the purpose of earning money, they are providing the products that people want. Smith argued that such an arrangement, not only creates wealth for the butcher, brewer, and baker, Rather creates wealth for the entire nation when that country is populated with citizens, so that they can better themselves and meet their financial needs. Similarly, Smith noted that an individual would invest his assets in the venture that is most likely to help him earn the highest return for a given risk level. today,

“The Wealth of Nations” is a large-scale work, consisting of five books of two books each. The ideas promoting it gained international attention and helped move away from land-based wealth to wealth created by assembly-line production methods driven by the division of labor. An example Smith included the work required to make a pin. A person could make one pin each week in the 18 steps required to complete the tasks, but if 18 tasks were completed in an assembly-line fashion in ten terms, production would jump to thousands of pins per week.

In short, Smith argues that the division of labor and specialization produces prosperity. “It is, as a result of the division of labour, the great multiplication of the productions of all the different arts that, in a well-run society, the universal affluence that extends to the lowest ranks of the people,” says Smith. wealth of Nations”.

Adam Smith creates the concept of GDP

Ultimately through the ideas presented in “The Wealth of Nations”, Smith transformed the import/export trade into what is now known as gross domestic product (GDP) and argued for free exchange.

Prior to the release of “nation’s wealth”, countries declared their wealth based on the value of their gold and silver deposits. However, Smith’s work was highly critical of mercantilism; Instead, he argued that the country should be evaluated on the basis of the level of production and commerce. This sentiment formed the basis for measuring a nation’s prosperity on the basis of a metric called GDP.

Before Smith’s book, countries were hesitant to trade with other countries unless they made a profit. However, Smith argued that a free exchange should be created, as both sides trade better. This led to an increase in imports and exports, and countries kept their prices in check. Smith also argued for a limited government, he wanted to see a hands-off government and laws that were open and friendly to the free market. Smith saw government responsible for certain areas, however, including education and defense.

bottom line

The ideas associated with Smith became the foundation of the classical school of economics and earned him a place in history as the father of economics. Concepts that led to Smith, such as the invisible hand and the division of labor service are now prevailing economic theories. Smith was born on July 19, 1790, at the age of 67, but the ideas he pursued came to life in the form of institutions such as contemporary economic research and the Adam Smith Institute. In 2007, his image was placed on the £20 note by the Bank of England.