Preview

Adam Smith: Views on Economics Mercantilist

Good Essays
Open Document
Open Document
847 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Adam Smith: Views on Economics Mercantilist
Adam Smith
Adam Smith looked at economics differently than the mercantilist. The old view of economics, mercantilism, believed that wealth was measured in terms of the amount of gold and silver the nation stocked, importing goods from other countries would negatively impact the wealth of a country, trade only benefited the seller and not the buyer, and nations could only become richer by making other countries poorer. Adam Smith believed the opposite by thinking that the wealth of a nation is based on production and commerce not the amount of gold and silver, free exchange increases productivity, both parties benefit during a free exchange and imports can be just as valuable as exports to a nation. According to “Making Adam Smith” in the Wealth of Nations Smith attacked Britain’s commercial policy because it “misdirected the nation's energies, weakened its colonies and plunged it into deep rivalries with its neighbors” because they believed wealth came from the gold and silver it hoarded (2010). Smith also believed that a company would progress and grow by allowing a free market because it would increase competition in the marketplace.
Due to this change in economic theory Adam Smith is believed to be the founder of classical economics. He also believed that there is an invisible hand present that guides people to produce the correct amount of their goods. Gorman gives a good example of this theory. His example is that a butcher, a baker, and a candlestick maker individually go about their business producing the amount of meat, bread, and candlesticks he judges to be correct. Then each buys the amount of meat, bread, and candlesticks that his household needs. All of this happens without their consulting one another or without someone telling them how much to produce (Gorman, 2003). Therefore this situation shows a free market economy in action and how the invisible hand guides. Smith believed the government should have a laissez faire attitude toward the



References: Gorman, T. (2003). The complete idiot 's guide to economics. Alpha Publishing. Laissez Faire. 2012. In Merriam-Webster.com. Retrieved July 31, 2012, from http://www.merriam-webster.com/dictionary/laissez-faire Making Adam Smith. (2010). Retrieved July 31, 2012, from http://www.economist.com/node/16740415

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Christian Ethics Project

    • 478 Words
    • 2 Pages

    The book talks about Adam Smith’s work titled, Wealth of Nations. Out of that book, came the Invisible hand quote. This quote is so popular, according to the textbook, it has been published in one million economic textbooks. To curb self-interest in an economy, Adam Smith…

    • 478 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Adam Smith’s The Wealth of Nations is extremely similar in that it postulates that the market will run smoothly when men are left to their rational self to pursue their economic desires. The market only runs smoothly and wealth is only spread when the market is free of policies such as protectionist measures. The rational individual will understand that developing industry locally is more beneficial to himself and therefore the community in which he invests (The Wealth of Nations, 16). The government plays next to no role in the economy, the market regulated by the “invisible hand.” Thus protectionist measures and other forms of market interference began to be greatly looked down upon as inferences within the market, and interferences with…

    • 123 Words
    • 1 Page
    Good Essays
  • Powerful Essays

    Karl Marx Vs Adam Smith

    • 1892 Words
    • 8 Pages

    During the 18th and 19th centuries, there were a series of intense discussions by the great thinkers of the time, on how the economy should be molded going forward. The two most prominent of these intellectuals were Karl Marx and Adam Smith. Combined they shared a vision of an emerging social system, which they had foreseen; and what we now know as capitalism. Marx called his theory “the capitalist mode of production”, while Smith referred to the idea as the “society of perfect liberty”. There are several similarities and differences between the two social systems, and through these ideas, we can find how the economic system we use today came to exist.…

    • 1892 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    Capitalism refers to the factors of production being privately controlled rather than by the state and that money is invested in businesses to make a profit. The foundation of capitalism was created by Adam Smith, a Scottish philosopher and economist, during the Age of Enlightenment. Smith’s objectives differed from those of the feudal empires and monarchies. The natural laws created by Adam Smith, which characterize the Industrial Revolution in the United States, led to a dramatic increase in competition and a transcendence in the rate of innovation, it is best exemplified through Thomas Edison and Nikola Tesla’s war of currents.…

    • 1553 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Scottish philosopher and economist Adam Smith was the father of laissez-faire capitalism. This form of capitalism opposed the idea of mercantilism. However, laissez-faire capitalism was appealing to many emerging political industrialists since it allowing factory owners to impose almost any circumstance on their employees without governmental interference. This ideology allowed for many years of greedy…

    • 619 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Gke1 Task 4 Analysis

    • 700 Words
    • 3 Pages

    Adam Smith, in his book The Wealth of Nations, wrote about the idea that production of wealth would increase if people pursued their self-interest in 1776, just before the Industrial Revolution took off. He went on to describe the division of labor, that is breaking the manufacturing of a product into several easier tasks to be done by separate people, commonly called an assembly line. The Industrial Revolution brought to life Smith 's ideas of division of labor and economic individualism with unrestrained competition, essentially birthing capitalism…

    • 700 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    How did the views of the mercantilist about the earth’s resources differ from those of Adam Smith in his book The Wealth of Nations? They were different because the book by Adam Smith wanted people to be prosperous, Rousseau wanted them to do good even if it meant for them to be poor, and the mercantilist was the opposite they didn’t believe in total loyalty of the community. Why might Smith be regarded as an advocate of the consumer? Because Smith had a strong argue for people to do good despite their wealth, and be highly encourage people to have loyalty to their community. How did his theory of history work to the detriment of less economically advanced non European peoples? His theories allowed people to let people go and find their own economic interest. How some enlightenment writers did criticizes European empires? They criticized the Europeans on their morals, conquest of…

    • 859 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    They believed that the government shouldn’t have any economic power and the economy should be left to the people. Adam Smith wrote “the obvious and simple liberty establishes itself of it’s own accord.”(Smith). What Smith is saying here is that government is not needed to establish economy, the economy will establish itself. In fact, the economy is better of without the government involved.…

    • 460 Words
    • 2 Pages
    Good Essays
  • Good Essays

    In addition, Britain's government pursued a relatively "hands-off" economic policy. This free-market approach was made popular through British philosopher and economist Adam Smith and his book The Wealth of Nations (1776). The "hands-off" or laissez-faire policy permitted new methods and ideas to flourish, which meant that the government could not interfere in relations between workers and business owners. In his book, Smith argued that private competition free of regulation produces and distributes wealth better than the government regulated markets. His arguments were to justify capitalism and discourage government involvement in trade and exchange. Smith believed that entrepreneurs seeking their own businesses organize the economy most efficiently.…

    • 925 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Modern political economic theory and philosophy can be greatly attributed to the works of two men who seemingly held polar opposite views on the subject. Adam Smith, a Scottish philosopher, published his most well known work An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 and is most often associated with the ideas and principles of the political economic system known as Capitalism. At the other end of the spectrum is Karl Marx; the German philosopher most often associated with Communism and the author (or co-author) of The Communist Manifesto. This paper seeks to discuss the core differences in their respective political economic philosophies with regards to what economic value is and what the role of government should be in their versions of political economy. This will conclude with the argument that while Smith's work had laid the foundation for modern economic philosophy, it was Marx who would ultimately leave the most significant impression upon the world with his revolutionary ideas.…

    • 2054 Words
    • 9 Pages
    Powerful Essays
  • Better Essays

    for a career, the way we eat or drink to conclude, the way we live.…

    • 1819 Words
    • 8 Pages
    Better Essays
  • Good Essays

    Adam Smith Research Paper

    • 1562 Words
    • 7 Pages

    Adam Smith was born to Margaret Douglas at Kirkcaldy, Scotland. His father, also named Adam Smith, was a lawyer, civil servant, and widower who married Margaret Douglas in 1720. His father died six months before Smith's birth. The exact date of Smith's birth is unknown; however, his baptism was recorded on 16 June 1723 at Kirkcaldy. Though few events in Smith's early childhood are known, Scottish journalist and biographer of Smith John Rae recorded that Smith was abducted by gypsies at the age of four and eventually released when others went to rescue him.…

    • 1562 Words
    • 7 Pages
    Good Essays
  • Good Essays

    Smith postulated that the amassment of gold and silver in a country's treasury doesn't mean much, but in fact it's the actual amount of trading that is done that defines a "Rich Nation". Smith reasoned that government interference in economy related issues only retarded growth. As an example, if the government agrees on granting monopole over a sector to a certain company, you banish competition and with it all efforts to advance and create new and cheaper products. Smith also postulated that without government intervention the market itself will regulate the economy through supply and demand. Facing this system that encourages private ownership of industries and free trade was communism. Communism is a very revolutionary ideology. Marx postulated that the capitalist regimes would be eventually over-thrown by the proletariat in what he called the "Class Struggle". Unlike capitalism, communism theoretically promoted a society where there was no class distinction, where the government would be handed down to the proletariat (working class), and where ownership of land, means of production, and riches by the working class government will be equally redistributed over all citizens. The individual life of a person in a communist society differs greatly from one…

    • 542 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Mercantilism suggested that a country's goverment should play an active role in the economy by urging more exports than imports, especially through the use of tariffs. A nations wealth, when it comes to mercantilism lays in its gold and silver amounts. Many physiocrats of the time opposed mercantilism because they saw it as exploition of business. The government collected substantial fees from guilds, and other groups. Therefore using them for their own profit. The government also restricted economic innovation, and regulated which goods would be made and what regions are to be traded with. This brought out many critics in the aristocratic classes. One of mercantilisms greatest critics was Adam Smith.…

    • 322 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    One of the explanation for the fact that the industrial revolution first took place in Britain was because scientific and technological ideas didn't suffer censorship by harsh or state that happened in many European countries at that time. Thousands of scientific breakthroughs occurred in this country, including Newton’s theory of force of gravity and one of the most influential sociologist, Adam Smiths. He was known as the founding father of economic liberalism in Britain. Smith’s findings changed people's view on “the perspective of God’s given the society, therefore, it could not be changed” to “it is possible to manipulate the society.” In 1759, he published “The Theory of Moral Sentiments”, which brought him to meet a French philosopher of Enlightenment, Voltaire. Smith has learned a lot about the economic system in French from Voltaire; he received valuable insights from Voltaire’s ideas. He learned that in France, the government allowed import of raw material to make sure the goods to be only produced in their country. Smith became more critical of import duties and restrictions. Smith also learned that the “division of labour ” was an important element in the economic system as it made one more productive. In other words the bigger the market, the more room for specialization in certain areas. The further increase of the productivity would lower the prices as the competition went up. Following by these inspirations, Smith started the expansion of the market. He openly criticized restrictions from both the guild and the governments, claiming that he is confident that the unregulated form of a free market will provide a sustainable wealth go the whole country. The British society began to change rapidly after Smith’s ideas occurred. Private citizens were redirecting rivers; they were also building long distance road for faster transportation. For instance, the…

    • 781 Words
    • 4 Pages
    Good Essays