Todd G. Buchholz defines economics as the study of choice. Economists examine the consequences of the choices people make. The creation and evolution of economics over centuries came from the ideas of four economists: Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, Karl Marx, Alfred Marshall and John Maynard Keynes. These well respected economists help the theory of economics grow and become what it is today.
Economics started with the ideas of Adam Smith. He is credited as the first true economist. He had never taught nor took a class in economics. In his book The Wealth of Nations Smith alludes to the idea that self interest motives allows a nation to prosper entirely. People do something in order to gain something. Without any gain, people would be hesitant to start business or political ventures. These acts of selfishness make for a successful nation. From this ideas Smith created the theory of the “invisible hand”. This particular theory is related with the concept of supply and demand. The more goods there are to sell, the less people want; the goods are sold at a lower the price. If there are less goods people want it more, which leads to a significant increase in the price. This result in the market regulating itself; the ‘invisible hand” keeps the market afloat. Smith also emphasized on competition within the market. Without competition there would not be an “invisible hand” because a company turns into a monopoly. The monopoly controls the prices and leaves consumers without choice. Another one of Smith’s ideas was the “division of labor”. Smith was saying to divide labor amongst the workers, instead of have each laborer working individually. The example Smith used was a pin factory. He said that there would be more output of pins if every worker was delegated a specific part, instead of having individual workers work on one pin alone. It is like an assembly line. And of course, with a division of labor there will be differences...
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