Market Economy Notes
Market Economy Notes (Capitalism):
Capitalism was both an economic and political theory that grew throughout the Enlightenment. This is why it is sometimes referred to as “Classical Liberalism”.
Adam Smith (1723-1790)
-His books, The Theory of Moral Sentiments and An Inquiry Into the Nature of Causes of the Wealth of Nations were published in 1776.
-The Theory of Moral Sentiments: In the work, Smith critically examines the moral thinking of his time, and suggests that conscience arises from social relationships. His goal in writing the work was to explain the source of mankind's ability to form moral judgments, in spite of man's natural inclinations towards self-interest. Smith proposes a theory of sympathy, in which the act of observing others makes people aware of themselves and the morality of their own behavior.
-The Wealth of Nations: In this book, he established his political argument against mercantilism. Mercantilism is the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism. An essential part of the argument was for new political arrangements to be established. He argued that the basic unit for social analysis should be the nation, not the state. In this and other works, he expounded upon how rational self-interest and competition can lead to economic prosperity.
-In his works, Adam Smith used the phrase “the invisible hand”. He introduced this theory because he was trying to answer the question, “How do we survive in a world where we must depend on others, but humans are by nature self-interested individuals?” The theory for the invisible hand states that if each consumer is allowed to choose freely what to buy and each producer is allowed to choose freely what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all the individual members of a community, and hence to the
Capitalism was both an economic and political theory that grew throughout the Enlightenment. This is why it is sometimes referred to as “Classical Liberalism”.
Adam Smith (1723-1790)
-His books, The Theory of Moral Sentiments and An Inquiry Into the Nature of Causes of the Wealth of Nations were published in 1776.
-The Theory of Moral Sentiments: In the work, Smith critically examines the moral thinking of his time, and suggests that conscience arises from social relationships. His goal in writing the work was to explain the source of mankind's ability to form moral judgments, in spite of man's natural inclinations towards self-interest. Smith proposes a theory of sympathy, in which the act of observing others makes people aware of themselves and the morality of their own behavior.
-The Wealth of Nations: In this book, he established his political argument against mercantilism. Mercantilism is the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism. An essential part of the argument was for new political arrangements to be established. He argued that the basic unit for social analysis should be the nation, not the state. In this and other works, he expounded upon how rational self-interest and competition can lead to economic prosperity.
-In his works, Adam Smith used the phrase “the invisible hand”. He introduced this theory because he was trying to answer the question, “How do we survive in a world where we must depend on others, but humans are by nature self-interested individuals?” The theory for the invisible hand states that if each consumer is allowed to choose freely what to buy and each producer is allowed to choose freely what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all the individual members of a community, and hence to the