Adam Smith And His Contribution To The Economy, His Main Contributions

Adam Smith and his contribution to the economy, his main contributions

Introduction

The year 1776 is considered a milestone in the history of economic thought. It is, in reality, the point where it starts, and without continuity solution, the economic thought of Western culture that, together with the globalization of the business world, becomes dominant worldwide.

Among its most important contributions include: the recognition of the division of labor, understood as specialization of tasks, for the reduction of production costs, capital accumulation as a source for economic development, and the defense of the competitive market as the most mechanismefficient resource assignment. The prediction of possible conflicts between owners and factories and workers their main theoretical contribution is the analysis of the mechanism through which the free market game (both internal scale and in commercial relations with other countries) between the various sectors ofThe economy generates the maximum economic benefit of the group. Established a theory of the value of a good that distinguished between its exchange value (ability to be exchanged for other goods) and its use value (utility it provides).

Methodology

The present investigation was framed in a type of inductive reasoning through which, it obtained general conclusions from premises that contain particular or individual data obtained by the application of the different types of agricultural policies used in Ecuador. The research focuses its interest on establishing the implications generated by land trends, water management, technological development, financing and those that promote in Social Development Strategy. A method is outlined as a method as a method using a method using the pragmatic according to Lewin (1946), cited by Duke (2015), it allows reflexes. The research processes clarify the professional work of a management of specific social problems. Duke (2013), notes interpreting the paradigm as an investigation or action that studies a social situation to seek an improvement in the actions of the same.

To achieve the mentioned objective, the historical behavior of agricultural policy was carried out to explain whether its application contributed to claim to the social population. The information collected and analyzed within the investigative process is of a bibliographic nature of the secondary source.

Literature review

Biography

Adam Smith was born in Scotland on June 5, 1723. The city where Smith is Kirkcaldy, characterized by being a fishing area. (Smith, 2007)

When he was three months old, Smith was orphaned, since his father died. His mother was Margaret Douglas, and he was Adam Smith’s second wife. When he died, Adam was under his mother’s care, who is said to always be very close. (Zizek, 2018)

When he was 4 years old, an important event occurred in his life, since he was kidnapped by a group of gypsies. As soon as they noticed his disappearance, his family began to look for him until they finally found him in a forest, where he had been abandoned. (Fernandez, 2018)

Apparently, this experience did not leave sequelae in the psychological field, because according to the records found in history it is known that he was a child equally studious and affectionate, only that he was always weak and became easily ill. (Lives, 2009)

Smith finished his studies in 1746, when he was 23 years old, and that same year he returned to Kirkcaldy. He began looking for a job and his beginnings were as a speaker, providing exhibitions in Edinburgh.

Little by little it was reaching some fame in the academic field, since their conferences used to deal with issues as diverse as economics, history or even rhetoric. In addition, he managed to publish some writings at the Edinburgh Review, thanks to which he also became better known. (Cookies, 2019)

All this experience allowed him to be part of a group of teachers, academics, intellectuals and businessmen. Especially, there were men specialized in colonial trade, and the interactions they had with these men in these circles allowed him to learn a lot about the economic dynamics of the moment. (London, 2007)

In the midst of this context, Adam Smith published his first book in 1759;Theory of Moral Sentiment (the theory of moral feelings) (Cokiees, 2019)

The birth of a new economic thought was created with the classical school initiated by Adam Smith in the 18Posted in March 1776. His writing work began in 1767 in his hometown Kirkaldy. The clarity of his ideas and the great detail with which he wrote his work, he was so popular that in twelve years they published five times and translated into different languages. His treaty is divided into five books: the first refers to the division of labor (and, therefore, to technological progress), the theory of value and distribution of income;the second deals with money and accumulation;The third is a brief and very suggestive digression about the history of institutions and the economy since the fall of the Roman Empire;The fourth critically illustrates mercantilist doctrines and physiocratic principles;Finally, the fifth refers to public expenses and income and, more generally, to the role of the State in the economy. (Roncaglia).

This school set aside the investigations of mercantilism in England in terms of its restrictive policy, and the physiocratic school in France regarding the conception that agriculture was the only productive activity that could generate surpluses of money, explaining in detail and with aclear language the factors that allow the industry to generate greater surpluses through the division of labor. Smith published before his Economy Treaty a work on theory of moral feelings, which inspired some of the sections of his treaty, where he expressed that human behaviors naturally respond to six motivations: 1) selfishness, 2) Switches, 3) The desire to be free, 4) the sense of property, 5) the habit of work and 6) the tendency to exchange and change one thing for another (Pantoja, 2011)

Preceptor

In 1763 Adam Smith obtained a work proposal, which was going to mean much greater economic remuneration. The entrusted task was to be a preceptor of the Duke of Buccleuch. (Physiocrats, 2017)

Adam Smith took advantage of this travel time to write, but in 1767 the brother of the Duke of Buccleuch died unexpectedly, so that Smith and the Duke quickly returned to London.

Summit test

The year of 1767 was for Adam Smith the beginning of the creation of what would be his next job. This book was titled An Inquiry into the Nature and Causes of the Wealth of Nations (the wealth of nations), and turned out to be his most important work. Culminated to write it in 1776, six years after having started it. (Torres, 2018)

Two years later, in 1778, after the great reception that his latest publication had, Smith decided to retire. He moved to Edimburg and there he continued with his life, quietly and with total dedication to review and improve his two most important publications. (Rojas, 2015)

Economic theory

Adam Smith has been considered the father of economic liberalism. The main issue that disturbed him during his dissertations was the origin of wealth, being located in the context of the Industrial Revolution, when England considerably increased the production of different goods. (Acosta, S.F.)

Smith considered that mainly two factors are influenced: the market and augmented productivity thanks to the division of labor. (Torres, 2018)

Divided work

According to Smith, to make productivity increase, which is the primary objective, it is necessary to carry out a division of tasks;That is, a specific task will be done more efficiently if several specialized people are responsible for this task, and if each one is responsible for a given area. (Work division theory, S.F.)

This concept is easily observable in a factory or establishment, and Smith’s commitment was that, if this model works correctly in a given establishment, it would also work efficiently if the economy of a country was extrapolated. In this case, the appropriate term to be used would be the social division of labor. (Acosta, Economy and International Finance, 2019)

Within the dissertation on the division of labor. Smith was also able to conceive the aspects that would not be as positive, perhaps as a consequence of his philosophical formation. (Doxrud, 2015)

Among these unfavorable elements, Smith recognized the danger of such a marked specialization that workers became automatons carried out monotonous activities, which could negatively influence people’s intellectual skills. (Acosta, Economy and International Finance, 2019)

Market

For Smith, once the goods produced as a result of the division of labor were obtained, they had to be marketed through the exchange. Smith indicated that, by nature, human beings seek a benefit following our actions.

In this sense, according to Smith, everyone who produces a good and gives it to another, does so with the intention of having something beneficial for him. In addition, Smith proposed that this benefit would not be anyone, but that each person will always seek to obtain the greatest possible benefit. (Steve, 2019)

For Smith, the State should only defend the Nation against external threats, take care of the construction and maintenance of costs of common use for private ones, administer justice and defend private property. (Steve, 2019)

Plays

Adam Smith produced two fundamental works, which have transcended and have been a reference in the economic field at different times. Next we will describe the most relevant characteristics of each one:

Theory of moral feelings

This book was published in 1759 and is about the need to create moral judgments that are based on what he called a "natural order" established in society. (Krause, 2017)

In the creation of these judgments, what Smith called "sympathy" participated, which is the ability to relate personal vision to someone external. Thanks to sympathy it is possible to create that natural order, which for Smith was infallible. (Nicol, 2016)

The Wealth of Nations

It was published in 1776 and is Adam Smith’s most important book. In this reference the economic evolution of nations such as the Netherlands or England, it speaks of the market, the division of labor and the value-work relationship that it considers must exist. (CEIP, 2019)

According to Smith, to the extent that there is individual freedom, each person can benefit from the common interest – in an unintentious way -, managing to meet the needs of a society thanks to the application of a free market and free competition. (CO, 2018)

Main contributions

Intellectual founder of capitalism

Capitalism, as a based economic system, cannot be considered as founded by a man;From feudalism, commercial practices were carried out that showed signs of what capitalism would be centuries later.

However, Adam Smith is considered to be the first to theoretically develop his mechanisms. Smith addressed economic processes at all possible scales, and allowed to elucidate how some commercial methods had the ability to increase or reduce the riches of an individual, a company or a state. (Lives, 2009)

With these investigations, the Scottish economist allowed himself2009)

Theory of moral feelings

Smith’s first job, and the second in importance behind the richness of nations. Before deepening economic systems and commercial relations, Smith developed his own conception of man in society.

Smith considered man as a being who watches over his own interests above others. However, it is able to recognize the need to provide or accept helping and cooperation by others, as long as this also reports a maximization in its moral, spiritual or monetary return. (Acosta, Economy and International Finance, 2019)

For Smith, individuality prevailed about collective values, at a human and business level.

To justify how such a society could remain functional, Adam Smith resorted to the presence of an "invisible hand" that regulated human phenomena and behaviors, subjectivating his thinking. (Nicol, 2016)

The Wealth of Nations

In this work Smith develops individual points such as the conception of the free market, capital, the division of labor, etc. These factors in themselves that reinforce the importance of the author’s thought.

Free market

The economic theory of free market proposed by Adam Smith consisted of determining products to products according to its level of production and consumption;as well as the implicit laws of supply and demand. (Economy, 2019)

The free market proposed by Smith is presented open and without the intervention or regulations of state entities such as the Government.

Division of labour

It was the basis of these postulates that would later face Smith’s economic thought with ideas that seek greater economic equity.

Gross Domestic Product (GDP)

Developed in his work, the richness of the nations, Smith decided to put aside the national conception that existed at that time of measuring national wealth according to the deposits and reserves of silver gold that were had, and giving way to the classification according to the levels according to the levelsPRODUCTION AND COMMERCE INTERNS. (Fry, M, 2005)

From this basis the outline of one of the most used economic indicators in todayof all trade. (R, 2016)

Mercantilism

The mercantilist current has its beginnings during an interventionist period, which had a presence during the time when capitalism arises and prior to the industrial revolution. (Páez, S.F.)

The concept of mercantilism is attributed to Mirabeau (Guzmán, 2009), who uses it to explain those economic ideas that predominated in the period of the 16th century until the middle of the 18th century. (Páez, 2011)

During this period, the vanguard country is followed, which begins in Italy, in Spain, Portugal, France and England. (Izquierdo, 2007) An incredible monetary development is observed, we begin to discuss terms, for example, financial strategies and standards. After the development of mercantilism, different recurring are used as a commercial frame. (Javier Villanueva)

A long separation exchange was developed, which caused the obtaining of settlements abroad, which is more, to the deterioration of feudalism. (Escartín, 2010)

With regard to its importance, Spain was in charge of controlling New Spain’s monetary improvement. Shakers said it was a settlement that had a place with him, it was established that he could only play products with the city. (Gomez, 2011)

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