Defects In Smith's Market example essay topic

In eighteenth century England, one would know of a man by the name of Adam Smith and be marveled by his theories and philosophies. Early on in Smith's life he was noted for being an intelligent child which lead him to go to Oxford at the age of seventeen on a scholarship. Here the foundation of his future began, the teachers at Oxford were reluctant and thus Smith found himself reading whatever he chose including a questionable work of David Hume, A Treatise of Human Nature, which ends up being an influence on him. He remained at Oxford for six years, graduated, and then moved on to the University of Glasgow, where although many of his actions were often disapproved of, he was still admired among his students. Already known for his scholarly achievements, well educated although a self-taught graduate of Oxford, and his absentminded persona, his first book The Theory of Moral Sentiments greatly increased his notoriety.

The theory that he introduced about human self-interest and moral judgment attracted much interest and debate. He proposed that humans being selfish creatures are capable of moral judgment only due to their ability of placing themselves in the objective view of the third-person. The theories he spoke of in this book may be what spawned the ideas for his second book, The Wealth of Nations, the work he is better known for to this date. As a tutor to the son of Townshend, they went to France together and spent just over a year in Toulouse in absolute boredom.

They then moved to the south of France and met Voltaire whom Smith worshipped, then to Geneva, and to Paris. This is when Smith began work on a treatise of political economy, this was the official beginning of a book later to be known as The Wealth of Nations but it would be 12 years before its completion. In Paris, Smith, after learning a limited but decent amount of French, was able to talk to one of the greater French economic thinkers, a doctor by the name of Francois Quesnay, the creator of the economic school Physiocracy. Part of this Physiocracy was a chart called a tableau e conomique that insisted that wealth sprang from production and that it flowed through the nation, from hand to hand, replenishing the body social like the circulation of blood. The main problem with Physiocracy was it insisting only the agricultural classes produced true wealth and that manufacturing and commercial classes only affected it in a sterile way.

Even though it introduced a laissez-faire view of the economy which was not common in their time, it still failed to recognize the importance of labor everywhere and not just on the land. Smith perceived that labor was the source of value. After some unfortunate incidents involving who he was tutoring, Smith moved back to England where his book started to form. This was when Smith met Benjamin Franklin, who then gave him information about the new American Colonies and made him gain a certain appreciation for them and the significance they may later have. His book was finally published in 1776. Although it wasn t necessarily an original book, it's ideas weren t all new, but in this work Smith was able to combine all of the great ideas and theories of those before him as he also mentioned over a hundred authors.

Smith was extensive with his credits as he was with the entire book. He touches on an incredible amount of subject and continues on side details for pages giving it a general unorganized layout. It was never meant to be a textbook, but it still didn t fall short of being a revolutionary masterpiece. He doesn t focus on any one class or side, but instead explains the role and importance of each.

His concern was the condition and wealth of the entire nation, all of society. Being in a modern world, where the consumption of goods and services is what drives the economic life. One of Smith's main purpose was to lay out a basic mechanism by which society keeps together. He managed to put basic principles behind the busy industrial world that keeps it working without any central planning or any set tradition. This is Smith's concept of the invisible hand where the private interests and the passions of men are naturally directed towards which is most agreeable to the interest of the whole society.

Here he brings up this concept of the market mechanism, where the individual is kept in line with everyone else and will only change if all changes over the years, but will still remain within this mechanism. These simple laws tell us that given to certain circumstances, evaluating them will bring about foreseeable results. They show us how the drive of the individual self-interest does not ruin the economy by resulting in competition. Then this competition leads to giving the goods that society wants in the amount they want in order to sell their product, therefore any individual cannot raise the prices above a competitor. Smith was able to recognize self-interest of the producers and consumers as a driving power to guide men to whatever work society is willing to pay for. Still, this isn t the entire package, because a community activated only by self-interest would be a community of ruthless producers interested only in their profit.

Competition is what keeps this balance level and the selfish motives of men are to yield the most unexpected of results of balance. One's self-interest will cause them to raise their prices above their competitor but then they lose their business to the cheaper competitor. Also a producer should not expect to produce more than the quantity demanded and expect to sell out of their good no matter what good it may be because it will only result in surplus and a loss of money. This idea that Smith introduced is one of an economy that yields to the wants and demands of society. Also, workers fluctuate along with the market. When the demand for a product is high, the wages will be higher in that field because there is more money being made.

Once the employment is filled and the demand for the product goes down, the wages will become low in that trade causing workers to move onto another field. With these simple explanations he has clarified many aspects of the economy, including how prices are kept from drastically changing, how society can make the producers provide them with their wants, why high prices occur and how they are brought back to balance, and he has accounted for a basic similarity of incomes and prices and each level of a trade, this all resulting in a self-regulating system. With this system, one may do whatever one pleases with the market but if it doesn t abide by the wants of society, there is sure to be economic ruination. Another point of Smith's was the concept of specialized labor.

He was able to recognize that this does greatly increase productivity but he also didn t strictly believe in this division of labor. Smith, being quite the humanist, believed that this would cause a man to be dull and uneducated and although increasing production this was something to be careful of. The world that Adam Smith referred to was one where there was no agent powerful enough to interfere with or to resist the pressures of competition. Although this world may have been very different from ours but these laws are the basis for much of the economic theory of today. The law that drives society to grow to this wonderful multiplication of wealth and riches is known as the Law of Accumulation. Following the same basic structure as Smith's other laws, this one pertains to that a capitalist should always accumulate their savings.

Not so as to just accumulate to become wealthy, but instead the accumulation of capital is a vast benefit to society by improving the welfare of the community. He believed in accumulating so that the world may benefit, but there is also a point where further accumulation would be impossible and cause all the savings to be eaten away. This is what prevents the self-interest of man to get in the way of the market. After a certain amount of accumulation, there is only so much the producer can do with their money that further expansion would only prove in bankruptcy (ex: Planet Hollywood). This law also deals with second great law of the system, the Law of Population. In this, laborers could be produced according to the demand.

Where wages were high, there would be an increase in workers, and when wages fell, these workers would decrease, also influencing the production of men. Smith believed that higher wages do affect birth rate slightly, but that these children will just be more children that are part of the working age. Provided that the market mechanism is not tampered with, Smith has found a new way to look at it all in a cyclic pattern of cause and effect. Everything is determined by the preceding link and the only outside affect ors are public tastes, which guide the producers, and the physical resources of the nation.

This cycle is what brings everything back toward a subsistence level and takes care of the needs of society if it was left alone. The interference of government was undesired because Smith considered governments spendthrift, irresponsible, and unproductive. But, these classical views did not expect the Industrial Revolution. Smith believed in a static community that grows but never matures. Although modern economist may point out defects in Smith's market, none could improve on the richness and life that Smith contained in this world.

No one may ever encompass his age again as did Adam Smith.