?Almost everybody who studies Economics or has an Economics course has heard about Adam Smith at least one time. Adam Smith (1723-1790) is a Scottish philosopher and economist. He is widely regarded as the father of economics as a social science, and is perhaps best known for his work The Wealth of Nations. Besides, he wrote many other famous books that have large influence to this day for example: The theory of Moral Sentiments, Essay on Philosophical Subjects, Lecture on Jurisprudence, etc. In these essay, I intend to outline some of Smith’s economic theories such as Invisible hand, the theory of Absolute Advantage and the theory of
First and foremost, I want to mention Adam Smith’s most famous theory- the invisible hand. He used this term describes the ability of market mechanisms to regulate supply and demand in the market. And compare the power of market mechanisms with the invisible hand that orients sellers and buyers, distributes economic resources to achieve maximum effectiveness society without government intervention. This idea is clearly showed in the book “Wealth of Nation”: “He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it”. It means that if each consumer is allowed to choose free 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 everybody and society. Furthermore, market intervention on the part of government is detrimental to market efficiency and should be eliminated. Adam Smith thought appropriate to capitalism in the long term - the period of free competition. But later, whe...