Why Adam Smith is Important
Adam Smith: an author, philosopher, and an economic pioneer. But what about Adam smith makes him so important? Born on June 16, 1723, Adam Smith is best known for writing a book titled the Wealth of Nations. In his book, Smith discusses the fallacies of commonly accepted economic philosophies, while also proposing better and more correct ideologies.
Before Adam Smith Came Along
Before Smith had written his Wealth of Nations individuals only viewed national economics as “importing vs exporting” terms. Many assumed that importing goods into the country was bad due to fact that money was leaving the country. This of course meant that exporting was good, because money was entering the country. This ideology lead to many countries making it so they could limit the importing that they did. Some tactics includes taxes on imported goods, and protection for domesticated industries.
Why is Free Trade Good?
Adam Smith argued that free trade among nations was a good thing. He stated that both sides of a free trade would benefit from a trade or exchange solely because no one would agree to a trade if they didn’t gain some sort of benefit from it. With this ideology smith proved that imports were just as good as exports. Instead of arguing against the old philosophy that amount of money equals wealth, Smith provided a new way of thinking about it; he suggested that wealth is based on production and commerce.
The Invisible Hand
One of Smith’s biggest philosophies discussed in his Wealth of Nations was a little thing called an “invisible hand”. He proposed that there was/is an unobservable force that guides the free market and will allow it to reach an equilibrium in supply and demand. Smith stated in his book,
“[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”
In summation, with out Adam Smith and his philosophies, we as a society would still be stuck in a old-viewed economic world. Adam Smith has taught us the importance of trade with others and that pure wealth is based on more than just actual money. But most importantly, Smith has taught us that the social order of the market did not need be regulated by the government anymore because the “invisible hand” will take care of the free market.