Adam Smith is one of the philosophers and political economist from Scotland who is well known for his influential work in the school of economics. He was born in 1723, and after attaining the age of fifteen years, Smith joined Glasgow University to pursue studies in moral philosophy. Under Lord Kame's patronage, he began to give public lectures in 1748. During his 20's, he explicated on his "natural liberty" philosophy where he opted to declare his Inquiry into the Nature and Causes of the Wealth of Nations (Adam, 2010). He was then appointed as a Glasgow University’s logic professor in 1751 and later on promoted to chair the department of moral philosophy. Smith came up with the Theory of Moral Sentiments in 1959 which earned him a great reputation.
In his later lectures, Smith laid more emphasis on jurisprudence as well as political economy (Kucukaksoy, 2011). The philosopher was later promoted to become the Duke of Buccleuch's tutor and made a lot of travels with his pupil where he interacted with most intellectual leaders. When he returned to his home at Kirkcaldy, he spent most of his time on his magnum opus. Smith was appointed to the post of customs commissioner in Scotland (1778) and opted to stay in Edinburgh with his mother. In July 1790, he succumbed to death after a throbbing illness. Adam Smith had dedicated a substantial amount of his earning to several hidden acts of charity.
Adam Smith's School of Thought
The first economic school of thought was the classical school and it is associated with Adam Smith, the Scottish economist including other British economists like David Ricardo and Robert Malthus. The classical school of thought's central idea is that markets can function well under minimum external forces like government control (Naz, 2014). This is one of the laissez-faire approaches which inclines to the belief that economic development can only be achieved if the efficiency of free markets is improved. According to the classical economists, "Markets should be left to work because the price mechanism acts as a powerful 'invisible hand' to allocate resources to where they are best employed" (Naz, 2014).The classical school of thought further holds that value is determined majorly by the scarcity of resources as well as the cost of production. Regarding the macro-economy, Smith and his fellow proponents of the classical school of thought made assumptions that the economy will constantly go back to the level of full-employment of actual production via the mechanism of automatic self-adjustment.
Adam Smith's Economic Theories
The Theory of Moral Sentiments
Although most of Smith's philosophical works are based on maximizing returns as well as self-interest, Smith's Theory of Moral Sentiments focused on the dependence of human communication on sympathy. This theory tries to explore the ideas of human sympathy and morality. In his approach, Smith introduced two concepts which are responsible for guiding human behavior; an "impartial spectator" and an inner man." The two concepts help in reconciling passion with reason since this is the basis for economic systems. They also help in generating a basis for creating institutions within human society. He further argues that self-preservation is expressed via a sense of justice and shared morality. According to Naz (2014), Smith postulated that an "impartial spectator” is embedded in the human mind during the interaction. Therefore, humans have an equally natural affinity for justice which help in promoting society's preservation and propagation.
The Theory of Political Economy of Capitalism
Smith is referred to as the "Father of Capitalism." The classical economist generated a social organization model whose basis was on perfect liberty. In his model, he tried to explore the role of capital accumulation, competition, private property and division of labor in creating an affluent profitable community. He gave insight into a society where individuals are driven by their self-interests devoid of external interference. Through his laws, Smith established that a society with self-motivated individuals who are competing would have surplus commodities at market price. However, he noted that this is only true when there is a perfect liberty market. Smith, therefore, concluded that "individual self-interest in a market economy, under the condition of perfect liberty, is guarded through competition rather than any planning authority" (Naz, 2014). This is because competition transforms the individuals' selfish motives via a self-regulating market system for society's orderly production.
Adam Smith's Significant Contribution to the School of Economics
Adam Smith made profound contributions to the classical political economy. In his work of Wealth of Nations, Smith proposed various economic models including the division of labor, the value labor model as well as the state's role in an economy. Regarding division of labor, Smith proposed that this would lead to increased production leading to efficient use of resources including lowered production price. As a result of the Smith model of division of labor, society was able to realize a skilled workforce, time-saving in the production process as well as machine invention which increases production efficiency (Kucukaksoy, 2011).
Moreove, in the Wealth of Nations, Smith advocated for a free-market in the allocation of resources which are scarce in society. He argued that society should be a free-market with minimum government intervention so that prices of commodities are determined via the interaction between the demand and supply. He advocated for a market where buyers and sellers have freedom of choice regarding type, price, and quantity of products. This helped in benefiting society as individuals were able to act on their interests and firms would operate competitively to maximize profits. The free–market economy advocated by Smith helped society in achieving efficient utilization of resources (Kucukaksoy, 2011)
According to Adam (2010), even though there should be minimum government intervention in the economy, some state action is also necessary since to some extent, the government plays a vital role in the economy. Smith explained that the government plays four major roles in the economy: upholding the rule of law, protecting the society against market enemies, maintaining public infrastructure, and fostering justice. This model proposed by Smith contributed to the realization of an orderly society (Kucukaksoy, 2011).
References
Adam, S. (2010). Inquiry into the Nature and Causes of the Wealth of Nations.
Kucukaksoy, I. (2011). Adam Smith's conceptual contributions to international economics: Based on the Wealth of Nations. Business " Economic Horizons, 4(1).
Naz, F. (2014). Adam Smith's Model of Capitalism and its Relevance Today. Filosofía de la Economía, 3(1), 71-85.
