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Adam Smith- Wealth of Nations

Matt, Tom, Kiki, Liam, Brett

Brett Carson

on 26 November 2012

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Transcript of Adam Smith- Wealth of Nations

•Smith begins his article on the division of labor
•He uses the example of a pin maker to show how it is more efficient to get more work
•Smith exclaims that when constructing a pin (or anything) you must be skilled and use your strength to be more efficient
•Smith states that it is better to have more people that are extremely skilled and specialize to complete a product instead of one person who has more of a general knowledge. Or to have a whole bunch of people that have no skill
•With using your strength working together with man is how man succeeds
•Smith also believes that all men know this and apply it because that is how companies succeed
•“This division of labor, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is necessary, though very slow and gradual, consequences of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter and exchange one thing for another.” 506, paragraph 2
•Smith views of the division of powers is that he believes that it is human nature
•Human nature to be rational, get ahead and help out society
•The division of labor is not a selfish thing it is so that man can help out one another to get ahead and use each other to their advantages in a nice and rational way
•The division of power is based on Smiths perception that all men are rational Division of Labor KW The Wealth Of Nations Kiki, Tom, Brett, Matt and Liam The Invisible Hand Laissez Faire is a French term that translates to "Let them do". In economics or political philosophy, Laissez Faire is used to describe an economy that is unfettered by government, whether through taxation or fixed prices. Smith explores the concept of a free market and believes that it is beneficial to a nations economic prosperity. Smith argues that government intervention is not needed in markets since his "Invisible Hand" is there to regulate the trade. Laissez Faire The Invisible Hand is a natural phenomenon that
guides free markets and capitalism through
competition for scarce resources. Biography Adam smith uses the Invisible Hand as a symbol to explain the self-
regulating behavior of the market place. Therefore to conclude Adam Smith had many ideas and concepts regarding the economy and how humans work. He was very outspoken and had a major input on how society looked at the economy back then and even today his ideas are still used. The Wealth of Nations made it very clear on how Smith viewed mankind and his ideas were predominately shown throughout the whole document. The Invisible Hand supports Smith's claim that individual's efforts to
maximize their own gains in a free market benefits society. Conclusion Market Price = Lowest Price for seller & Highest Price for buyer
= Consent
*Just because both parties consent does not mean it is fair
*In order for consent, the 3 constraints must be met;
1. People are rational
2. People have access to perfect information
3. There must be perfect competition The concept of the invisible hand was introduced through the
observation of supply and demand. Questions - Born in Kirkcaldy, Scotland. Date of birth is unknown but he was baptized on the 5th of June, 1723
- Attended Burgh (elementary) School of Kirkcaldy to study latin, mathematics, writing and history from 1729 to 1737
- Attended the University of Glasgow in 1738. There, he met his mentor and close friend Francis Hutchenson
- In 1740, Smith received a scholarship to Oxford University in England, which he accepted
- Smith disliked the teaching styles that were prevalent at Oxford and left before his scholarship ended in 1746
- Met David Hume in 1750, they remained close friends for the rest of their lives
- In 1751, he was given a teaching position at the University of Glasgow, teaching logic
- In 1763 he became the tutor to the young Duke of Buccleuch. They later traveled across Europe together
- In 1776 he published his magnum opus "An inquiry into the nature and causes of the Wealth of Nations"
- He died on the 17the of July, 1790 in Edinburgh Scotland Are Smith's writings influenced by any of the other philosophers we've examined in this course? If so, whose? Where are they evident? On page 507, Smith compares the intelligence of men and animals:
“In almost every other race of animals each individual when it grows up to maturity, is entirely independent, and in its natural state has occasion for the assistance for no other living creature. But man has almost constant occasion for help of his brethren, and it is in vain for him to expect it from their benevolence only.”
Do you agree on Smiths perception of man? Do you think that man cannot be independent? One of Smith's key concepts is Division of Labors. On page 506, he states that this is not the result of wisdom gained over time but the very nature of mankind. Do you believe that all men have the intelligence to be rational and use this concept to be more work more efficiently? Smith completely opposes mercantilism and believes that it's the reason for monopolies and lack of perfect competition. Do you believe that this is the true or is Smith's theory flawed? Adam Smith Key Concepts BC MS Mercantilism LH “It is because mankind are disposed to sympathize more entirely with our joy than with our sorrow that we make parade of our riches and conceal our poverty.”
Smith uses this idea to illustrate the cause of a materialistic consumer society. Do you agree or disagree with this theory? Why? Do you believe that free markets work because of the nature of humans, or the nature of humans is dictated by the implementation of a free market? Adam Smith believes that through a free market, a nation’s economy will undoubtedly flourish. However, we can see many instances where this belief is challenged and doubted. What are some examples? Mercantilism is an economic doctrine that poses the ideas that economic growth is zero sum and that government control over foreign trade maintains the most military stability. Smith and his writings completely opposed mercantilism. While Smith promoted international trade and open markets, mercantilism offers such policies as:
-Building a network of overseas colonies
-Forbidding colonies to trade with other nations
-Banning the export of gold and silver
-Forbidding trade to be carried in foreign ships
-Limiting wages
-Maximizing the use of domestic resources “The natural effort for every individual to better his own condition”. Smith believes that the natural goal of mankind is to better oneself. Do you think that man's desire to achieve self-fulfillment betters or worsens an economy? Does it better or worsen society in general? TS Smith talks of the great economic advantages
that the division of labor grants, on page 506
he states "This division of labor, which so
many advantages are derived". The division of labor did propel many Nations into prosperity
such as Great Britain, but what physiological
implications could the division of labor pose
to a society? In opposition to the beliefs of Adam Smith, how do you
think Jean Baptiste Colbert would react to the world
of economics today from a mercantilism point of
view? What significant changes or events would occur
if the world today were suddenly run by mercantilism? On page 508 Smith states "the principle
which prompts to expense, is the passion
for present enjoyment (...) But the principle
which prompts to save,is the desire of bettering
our condition". Do you think in today's society
that people are rational enough to save their capital
to better their conditions? From the secondary source, If Adam Smith Were Alive Today, Henry Kaufman states that if Adam Smith were alive today,"He would no doubt applaud the rise in living standards and the rapid industrialization in many parts of the world..." Do you agree or disagree with this assumption? If so, what aspects of living standards and industrialization do you believe he would praise most? If do not agree with Kaufman's assumption, why? Are all of Smith's theories just as relevant in today's economies as they were when he first created them? Where can you see Smith's theories influence today's economies?
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