Economic Chapter 3 - Adam Smith (1723-1790) - Father of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Adam Smith (1723-1790) - Father of modern economics and the found of capitalism - Outline in detail the characteristics and benefits of a complete economic system o Free market economy - An inquiry into the Nature and Causes of Wealth of Nations 1776 (took 12 years to complete) o America declared independence from Britain in the same year o Commonly referred to as the Wealth of Nations - Physiocrats reasoned that if unchangeable natural laws governed human behaviour and, therefore, the social, economic and political worlds o All human behaviour was controlled by nature laws then all the artificial laws created by humans were unnecessary and ineffective o People have a natural tendency to serve their own best interests and to acquire wealth, the pursuit of self-interest would ultimately benefit all individuals if they were left alone to create more wealth Laissez-faire Literally means leave to do or leave thing alone so that matters can work out naturally - Mercantilism is based on the state’s control of economic production and trade with the goal of exporting as many goods as possible for sale abroad while, at the same time, importuning as few foreign goods as possible o Required a protectionist policy to safeguard gold and silver reserves by limiting the entry of foreign goods Imposed tariffs to make them more expensive than the goods produced in the country More nations adopted this strategy and the trade between nations drops off Prices of all but the most common domestic goods would inflate The established merchants, industrialists and working class were handcuffed - Laissez-faire suggests to replaced state control with a reliance on natural laws to regulate economic activity - The American Revolution was a direct reaction to Britain’s economic control - The Enclosure Movement distributed land to farmers who ran it for profits o an age of new ideas and technological advancement spinning jenny, power loom and steam engine The Industrial Revolution - Self interest o Human beings are motivated primarily by self interest, or the desire to better conditions in life o Profit motive provides the major stimulus for economic growth and prosperity o When society requires greater production to satisfy its wants, it does not appeal to the generosity of producers, but rather to the desire of producers to increase their own profits o The trick is to ensure that this desire for greater profit does not completely overwhelm a producer’s sense of obligation to the rest of society There are completion between many producers, none of whom can raise their prices too high without losing customers Self interest and competition can work together to advance the common good - Invisible hand o Government regulations is not necessary to control the economy because the forces of market competition will serve as an invisible
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/16/2011 for the course ENGLISH 101 taught by Professor Parkin during the Summer '11 term at Wilfred Laurier University .

Page1 / 4

Economic Chapter 3 - Adam Smith (1723-1790) - Father of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online