adam%20smith - Adam Smith and the Beginnings of Modern...

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Adam Smith and the B eginnings of Modern Economics The Wealth of Nations, published in 1776 Seen by many as the first exposition of capitalism Note that it was really written before industrial revolution took full spring Emphasizing the “benefits of profit-seeking, unregulated market economy” 1. The invisible hand and the operation of the market economy Smith argued that the free operation of the forces of supply and demand would result in the emergence of a “market price” (nowadays called an “equilibrium price”). This market price is responsive to the difference between supply and demand: If D>S, the price increases and vice versa. In the long run the price settles down to its “natural price”. This mechanism was called “the invisible hand” When the invisible hand was in operation, there was no need for government intervention The government needed to provide public goods: protection of property rights, national defense, roads, basic education
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adam%20smith - Adam Smith and the Beginnings of Modern...

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