Adam Smith: Case Study

Adam Smith was an economist and philosopher born in Scotland in 1723, although the exact date of his birth is not know. He is considered to be the father of capitalism and published one of the most influential books ever written: The Wealth of Nations. Adam Smith believed that rational self-interest in a free-market economy leads to economic well-being, which is the basis on which capitalism was founded. His written works focus on the study of political economy, and are the foundation for classical economics.

In his book, The Wealth of Nations, Adam Smith proposes that a nation’s wealth should be based on the total of production and commerce, commonly known as gross domestic product (GDP). He also talks about the division of labour and explores the idea that specialization can lead to an increase in productivity. An example he uses is that that of a person making a small pin: “One man undertaking the 18 steps required to complete the tasks could make but a handful of pins each week, but if the 18 tasks were completed in assembly-line fashion by 10 men, production would jump to thousands of pins per week.”

Adam Smith was also an advocate for minimal government involvement. He believed that the “invisible hand” should guide businesses as opposed to government input. The theory is that the “invisible hand” guides supply and demand and, therefore, price. It places the power in the consumer’s hands, which can increase quality of products. Adam Smith was integral part of the Industrial Revolution and modern economics. His ideas encouraged governments of the Industrial Revolution to allow businesses to conduct themselves and helped them to get the most efficiency out of their workers. Adam Smith inspired change in an era that desperately needed it.