"An inquiry into the nature and causes of the we alth of nations" in Adam Smith's theory

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:47

The work of Adam Smith had a huge impact on classical economic theory. First of all, the merit of the author was the kind of clear system that he gave to the economic structure of society.

The idea of economic freedom

The most popular ideas of Adam Smith acquire in Europe during the formation and development of capitalist relations. The interests of the bourgeois class were to provide it with complete economic freedom, including those focused on the purchase and sale of land, hiring workers, using capital, etc. The idea of economic freedom in practice, no doubt, was a progressive moment in the development of society, as it restrained the arbitrariness of monarchs and gave ample opportunities for the development of productive forces in the economic system.

The ratio of the roles of the individual and the state in the economic system

The philosophical foundations on which Adam Smith's theory was based concerned primarily the system of obtaining and distributing profits, social and ethical norms of economic activity, the role of the state in regulating economic processes, as well as the role of individual entities (groups of entities).

From the position of Adam Smith, the state should act as a so-called. "night watchman" It should not establish and regulate economic processes, its main function is in the implementation of the judicial, constituent, as well as protective functions in society. Thus, the role of government in the economy, from Smith's point of view, should be minimized.

As for the role of the individual, here we should refer to the idea of "economic man". Smith's "Inquiry into the Nature and Causes of the We alth of Nations" characterizes the individual within the economic process as a person with a selfish orientation, guided in his actions by considerations of personal gain. The actions of the "economic man" are built on the principle of equivalent compensation. This principle forms the system of economic exchange, which is the foundation of a natural market economy for human life.

The law of the "invisible hand"

Besides the state and individuals, economic processes in society are regulated by certain economic laws. Adam Smith calls them "the invisible hand". Actionsuch laws do not depend on the will and consciousness of society. However, the management of economic processes is an order of magnitude higher than management at the state level. In turn, each individual, guided by his own benefit, can bring much more benefit to society than if he was oriented to the benefit of society from the very beginning.

We alth of Nations System

"A Study on the Nature and Causes of the We alth of Nations" by Adam Smith singles out the number of working subjects in the state and the productivity of these subjects as the basis of we alth. The source of we alth, in turn, is determined by the annual labor of each individual nation, people, based on its annual consumption.

The system of division of labor is a necessary condition for productivity. Thanks to it, working skills for a particular operation are improved in the labor process. This, in turn, determines the savings in time required for workers to move from one operation to another. The division of labor at the micro and macro levels, as Smith's Inquiry into the Nature and Causes of the We alth of Nations defines, is different in origin. In the course of the work of the manufactory, the specialization of the workers is determined by the manager, meanwhile, the “invisible hand” mentioned above functions in the national economy.

The lower limit of a worker's wage should be determined by the value of the minimum means necessary for the subsistence of the worker and his family. There is also a place herethe influence of the material and cultural level of development of the state. In addition, the amount of wages depends on such economic characteristics as the demand and supply of labor in the labor market. Adam Smith was an active supporter of a high level of wages, which should improve the situation of the lower strata of the people, motivating the material worker to increase his labor productivity.

Essence of profit

Smith offers a dual definition of profit. On the one hand, it represents a reward for the activities of the entrepreneur; on the other hand, a certain amount of labor not paid by the capitalist to the worker. At the same time, profit depends on the amount of capital involved and is not related to the amount of labor expended and its complexity in the process of managing an enterprise.

Thus, "The We alth of Nations" by Adam Smith formed a special idea of human society as a gigantic mechanism (machine), the correct and coordinated movements of which, ideally, should provide an effective result for the whole society.

Subsequently, Smith's idea that in order to make a profit, each individual must proceed from his own interests, was refuted by the American mathematician John Nash. From his point of view, there are situations in which there is a "disadvantage" (negative amount or mutually beneficial relationship). At the same time, Nash notes the fact that this behavior of economic entities meets cultural norms (refusalviolence, perfidy and deceit). A trusting atmosphere between subjects was considered by Nash as a necessary condition for the economic well-being of society.