A Summary Of Adam Smith - Ideas, Life & Legacy

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All you will ever need to know about the father of economics in 9 slides.

All you will ever need to know about the father of economics in 9 slides.

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  • Anyone interested in this should also read the Reddit discussion for a more nuanced view: http://www.reddit.com/r/Economics/comments/1tgnx6/adam_smith_all_you_need_to_know_in_9_slides/

    Adam Smith wouldn't quite be the darling of the American Right he is often painted to be.
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  • You missed a crucial quote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
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  • 1. ADAM SMITH Father of economics
  • 2. LIFE Moral Philosopher Professor at Oxford University and University of Glasgow Published ‘The Theory Of Moral Sentiments’ and then ‘An Inquiry into the Nature and Causes of the Wealth of Nations'
  • 3. THE MARKET Society can depend on unregulated capitalist markets rather than tradition or authoritarianism Self interest (guided by profit) motivates people to perform tasks required by society (what people are willing to pay for) Competition regulates greed i.e. over chargers lose to those that charge cheaper, even for wages Thus pursuit of self interest leads to communal prosperity Depends on freedom to pursue self interest and compete
  • 4. THE INVISIBLE HAND Supply and demand always uses prices and profits to signal to producers that society required. Thus producers, in search of profits, produce what society requires - in the correct quantity and at a competitive price. Too little of a good produced for society - high demand for low supply leads to high profit from high prices so attracts more effort into production and vice versa until at ‘equilibrium’
  • 5. GROWTH Division of labour (splitting up a task) allows workers to specialize in niches (leading to productivity, innovation etc.) Growth comes from the above Wealth = freedom + trade + division of labour Freedom - pursuit of self interest Trade - allows competition and global cooperation for division of labour; against mercantilism
  • 6. MARKET IS PROSPERITY Market will work for societal good if left alone (‘laissez faire’ from French Physiocrats) Guided by laws of ‘invisible hand’ rather than iron fist Capitalism today is unlike his ideal model - with less competition from monopolies, large unions etc. Less freedom and trade leads to less prosperity
  • 7. MORE LAWS OF PROGRESS Law of accumulation - profits will be spent for expansion until higher demands for wages makes profit margins thin and disappear Law of population - labour is subject to demand; as wages rise, more people will enter the workforce (e.g. through birth rates) and vice versa Increased population increases worker supply so lower wages and higher profit - laws counter balance for harmony Thus, progress inevitable and society will reach its reward
  • 8. LEGACY Formalized economic thinking - presented both sides whilst giving evaluative factors, then argued for his opinion on the best means for prosperity Optimism in dynamic progression of society Long discussions and digressions on prominent economic themes of his day
  • 9. TOP QUOTES It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. To feel much for others (is) human nature. All money is a matter of belief. On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity.