Adam Smith

Who Was Adam Smith?

Adam Smith was a Scottish philosopher and economist. This great personality was a pioneer of political economy and considered a towering figure in the history of economic thought.

Smith wrote two incredible works titled The Theory of Moral Sentiments (1759) and An Inquiry Into the Nature and Causes of the Wealth of Nations (1776). The central idea of these classic works was that the need to fulfil self-interest results in societal benefit (also called The Invisible Hand). Apart from this, he is known for revolutionising and transforming the face of economics.

Early Life

Adam Smith was born in a small but thriving fishing village called Kirkcaldy, Fife, Scotland, near Edinburgh, on June 5, 1723. He was raised in this village only up to the age of 4, where he received his elementary schooling. After that, he was kidnapped by gipsies. However, the young Smith was abandoned by his captors when people went to rescue him.

He managed to enter the University of Glasgow at 14. Smith was profoundly influenced by Francis Hutcheson, a renowned philosophy professor at the University of Glasgow. Adam won a scholarship in 1740 when he was 17, which presented him with the opportunity to travel on horseback to Oxford. He spent a few years at Oxford, educating himself and absorbing knowledge. During this time, he gathered extensive knowledge and information on philosophy.

While returning home after 6 years, he was offered a chance to deliver a series of lectures on history, economics, and rhetoric in Edinburgh. In 1751, he was appointed as a professor at Glasgow and promoted to the remunerative professorship position in 1752. With this, he formally embraced the stream of political economy and moral philosophy.

The Father of Economics - Adam Smith

Adam Smith was considered the Father of Modern Economics. His writing and beliefs of that era influenced modern economics. He was among the philosophers who played a pivotal role in establishing that wealth creation is viable only when you have efficient and productive labour. He also established that one could use their resources well only if self-interest motivates them.

Another key contribution towards economic development was Adam Smith’s theory stating that profits flow from capital investments, and capital is directed to areas where profits can be maximised.

Adam Smith's Major Accomplishments

The primary reason for Adam Smith being considered the Father of Modern Economics is that his theory revolutionised world economics.
Even 21st-century philosophers, economists, and writers study Adam Smith's writings.
The 3 ideas presented by Smith formed the basis for theories of classical economics: The Introduction of the Assembly Line (Production Method), The Significance of Free Markets, and the Gross Domestic Product.
His Theory of Moral Sentiments introduced dynamic ideas and made way for philosophical breakthroughs.
He introduced the idea of a social order based on freedom.
All his concepts are relevant to modern-day industrialisation.
Adam Smith is considered the most influential person of the 18th century.

FAQs

Which Adam Smith theories are popular?

Adam Smith was best known for his practical theory, which laid the foundations of the classical free-market economic theory. His theory primarily presented the idea that markets tend to perform well when there is no government intervention.

What did Adam Smith believe in with great conviction?

Adam Smith believed in maximising profits and empowering emerging and existing businesses to succeed. However, he believed greatly in taxing profits, property, wages, and business transactions. Smith added that nominal taxes must be imposed on these aspects as that helps meet a country’s public needs.

Adam also thought that the taxes imposed on these considerations should not be uncertain or arbitrary. They must be clearly supported by law or written in a country's law enforcement.

What were Adam Smith's 3 Laws of Economics?

The 3 laws of economics propagated by Adam Smith were:

Law of Demand & Supply
Law of Competition
Law of Self-Interest

These laws validate the current happenings in the world. These laws suggest that goods must be produced in sufficient quantities to meet the demand in the market. In addition, competition ensures that quality goods are manufactured at affordable/lower prices.

What is the significance of the Adam Smith Quizlet?

Adam Smith was the first thinker to establish the economic system as a free market economy. According to him, free markets bring prosperity to the economy and help businesses thrive. It was one of the reasons the Scottish philosopher, also known as The Founder of Capitalism and The Father of Modern Economics, is so popular even today.

What are the most valuable ideas that Adam Smith contributed to economic thought?

Smith's ideas revolutionised the economies of countries around the world. These include The Measurement of Economic Activity (an idea that determines the size of a country's economy and gauges the performance of an economy based on its Gross Domestic Product), The Division of Labour (the idea that individuals must have expertise in particular tasks), and The Invisible Hand Theory (the idea of facilitating coordination between free markets).