Adam Smith died over two hundred years ago but he is still considered one of the most important economists of all time. This Scottish philosopher wrote a book called the ‘Wealth of Nations’ and his writings still have an influence today. He is often referred to as the founding father of economics.
The full title of his most influential work is, ‘An Inquiry into the Nature and Causes of the Wealth of Nations‘ and it was published in 1776. He was creating his masterpiece at a time of great change in Europe; this was the dawning of the industrial revolution. The events that were occurring around him greatly inspired his thinking and he became convinced of the wonders of a free market; he felt sure that this type of economy would bring the most benefit to society.
The Wealth of Nations is actually made up of five different volumes that deal with different aspects of the economy. Smith examined how things could be improved and what the politician’s role should be in relation to wealth creation. He also spends some time discussing taxation.
A very important idea for Adam Smith is the ‘invisible hand’. He believed that by allowing business people to go after their own self-interests it would benefit society as a whole. This invisible hand was a metaphor that Smith used to describe the way that the market forces are self-regulating and that they lead to the common good without any real effort on the human’s part. Smith was quite insistent that the market should not be interfered with because this would prevent it from perform correctly. The forces that made sure the invisible hand works in the way it does are; supply and demand, competition, and self interest.
At the time of writing the Wealth of Nations, Smith could see a lot of interference in how the market was functioning. For example, the monarchy would often grant special privileges to certain business interests. Smith did not agree with this practice and always felt that the market worked best when there were no attempts at manipulation.
Many of the ideas that Smith discussed are still being argued today. His belief in the power of the free market can be heard echoed in the work of many modern day economists. There are also those who are fiercely critical of his ideas, and this has insured that his work continues to be remembered.