Politics Of Economics Essay

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Adam Smith is famous for his theory that nations attain wealth and function best where individuals are completely free to use their skills and capital (money, land, etc.) in their own self-interest and at their own discretion. Smith taught that prices and wages will automatically reach optimal levels (guided by an "invisible hand") when such freedom is allowed. For instance, jobs that require special training will result in fewer people making that investment and, therefore, eventual higher wages. This explains why doctors make more than bus drivers. He also taught that odious or unpleasant jobs would result in higher wages (garbagemen versus retail clerks, for example). When new products are invented, prices will initially be high until others see the profit potential and enter the field - then prices will go down. We see this today with electronics. Smith was very much opposed to the falsely high pricing produced by monopolies. Adam Smith spoke for democracy with his idea that self-interest, practiced by all classes of people, works to the benefit of society as a whole. Each person ought to be free to pursue their ambitions, and such freedom will benefit everyone with new markets, better products, and opportunities for greater wealth all around. Smith felt the role of government should be to protect contracts under the law, grant patents and copyrights as incentives for invention, and provide public works such as roads that would benefit everyone. He also strongly illustrated (through his analogy of "pin" manufacture) the benefits of division of labor in production, a guiding principle of the industrial revolution. In short, most of the ideas we hold today about how our economy does or should work stem from Adam Smith's The Wealth of Nations. America was built on these principles and many Americans, both economists and citizens, still believe that Adam
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