Adam Smith o Adam Smith made his contribution

Adam Smith o Adam Smith made his contribution in the field of economics. He was greatly influenced by the organized empirical science, which according to him gives the most impressive result of human rationality. He strongly believed that natural science is one of the best accredited candidates for knowledge.

o This philosophical thought (philosophy of science) was popular in Europe during that period. So he built his economic doctrine on a belief in the supremacy of natural law, of order, and of wealth. That makes it off from guesswork and makes its prediction worthy of confidence.

o Smith discovered a natural law that he believed governed the economic realmthe law of supply and demand. An explanation of his discovery and the effect this law had on economies was published in his 1776 book entitled, An Inquiry Into the Nature and Causes of the Wealth of Nations.

o Smith said that the best way to generate the greatest economic good for the greatest number was to encourage each individual to pursue his own self-interest whole-heartedly.

o Smith said that if society keeps its hands off, the economy will regulate itself more efficiently than the government could ever hope to. When asked about the possibility of exploitation due to the absence of regulation, Smith said the “invisible hand” would ensure that the individual pursuit of wealth ends up benefiting the whole.

o But Smith also said that for the supply and demand approach to work, everybody must be willing to play by the rule. Companies cannot, for example, decrease prices artificially in order to force smaller competitors who are unable to follow suit out of business.

o Companies cannot, for example, build monopolies. They cannot gain control of critical resources and deny other producers access to resources. They cannot spread false rumors about the quality of other companies’ products. Manufacturers have to do their best to win and to add to their wealth simply by raising or lowering their price according to the law of supply and demand. No cheating allowed.

o The temptation to not play by the rules, however, was too great. Despite the lessons taught by the American Revolutionary War (1776) and the French Revolution (1787), both of which resulted in large part from the unwillingness or inability of monarchs to follow Smith’s council, very few if any of the new, hungry industrial entrepreneurs listed to this second part of Smith’s message, i. e. , the part about playing fair.

o Instead, they began doing everything possible to pervert the law of supply and demand in ways that would give them an advantage and would make them the new ruling class. Their exploitations turned the early Industrial Revolution in Europe (18001850) and the United States (18601910) into one of the bleakest periods in the history of human exploitation

o Egoism quickly becomes the dominant thinking. The common good is all but forgotten. This arrangement, unrestrained, ends up benefiting only the strongest, or, perhaps, the most ruthless.

o egoism generates a short-term perspective. Egoists need to win every little battle, progressing from moment to moment ignoring the more long-term perspective.