Biography (1723-1790)

  • Scottish Philosopher and Economist
  • The Wealth of Nations
  • Professor of Philosophy at Oxford and University of Glasgow
  • Known to be charitable
  • His works were badly distorted by the late 1800s.

Human Are the Animals Who Bargain

  • Humans Are The Animal That Bargains
  • People are self-interested + We can receive goods and services from other people —–> Ability to bargain for mutual self-interest
  • Money makes this possible

The Law of Self-Interest

  • Self-interest (driven by profit) motivates people to perform jobs that society wants and needs.
  • “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from our regard to their self-interest.”
  • The pursuit of self-interest leads to communal benefit.
  • Freedom to buy/ sell = natural liberty

The Law of Competition

  • Society can depend on unregulated capitalist markets rather than tradition or government.
  • Competition regulates greed. (For example, those who overcharge will lose out).
  • The system depends on the freedom to compete.
  • The Market will work for societal good if left alone. This term is often called laissez faire, although Smith did not coin the term.

The Invisible Hand

  • Supply and demand rely on prices and profits to signal what society requires. Thus, producers will produce what society desires—at the right price and in the right quantity.
  • Too little of a desired good leads to high profit, so others will produce the good.

Division of Labor

  • People no longer need to be self-sufficient
  • Allows focus on craftsmanship, allows the workers to specialize in small areas, leading to innovation and productivity.
  • Leads to improved human condition
  • Jacks of all trades can no longer survive.
    • In fact, Smith condemned the labor practices of those who lived and worked this way on farms.
    • Of them, he wrote:”The habit of sauntering and of indolent careless application, which is naturally, or rather necessarily acquired by every country workman who is obliged to to change his work and his tools every half hour, and to apply his hand in twenty different ways almost every day of his life; renders him almost always slothful and lazy, and incapable of any vigorous application even on the most pressing occasions.”

The Functions of Government

  • Smith did not believe that government had no role.
  • Smith did call for specific government actions:
    • abolition of slavery
    • education for all
    • abolition of child labor
    • protections for consumers, workers, and society as a whole
    • control of monopolies
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