Adam Smith

1
Adam Smith

• Adam Smith made his contribution in the field of
  economics. He was greatly influenced by the
  Physiocratic School of philosophical thought
  popular in Europe during that period. The
  Physiocratic School built its economic doctrine
  on a belief in the supremacy of natural law, of
  order, and of wealth.

2

• Smith discovered a natural law that he believed
  governed the economic realm-the 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 .

3

• 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.

4

• 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.

5

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

6

• 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.

7

• 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 Smiths council, very few if
  any of the new, hungry industrial entrepreneurs
  listed to this second part of Smiths message,
  i.e., the part about playing fair.

8

• 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
  (1800-1850) and the United States (1860-1910)
  into one of the bleakest periods in the history
  of human exploitation

9

• 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.

10

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