Theory of Economics by Adam Smith (Essay Sample)

Economics
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Theory of Economics by Adam Smith
Adam Smith was baptized in 1723 in Kirkcaldy, Scotland. At the age of 13, he studied moral philosophy at Glasgow University. He later attended Oxford University to pursue his postgraduate studies. He returned to Scotland, where he lectured at Edinburgh University, and this helped him earn a place in Glasgow University as a professor in 1751. A few years later, he secured the Chair of Moral Philosophy position. In the process, he published his book in 1759, termed "The Theory of Moral Sentiments." He went to France later as a personal tutor for a stepson of well-known economist Charles Townshend.
He is considered the Father of modern economics not because he was the inventor of economics but because he modified what he learned from the earlier economists to guide the current and forthcoming generations. He politely criticized the existing data and provided supportive shreds of evidence to the information arrived at by others. He is famous for his book "The Wealth of Nations," where he addressed the Theory of Economic Development. He based his considerations on the market structure, labor division, the current and modern free markets, the invisible hand, price, government intervention boundaries, and self-interest exchange. This paper will address the classical economy as a school of thought, division of labor, the modern free market, and the invisible hand.
The Classical economy is the first thought of economic school associated with Adam Smith and the other following British economists. It is majorly centered on the fact that markets work best with minimal intervention from the government authorities. It had firm faith in the idea that current and modern free markets played a crucial role in developing an economy while using the laissez-faire approach. It was thought to allocate and distribute resources to where they are best utilized; it should employ price mechanisms as it works as a strong and effective tool, "the invisible hand," which is achieved when markets operate freely. It was based on the costs and scarcity of production (Montag, 2020). Through the mechanism of self-adjustment, the classical economists believed that would reach the real output level of full employment.
The labor size and its productivity hugely determine the growth of an economy. The level of technology and division of labor results in higher productivity. According to Schumpeter, labor division is the only factor that determines the progress of an economy based on Adam Smith's writings. Before or after Smith, no one has ever exerted much burden on the division of labor. Productivity and efficiency are increased through task specialization; this occurs when the current job is divided into parts. Employees or laborers perform single tasks to maximize output as they focus and pay attention to it. Adam Smith also encouraged social labor division where individuals cooperate to achieve or satisfy their goals or desires(Sinha, 2019). Here the different types of laborers manufacture and produce goods and services for exchange with others rather than meeting the producer's needs.
According to Adam Smith, the "invisible hand" idea determines the supply and demand curves in a country's economy. When people are set to set up several businesses to provide for themselves, it leads to a better outcome for all the members of the society. Suppose a person sets up a business, shop, bar, etc., that caters to