ADAM SMITH (the classical school)

ADAM SMITH (the classical school)

1. Life

   • Borned at 1723, in Scotland
   • Enrolled at Glasgow University at age 14
   • Studied moral and political science in Oxford
   • Scottish Philosopher and Economists
   • " Father of Economists"
   • Died at 1790

2. important influences

   • General intellectual climate of the Age of Enlightenment (17th century)
     • People's reasoning ability
     • The concept of the natural order
   • Quesnay and Turgot
     • Physiocrats' attack on mercantilism
     • Proposed to remove trade barriers
   • Fancis Hutcheson ( Smith's teacher of Moral Philosophy )
   • David Hume ( Smith's friend )

3. Major Contributions

   • The Theory of Moral Sentiments (1768)
     • Selfishness
       • sociable
       • unsociable
     • Benevolence
       • Attitude towards right/wrong based on the degree of sympathy
   • Wealth of Nations (1776)
     • 3 important elements
       • Division of Labor
       • Self- interest
         • Business = Profits
         • Individual = Stastification & lower price
         • Worker = Wages
       • The absoliute advantage of international trade
     • Discussion of 2 Systems
       • Nature of Economic System
         • Determined by the private interest of individual
           • support the country's industry to seek their own safety
       • Natural Freedom System
         • Sovereign - Public Work
           • Defend the country from foreign invasion
     • Price of Goods
       • Use Value
       • Exchange Value
       • Value of Goods
     • The economic laws of a Competitive Economy
       • Value
         • Market Price
           • Wages
             • Profit
               • Rent
                 • Debt
                   • Economic Development

4. Impacts

   • Economic context
     • The Feudal world ends and merchants
     • Industrial Capitalist era begins
     • Free Trade
     • Earth Natural Law
     • Against Free interventionism
     • Laisser - faire
       • Slogan " let do, let pass"
   • Social context
     • England: Industrial Revolution
       • Creation of large factories and railway lines
       • Invention of Machine to vcalue
       • People from countryside to the city
       • Division of labor
         • Specialization
         • Invisible hand
   • Political context
     • Interventional role of the Government
       • wealth does not leave the country
     • Dictate Trade Laws
       • Tariffs
       • Import ban
     • Market
       • Monopoly Patents granted to individuals or companies

5. Opposition to other schools

   • Mercantilism
     • Accumulation of Gold and sliver as the basic of wealth
       • Smith : Gold & Silver led to a devaluation of metals
   • Keynesian
     • Relied heavily on monetary policy

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