Adam Smith

Adam Smith

1. "A System for Perfect/Natural Liberty"

2. "the invisible hand"

   • A person's private interests and passions lead to the interest of the whole society

3. Laws of the market

   • Self-interest leads to competition, competition leads to production of goods and prices wanted by society
     • Self-interest "drives men to action"
     • Competition regulates the market

4. Public demand is the final arbiter

5. Regulates income of those who cooperate to produce these goods

   • Workers will move to wherever there is prosperity

6. Old market vs Today's market

   • Today's market includes huge corporations and labor unions. Its massive size can stand against competition pressures and price surges. It allows for companies to think about their self-interest.

7. Laws of behavior

   • Law of Population
   • Law of Accumulation
     • To accumulate your savings
       • Accumulation of capital provides division of labor -> productivity
     • Problem: leads to more machinery which leads to more demand for workers which leads to higher wages
       • Results in fewer profits
       • Overcome by the Law of Population
         • According to Smith, how many workers according to the demand
           • Increasing the wages meant more workers
           • "[the demand for men regulates the production of men]"
     • Profits are the source of accumulation

8. "economic growth has its limits"

   • "Population would push wages back to their 'natural' level"

9. "the least government is the best"

10. is not opposed to governments who's goal is the "promotion of general welfare"

11. The Government's Economic Role

    • "protect society against the violence and invasion of other societies"
    • provide justice to all citizens
    • taking care of public works and institutions

12. Disadvantages include powerful social forces that disturb society

    • his vision could only work in a perfect society where only growth was possible