▷ What were Adam Smith's contributions to the economy?

Adam Smith without a doubt one of the most emblematic figures in the history of economics, he considered the father of modern economics.

It is practically impossible to talk about economics without mentioning Adam Smith and his contributions to explain the processes of generation and administration of wealth in nations, being the great precursor of the philosophical thought of liberalism economic.

But nevertheless, Do you know exactly who Adam Smith was and what his contributions were to the economy?

The economy undoubtedly moves the world, so in this post we will address who this character was and what his contributions to the economy were.

Who was Adam Smith?

This important economist was born in 1723 in Scotland, at the age of 14 when he finished school he began his university studies at the University of Glasgowbeing a disciple of Francis Hutcheson, among other recognized professors in moral philosophy.

After finishing his studies in Glasgow, he received a scholarship to complete his studies at Balliol College, Oxford, culminating his studies at the age of 23 with extensive knowledge in philosophy.

Knowledge that served as a basis for him at the age of 36 to publish his first book about “The theory of moral sentiments”, where he describes the behavior of the human being in society and the role played by the state.

However, his most notable contributions from him to the economy emerged 17 years later in the year 1776, with the book of him called"The Riches of Nations" that served as the basis for political economy.

During his career he wrote five editions of his book, where he expanded on his work on topics such as work productive and unproductive, history, economic policies, administration of justice, tax collection, among Other themes.

Throughout his professional career he was a professor, Dean of the Faculty of Philosophy and Morality, Chancellor of Gasgow University; In addition, his books were studied by other great emblematic characters such as Karl Marx, David, Ricardo Milton and Rose Friedman and Amartya Sen.

invisible hand theory

One of the most emblematic theories of Adam Smith is called "the invisible hand" which is one metaphor What do I use to refer to free market behavior and his ability to self-regulate.

He describes it for the first time in his book "Moral Sentiments", however, this theory is expanded in his greatest work "The Wealth of Nations".

In which he argues that the development of man in his social environment occurs through an empathic process, in which an individual has the ability to put himself in the place of another to understand and satisfy human needs, behavior that indirectly generates social welfare through the so-called hand invisible.

The Wealth of Nations

For the year of 1776 he publishes his great masterpiece the book titled “Nature and Causes of the Wealth of Nations” better known as "The Riches of Nations", a book for which he is considered the father of economic policies.

In this work stand out the criticism of the mercantilist system, stating that the economy was much more than a theory of prices, of mechanisms of production and distribution, from finance public, of banking systems, of policies of commercial exchange both internal and external and the study of Economic progress; being topics of study of great relief at present.

well smith he considered that economic development was closely related to the social welfare of the populationTherefore, the divisions of labor should also be strengthened.

Smith argues that the free market competition is the most effective way of economic development, where the market is not only motivated by the interests individuals, also for the satisfaction of the needs of the other, otherwise the negotiations would not be possible.

Adam Smith's contributions to modern economics

Although the works of Adam Smith also had his detractors, the truth is that even today he continues to have an influence on modern economics.

Well Thanks to his contributions, the so-called economic liberalism was born. which is based on his book “The Wealth of Nations”.

in his book responded to different questions that allowed us to understand the behavior of the different economic agents, being a precursor of capitalism and the free market as the basis of the study of the school of liberal thought.

Basically, his main contributions were:

• The recognition of the divisions of work through specialized activities with the purpose of reducing costs.
• The establishment of differentiating between the two types of value, that of use and that of exchange.
• The estimation of possible future conflicts between factory owners and low-paid workers.
• The accumulation of capital as a driver of economic growth.
• The recognition of competition for a free market economy as the only efficient means for the distribution of resources.