About:
Also known as the father of capitalism, Smith’s book, Wealth of Nations, provides the foundation of modern capitalist theory. The key elements of the classical free market economy (capitalism) include a focus on how the roles of self-interest and competition balance one another. The free market is a curious paradox and “self-regulates”, guarding against its own collapse through supply, demand, and competition. Self-interest motivates people to use their wealth as efficiently as possible. Competition provides a restraint to self-interest.
He also was the first philosopher to theorize that labour production generates wealth rather than land and agriculture. During his time, wealth was constrained by one’s access to natural resources. His research and theories extended to noting the increased efficiency (profit) of having assembly-line production. Before assembly and production lines, manufacturing occurred as a cottage industry where one person might produce an entire item from start to finish; this is juxtaposed to a person who focuses on only one step in a production line.
Influential Books and Writings:
The Theory of Moral Sentiments (1759)
An Inquiry into the Nature and Causes of the Wealth of Nations (1776)
Key Concepts:
Invisible hand—free markets to regulate themselves by means of competition, supply and demand, and self-interest.
Laissez-faire—minimum governmental interference in the economic affairs of individuals and society.
Absolute advantage—producing a good or service more efficiently than competitors, specializing in accordance with the firm or country’s strengths.