Adam Smith's book "The Wealth of Nations" is considered to be a timeless piece writing in the economic field as this book is able to provide wealth of knowledge regarding the economic system and its workings. The entire book is based on hard core research that is supported by graphs and other diagrams.
The initial part of the book develops the idea of division of labor and how this mechanism results in benefits across the society. The book emphasizes how the basic concept of division of labor and specialization is likely to lead to an increase in productivity and efficiency. The increase in productivity is likely to create economic surpluses and these could ultimately lead to an increase in the gross domestic product of the economy. Smith emphasizes that the division of labor is likely to improve with the period of time as technologies improve and provide further means of increasing efficiency. Through the division of labor, countries must specialize in the goods where they have a competitive advantage and exchange these goods with other countries through the mechanism of free trade of goods. Here, Smith introduced the concept reinvestment that must focus on bringing about improvements in productivity. Investment in capital goods would bring about a constant or increasing growth level that would in turn improve the GDP of the economy.
The second part of the book focuses on Great Britain and how the society evolved with the period of time. The different stages of the society are highlighted from the time period of hunting to the modern day era of commerce. Here, Smith emphasizes that the Roman era and feudalism resulted in a decrease in efficiency throughout the Great Britain. The book also criticized the mercantile system that was adopted by the Europeans. It stated that this system was responsible for consumption of wealth in terms of metals. Here, Smith introduced the concept of gross domestic product which is a central theme of the book. The concept is now widely applied within the economic system. The book highlighted that the actual wealth of the nation is measured by the goods and services produced by the economy rather than the amount of metals hoarded. Within this part, Adam Smith, stated that the role of the government should be largely restricted and any interventions within the economic system must be avoided.
Another important part that is explored within the book is the market forces that are labeled as the invisible hand. This is once again an important concept that has been investigated; Smith highlighted the forces of demand and supply at work and how the economic system is actually self regulated. The book states that without any intervention, the country would be able to achieve maximum efficiency. However, the intervention of monopolies and the existence of tax world mean that the economy is unable to maximize efficiency and productive capacity. The role of various groups within the society is emphasized and how they can hamper the ability of the economy to achieve the potential level of output.
It's simply amazing to consider that this amazing book was written in the 1700's. Nearly 300 years later, Smiths' ideas and opinions are more relevant than ever before. Although this article only describes a few of the important pieces of Smith's thesis, countless more are found throughout the entire text.
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