Adam Smiths Contribution to Classical Political Economy

Adam smiths Contribution to Classical governmental EconomyAssess the contribution of Adam metalworker to the tradition of Classical Political EconomyImportant Assignment Related NoticesPenaltiesUniversity policy requires that a penalty be deducted from the actual mark achieved for each work day the assignment is late until 0 is reached. There is a strict deadline of 1159pm on day of submission. One stage step will be deducted for very 1159pm deadline that is missed. Any written assessment that exceeds the verbalize word limit by more than 10% will receive a bingle grade step mark deduction.Extensions Plagiarism InformationFor more information about extensions and plagiarism please refer to your One Stop Shop course. An Originality newspaper (OR) is generated by Turnitin every time a piece of work is submitted. 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It is College policy that staff will not be actively engaging in debate over matters of feedback and grades with individual students via Canvas online Speed Grader system.Assignment Grade 100 98 93 88 85 83 78 75 73 68 65 63 58 55 53 48 45 43 38 33 28 23 18 13 8 3 0Admin Note Marker please a) highlight or box the grade from the above Grade Mark Steps that this assignment has achieved and b) insert the same % into the grade box in the right hand column of Canvas Speedgrader.FeedbackOverview of submission (Definition of question, integration of theoretical and empirical material where appropriate, engagement with germane(predicate) themes and issues, engagement with relevant academic literature)Quality of explore and analysis (Clarity and depth of argument, scope of argument, originality of approach, range of sources utilize, critical use of sources)Evidence of key acquirements (Structure, clarity of expression, proper referencing and accompanying bibliography, formatting, manifest of sustained research)Potential atomic number 18as for improvement (How could a future submission be enhanced?)Assess the contribution of Adam Smith to the tradition of Classical Political Ec onomyIntroductionAdam Smiths contribution to the tradition of classical semipolitical economy was hugely influential. This essay will discuss deuce of his major theories outlined in the Wealth of Nations the division of jade and then the invisible hand, whilst briefly touching upon Smiths view on the function of the utter and the free-market. Smith was a moral philosopher from the late eighteenth Century and wrote An Inquiry into the Nature and Causes of the Wealth of Nations in 1776, to critique the political- economic system of the time mercantilism. This was an economic theory and bore that encouraged imperialism and state intervention into the allocation of scarce resources. Smith was writing at the outset of the Industrial Revolution when the world was changing.In the Wealth of Nations, Smith proposed many revolutionary economic theories including the division of labour, the labour theory of value, the role of the state in an economy and the invisible hand among others, wh ich he thought would build a nations wealth. Classical political economy is a group of theories that developed in the 17th 19th Century to try and witness auberge on the basis of its economic foundation. Smith viewed political economy as a branch of science of statesmen, aimed at providing its citizens with plentiful revenue or subsistence and sufficient revenue for state for public service. It proposed to enrich both the people and the sovereign. (Smith, 2008, p. 275 Burnham, P., 2014, A). Smith believed that society should be market-based, which he believed were characterised by the three factors of issue land, labour and capital. These factors of production produce three classes within society landowners, capital owners and labour. Each class receives revenue, and all are independent of each other. Smiths main(prenominal) point in the Wealth of Nations was that all classes could gain from an increase in the scope of the market anything that impedes the free-market is a probl em (Burnham, P., 2014, B).DiscussionOne of Smiths key theories, proposed in the Wealth of Nations, was that of the division of labour. This refers to the separation of different parts of the production process according to the doers ability and/or the workers equipment. Smith believed that the benefits were clear it enhanced the production process moderateing to a more efficient use of scarce resources as well as lowering the cost of production (Smith, 2008, Book I, ch.1). Furthermore, Smith strongly believed that the division of labour greatly increased the quantity a worker and/or theater could produce. The results of dividing labour are the increase in the skill of the worker reduced time loss upon switching production process, and the invention of machines which aids workers and enables one man to do the work of many. By reducing the workers part of the production process to one, simpler operation performed solely by the worker, this increases the workers skill and performanc e. As no worker needs to change task, more time can be dedicated to the production process. The strong suit of workers would enable firms to employ machinery, and then producing more goods more efficiently compared to homosexual capital, reducing the number of workers required to make a certain quantity of goods, and therefore reducing the cost of production (Smith, 2008, pp.15-17). In the 18th Century when The Wealth of Nations was published, factory owners take his principle of people specialising in particular jobs as shown in his example of the pin-maker. This principle of specialisation has continued to modern industrial occupations, such as car manufacturing.However, Smith believed that the division of labour was limited by the extent of the market. For example, if the market is so minor(ip) that a worker cannot sell their produce of labour efficiently, the worker will make losses, and so, on this basis, may work in an industry for which they are not technical in. Smith argued that division of labour will only take place when the population is large, that will create enough demand for specialised work (Smith, 2008, Book I, ch. 3). Karl Marx disagreed with Smiths theory, as he believed that specialisation would lead to the alienation of workers as the work becomes repetitive and reduces the value of the worker from a human being to that of a machine (Marx, 1988, p.72). In addition when work becomes more specialised, less training is required for each job, and so, the individual workers become less skilled than if one worker performed the whole task (Marx, 1999, p.119). Smith also critiques the division of labour he believed that if a worker devoted their life to performing one or a few simple operations of which the effects are similar or the same, the worker has no occasion to discover methods for removing difficulties that never occur. Smith argues that because of this, the worker would generally become as stupid and ignorant as is possible for a human to be (Smith, 2008, pp. 429 430).Another one of Smiths most prominent ideas was the concept of the Invisible Hand and the idea of a free-market (Smith, 2008, Book IV, ch. 2). What Smith actually meant by Invisible Hand is still a contested idea between economists, but it is widely believed that it is a metaphor to describe the guide of the allocation of scarce resources in a free-market. A free-market is a market free from government intervention and so the market terms of goods are determined by the interaction between supply and demand. Smith stated that all actors, buyers and sellers, act in their own self-interest (Burnham, P., 2014, B). Smith claimed that, due to the absence of government intervention, buyers are free to choose where to buy goods from and seller are free to choose which goods they want to supply and at what price and quantity.Smith believed that this method would benefit society as buyers, acting in their own self-interest, would buy goods from the c heapest sellers. This would mean that firms would compete against each other, trying to gain as many customers as possible to maximise their own self-interest profit. This would lead to firms cutting their prices in order to gain buyers. In turn, the inefficient firms with higher costs and whose use of resources are inefficient, will not be able to cut their prices, so are forced out of the market. An obvious example of this is budget airlines competing against each other, Laker Airways became bankrupt in 1982 trying to compete. This inevitably leads to a more efficient use of resources, with buyers acquire their goods at a cheaper price and/or higher quality improving their utility whilst the efficient firms reap the benefits of increased profits. Smith believed that because of this, the free-market is the best way to allot scarce resources and that individuals trying to maximise their utility would in turn increase the utility of society (Smith, 2006, p.316). The most obvious ex ample of the free-market theory in practice today is America whether or not it is successful in allocating resources efficiently or lowering prices is debatable.A common misconception is that Smith wanted no state intervention whatsoever. However, although he wanted a small state, he saw four main roles for the state to play to uphold the rule of law, to protect society from people who are against the market, to maintain public infrastructure, and to foster justice (Burnham, P. 2014 B).Not everyone agrees with Smiths theory of the invisible hand and that the free-market benefits society. The free-market does not work efficiently when externalities exist. An externality is an action of an individual that has an impact on others, which the individual does not pay for/the other individual is not compensated for, so therefore, the market price does not reflect the true cost to society (Mankiw Taylor, 2014 p. 189). Marx argued that the capital class, that is those who own the modes of production, do not work and therefore exploit the workers. He also believes that capitalists would lastly accumulate more and more capital, further exploiting the working class (Marx, 1999, Vol. 7). More recently, Joseph Stiglitz identifies that markets are too short-term driven, and are unlikely to invest in research and development, which historically has been done by the government. As well as this, Stiglitz believes that due to asymmetric information and individuals pursuing their own personal interest, the free-market will inevitably lead to those with the information to benefit at the expense of others, therefore, markets will not be efficient (Stiglitz, 2004). This can be seen in George Akerlofs example of a use car salesman, who has more information than the customer, and so can gain at the expense of the customer (Akerlof, 1970).ConclusionAdam Smith was immensely influential and do a huge contribution to the tradition of classical political economy. He produced the buildin g blocks for basic liberal economics that of the free-market and many of his theories are still used in some way today. Smiths works influenced many prominent economically liberal academics of the 20th Century, including Milton Friedman and Friedrich Hayek. Smiths theories have been adopted by governments, most notably Margaret Thatchers and Ronald Reegans, and have been adapted to suit the different situation of modern society. With hindsight, and through criticisms from prominent academics, such as Karl Marx, we this instant know that there are faults with some of Smiths key theories, such as asymmetric information and externalities in a market. However, in the 18th Century, Smiths theories were revolutionary and helped change the political-economic system of Britain from that of mercantilism to classical political economy. Smiths theories also helped to kick-start Britains Industrial Revolution in the 18th Century, which aided Britains ascension to be the most powerful and wea lthy country in the world (Hudson, 2011). Therefore, it could be argued that his contribution was immense and most two hundred and fifty years later, he continues to influence political and economic thinking.BibliographySmith, A. (2008)An Inquiry into the Nature and Causes of the Wealth of Nations A Selected Edition. New York Oxford University Press, USABurnham, P. (A) (2014) What is political economy-2.ppt, 08 20891 Political Economy. online via internal VLE University of Birmingham available at https//canvas.bham.ac.uk/courses/7985/files/845717?module_item_id=147603Burnham, P. (B) (2014) Economic liberalism.pptx, 08 20891 Political Economy. online via internal VLE University of Birmingham available at https//canvas.bham.ac.uk/courses/7985/files/845717?module_item_id=147603Marx, K. (1988)Economic and Philosophic Manuscripts of 1844 and the Communist Manifesto (Great Books in Philosophy). Prometheus BooksMarx, K. (1999)Das Kapital A criticism of Political Economy. Regnery Publishi ng, Inc., An Eagle Publishing CompanySmith, A. (2006)The Theory of Moral Sentiments. 7 vols. United States Waking Lion PressMankiw, G. and Taylor, M. (2014)Economics. 3rd ed. Boston, Massachusetts, USA Cengage LearningStiglitz, J. (2004)The roar Nineties A New History of the Worlds Most Prosperous Decade. Norton, W. W. Company, Inc.Akerlof, G. (1970) The Market for Lemons Quality Uncertainty and the Market Mechanism.The Quarterly Journal of Economicsonline, 84 (3). Available from http//socsci2.ucsd.edu/aronatas/project/academic/Akerlof%20on%20Lemons.pdfHudson, P. (2011) The Workshop of the World. BBC online, 29 March. Available from http//www.bbc.co.uk/history/british/victorians/workshop_of_the_world_01.shtml Accessed 4 December 2014