a Scottish moral philosopher, pioneer of political economy, and a key figure in the Scottish Enlightenment
question
which two works is adam smith known for?
answer
The Theory of Moral Sentiments
An Inquiry into the Nature and Causes of the Wealth of Nations
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when was the theory of moral sentiments created?
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1759
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when was an inquiry into the nature and causes of wealth and nations created?
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1776
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An Inquiry into the Nature and Causes of the Wealth of Nations is usually abbreviated to what?
answer
the wealth of nations
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what is a magnum opus?
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a large and important work of art, music, or literature, especially one regarded as the most important work of an artist or writer
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which one of adam smith's book were considered a magnum opus and the first modern work of economics?
answer
An Inquiry into the Nature and Causes of the Wealth of Nations
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why is adam smith important?
answer
he is cited as the father of modern economics and is still among the most influential thinkers in the field of economics today
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who created the classical free market economic theory?
answer
adam smith
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what did adam smith's classical free market economic theory say?
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that the wealth of nations was based not on gold but on trade: when two parties freely agree to exchange things of value, because both see a profit in the exchange, total wealth increases
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what is a laissez-faire economic market?
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a market requires little to no government intervention
it also allows individuals to act according to their own self interest regarding economic decisions
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what does classical economics do?
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asserts that markets function best without government interference
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what is a free market?
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a market economy system in which the prices for goods and services are set freely by consent between vendors and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority
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what does a free market contrast with?
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a regulated market
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what is a regulated market?
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when government intervenes in supply and demand through non-market methods such as laws creating barriers to market entry or price fixing
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what is the invisible hand?
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a metaphor to describe unintended social benefits resulting from individual actions
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what does the invisible hand metaphor refer to?
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income distribution (1759) and production (1776)
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what does the invisible hand metaphor do?
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capture his notion that individuals' efforts to pursue their own interest may frequently benefit society more than if their actions were directly intending to benefit society
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where did adam smith introduce his invisible hand metaphor?
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in The Theory of Moral Sentiments, written in 1759, invoking it in reference to income distribution
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how was adam smith's second use of the invisible hand metaphor in his book the wealth of nations different from the first one in his book theory of moral sentiments?
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the invisible hand is more directly linked to production, to the employment of capital in support of domestic industry in the theory of moral sentiments
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what is the division of labor?
answer
the specialization of cooperating individuals who perform specific tasks and roles
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