Category: Adam Smith

In the first three chapters of the book, ‘The Wealth of Nations’, by Adam Smith, the central question addressed is how division of labor resulted in man’s newfound capability to produce in quantities previously unattainable. Division of labor has resulted in an identical amount of work producing significantly more. This improvement is credited with the increased specialization of laborers, time saved from absence of the need to switch tasks, and increased technology. How division of labor came about is explained through human nature and market realities. Smith contends that human nature is to barter and to pursue making one’s surroundings more efficient. The practical realities are access to water-transport and the existence of bigger markets. In sum, the increase in production can be attributed to two traits of human nature and to two tangible realities.

One of the sources of the vast increase in the output of the individual laborer is human nature, which constantly strives to make its surroundings more efficient. This attribute is assumed by Smith and is elaborated upon in numerous examples. In an industrial environment benefitting from division of labor, each worker has a narrow lens through which he sees the world, forcing all his concentration onto the task at hand. The laborer has undergone extreme specialization and mastered a task which is one of a series of processes needed to manufacture, for example, a nail. This ecosystem coupled with the aforementioned attribute of human nature naturally results in the worker devising methods to do his task in a more efficient manner. Smith credits not only the great thinkers and philosophers for the various inventions which increased industrial efficiency, but also the simple worker for precisely this reason. To emphasize the intuitiveness of this pursuit, Smith describes a boy, responsible for the opening and closing of an essential valve on a fire-engine, who manages to automate his task by tying a string to the various elements of the valve. The latter made his life easier and allowed him time to play with his friends. This example, while seemingly trivial, emphasizes the outlook endowed upon those whose work is extremely specialized. In sum, the human urge to streamline has naturally led to the division of labor.

Continuing his thought of the influences of human nature on the division of labor, Smith elaborates on the significance of the instinct to barter. Multiple ideas are raised as to what is the reason for such an attribute and why it is unique to man. An explicit acknowledgement of human uniqueness in speech and ability to reason is used as a possible explanation. In contrast, animals never barter and have never been observed partaking in any form of exchange. Additionally, a typical fully-grown animal does not rely on any other creature for his wellbeing, whereas humans in modern society are precisely the opposite. A human is constantly required to interact and rely on other people. Furthering the logical flow of these ideas, is the assumption that like animals, humans act purely in self-interest, and that this is the basis for mankind’s utilization of bartering. Through bartering man can obtain what he desires by convincing the other that it would behoove him to accept what is offered. This is proved by Smith through an extreme example of a beggar, wholly reliant on others’ compassion, who too barters, when exchanging that which he has received for other goods which he requires. The latter disposition is the root of the creation of division of labor. To emphasize the instinctiveness of the matter, Smith uses another example to prove the solidity of his claim. Even a tribe of huntsman partake in the division of labor. They barter their various skills to their fellow tribesmen whether it be in manufacture of weaponry, homes, or clothing. Through taking mankind back to its prehistoric roots, Smith effectively shows that human nature is the source of the need to barter and not any other external factor or influence. Through this simple yet effective method, one can easily trace human activity from its roots in a tribal economy, to the current, highly developed economy with endless opportunities to barter unique goods and skills.

Smith does not naively credit aspects of human nature as solely responsible for the development of the division of labor. The tangible realities of market size and natural factors, which surrounded humans in certain areas of the world, served as catalysts to the progress of this division. Smith puts it very plainly: specialization can only occur if there are enough people who can benefit from this individual’s sole toil. This is a very logical fact, yet he nonetheless elaborates thoroughly to prove it, using the Scottish Highlands as an example. In addition to demand and consumers in the vicinity of a specialized worker, transportation of goods also serves an essential role. Smith compares transport of goods over land to that of over water. Through detailing the expenses and inefficiencies of horse-drawn wagon transport to the efficiencies of water transport, in terms of speed, labor costs, depreciation of infrastructure, risk, and amounts of goods able to carried in either method, it is empirically proven that water transport is far superior to that of land transport. However, what are the results of this fact and how does it connect to the rest of the argument? In essence, water transport allows specialized workers to provide their goods to other markets in a way that land transport is incapable of doing. Smith concludes that areas of the world which first implemented division of labor were ones with easy access to ports and waterways, whether it be Egypt, India, China, Holland, or Greece. Therefore, the significance of market size and water transport are shown to be essential in the development of division of labor.

On one hand, Smith eloquently details the fruits of the division of labor and the material opulence it has brought to modern society, but fails to address the significance of individual rights. Furthermore, the claim that the opulence obtained through industrialization is ‘diffused’ in society is particularly unfounded. It may be true that in an industrialized society the working class will have more, in contrast to that of a purely agrarian society, but it does not mean that the wealth is distributed in a fair or just fashion. The United States’ Founding Fathers wrote of inalienable rights and the right to life, liberty and the pursuit of happiness. In my view, there are elements of life that bear more significance than owning more or living in more opulent conditions. Smith strictly addresses the utility of goods. The utility of meaning and self-worth are immeasurably greater than the utility of a fancier garment or other material objects. Smith assumed that a worker only desires good living conditions, proving so through stating his living conditions are better than an African king. This is too narrow an approach to the nature of mankind. The sole desire of man is not to satisfy an insatiable thirst to consume goods. Making a simple industrial or manufacturing operation the sole employment of a man’s life, as Smith states, is not a recipe for meaning. I cannot decisively refute any claim that capitalism is an overall force for good, but what is apparent is that additional aspects of human nature must be taken into account when discussing the utility of the division of labor.

In conclusion, Smith explains the history, source and byproducts of the division of labor. The many claims made are reinforced with detailed examples, evidence, and empirical observations. Some, assumptions which are made regarding human nature’s tendency to strive for efficiency, slothfulness in pre-division of labor, and the fact that humans only act in self-interest, are not effectively proven. For the most part, however, the claims made are systematically proven through a diverse set of observations and historical examples. Therefore, the question of how division of labor has resulted in the increase of production is addressed and sufficiently answered.

‘Economy’ is assumed to be a part of natural phenomenon, something that was given to human creatures completely predefined. This means that we do not classify the existence of economy as modern. However, it is essential to note that the word ‘economy’ itself came into being in the late 20th century when neo-liberalism started in the 1970’s. Economy is a modern concept, just like progress. It is ironical that we categorize economic development as ‘progress’ and countries or nations spend a lifetime thriving to achieve this progress through advancements in their economy.

It is reasonable to believe that exchange of goods and services has been a part of society since forever because one person can certainly not produce and consume every item. For this reason, the barter system came into being where people exchanged goods and services frequently. For instance, exchange of apples for bananas. This system was successful and widely used until the concept of money emerged. Money got more popularity because of its portability, value, and durability. Overtime, the barter system completely ended and power of money took over. This requested the beginning of market where producers and consumers can come together to sell/buy goods and services. Thus, it was in the 18th century when the consumer society emerged and people started to acknowledge the existence of ‘market’.

Idea of market, defined by various scholars, circulated worldwide. During this very period, Adam Smith expressed his ideas through a book named ‘Wealth of Nations’ published in 1776. This book brought a lot of popularity to Adam Smith who was also titled as the ‘Father of Economics’. Adam Smith introduced the components of free market, self-interest, and division of labor as the domain for economy. He also gave the theory of ‘invisible hand’, which formed an entire market structure. His ideas created a capitalist society later on, which is one of the most significant reasons as to why his importance has grown over time.

Adam Smith introduced the idea of free market for all the economies concerned. He suggested that a market should operate without any kind of government intervention. To be more precise, he wanted the government to understand that politics and economy have different implications and one should not intervene with the other. As per the theory of invisible hand, he suggested that the market forces readjust themselves to form equilibrium. Demand is the willingness and ability of consumers to pay for a certain good or service while supply is the willingness and ability of producers to produce a good or service at a specific amount. Demand has an inverse relationship with price, as when the price increases, demand falls. On the other hand, supply has a positive relationship with price where an increase in price will cause an increase in supply. The point where supply and demand meets is known as the equilibrium. Smith argued that these market forces are designed in a way that they can readjust themselves in case of any difference to reach a new equilibrium. He deemed state intervention as ‘unnecessary and inefficient’ (Brown, 1992).

The concept of self-interest is equally important as it recognizes the human cognition and molds the market accordingly. Adam Smith argued that people are rational human beings and they always act in favor of their self-interest, regardless of its effect on others. In Wealth of Nations, Adam Smith says, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” (Smith, 1776). This means that Smith expected every consumer and producer to behave in accordance to their benefit rather than as a favor on others. For instance, consumer will only buy the product when its utility is greater than the price and a producer will only produce if there is some profit attached to the production. Moreover, due to a visible trend, it can be concluded that people want to have positional goods that will bring them some kind of status position or status in a society since many people will be unable to buy those goods. Smith links this to the moral philosophy and claims that people do not strive for position, or they do not spend a lot to get a sense of achievement, they want acceptance by the society and they only care about what people think of them. In ‘Theory of Moral Sentiments’, another book of Adam Smith published in 1759, argues, “To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure that interests us” (Smith, 1759).

Lastly, Smith proposed the idea of division of labor and specialization. He claimed that in order to increase productivity, labors should specialize in what they are best at, and then repeat that task in order to do it perfectly and speedily. In his book, Smith has portrayed this with the example of production of a product as tiny as a pin. He broke down its manufacture in 18 different stages, which increased the production to forty-eight pins a day from twenty pins a day. Smith claims that division of labor has numerous benefits for the society. Firstly, it increases the output and efficiency of the workers. Secondly, due to the reduction in cost, a variety of goods and services become available for people to maximize their utility and choose accordingly. “A consequence of this worldwide division of labor is that even a common artificer or day-laborer in a civilized and thriving country has access to wide range of commodities that represent the labor inputs of many thousands of other workers” (Brown, 1992).

Although Smith introduced the components of free market, self-interest, and division of labor for an economy to function properly; these elements also faced criticism. The concept of free market was questioned based on the requirement of public goods. Government involvement becomes necessary in the case of provision of public and merit goods. For instance, market would prefer to sell cigarettes because of their profitable nature, but government puts a restriction on its excessive production because of the negative externality. The element of self-interest is questionable because of its selfish motive. Behaving in a certain rational way for economy might lead to distortion of an economy as a whole. This self-interest serves, as a justification for the parallel economy where people transact according to their benefit since all the care about is their self-interest. Lastly, the idea of division of labor was even criticized by Adam Smith himself. He critiqued that specializing might increase the output but the performance of monotonous task by workers lead to a decrease in motivation. Workers get tired of executing the repetitive job as they are expected to behave like a machine. Moreover, division of labor is dependent on the size of market and the scale of production. For instance, a factory worker might go through division of labor but a butcher, owning a small shop, might have to complete all the tasks himself.

To conclude, the model proposed by Smith is unrealistic for modern day world. The ideas given by Adam Smith are still used and evaluated in the economy. These concepts helped in shaping the market as a capitalist one where people only consume or produce to maximize their profit. Although the ideas presented by Smith were before the capitalist model came into existence but the notions of capitalist market stand by the influence of Adam Smith. This is why Porter refers to Adam Smith as ‘that high priest of capitalism’ (Porter, 1990). Similarly, an authority on Adam Smith writes, ”The Wealth of Nations’ was adopted as an ideology of early liberal capitalism and its popularity may have been due as much to the way in which it accorded with the economic and political prejudices of the emergent bourgeoisie as to its intrinsic merits as a scholarly works’ (Campbell, 1971).

References

1. Brown, V. (1992). The emergence of economy. In S. Hall, & B. Gieben (Eds.). Formations of Modernity (pp. 128-174). Oxford and Cambridge, Great Britain: Redwood Books.
2. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. London: Cadell, T. & Strahan W.

Adam Smith believed that, “Government should limit its activities to administer justice, enforcing private property rights, and defending the nation against aggression” (Mark Skousen, 2016). Smith advocated for free markets and believed that government intervention was not necessary to control the economy as the forces of market competition would allow the economy to function in the most efficient way; this is the notion of the invisible hand. He agreed with ‘laissez-faire’ believing that a pursuit of self-interest would ultimately benefit all individuals if they were left alone, leading to allocative efficiency being achieved and more wealth being created. This being said he did not reject the state and gave them important roles in external protection, internal protection and building and maintaining certain institutions in order to provide an environment that would allow for policies that he believed would maximize the wealth of nations.

Smith gave the state such a limited role in the economy as he believed all systems of political preference cause scarce resources to be employed less economically than would have otherwise been the case (D. A. Reisman, 1998). In Smith’s eyes, in order to maximize productivity, the market must be controlled by market forces if nations want to be as successful as possible and become wealthier. Smith thought that the government would repress self-interested people, and self-interest motivates more powerfully and consistently than kindness, altruism or martyrdom (Todd Buchholz). So, the state shouldn’t intervene in order for everyone to be able to pursue their maximum self-interest resulting in the economy achieving the maximum productivity attainable. This being said, due to Smith’s focus being on achieving maximum productivity and wealth, it is often assumed that he would accept inequality as a trade-off for a more prosperous economy- this is not true. By virtue of the design of his policies inequality was impeded without sacrificing the wealth of nations; in fact, Smiths key policies work against the concentration of wealth (Deborah Boucoyannis, 2014).

Another reason Smith gave the state a minimal role in the economy is because inefficiencies would be created due to policy makers making decisions that would not benefit individual workers or businesses. Policy makers have missing information and are not as knowledgeable about individual circumstances as the people that are directly involved; this lack of information will restrict prosperity of individuals and businesses and there will be a deadweight welfare loss. Another flaw that Smith identified is that government workers always get rewarded regardless of their effort/success; he believes that policy makers will become negligent and this will augment the allocative inefficiency they already create. Furthermore, Smith believed the state would favor the rich. Public policies generate the most economic rent for those favored by the policies. Policy makers themselves are wealthy, so they are likely to create policies that favor the rich which are not in the best interest of the majority of the population. Rent-seeking behavior of policy makers would compromise the ability of the state to create an environment where all individuals could fully pursue their own self-interest; the state has an incentive to keep money for itself and become more powerful as then it will then have more influence and control over the citizens of the country and the functioning of the economy (Arthur A Goldsmith, 1995).

Smith gave the state a role in both internal and external protection. He wanted the state to provide a military to protect against foreign aggressions, and also police and law to protect against domestic aggressions. As the economy grows the importance of having a strong military increases due to the fact richer nations are more likely to be targeted by other nations. In ‘The Wealth of Nations’ Smith says individuals must be protected from ‘injustice and oppression’ (Wealth of Nations) within society; he believes the state must provide internal protection in the form of police/ law and order. He believed that the government must civilize society and sustains its civility (Werner Bonifield, 2013). Without a civil society Smith’s ideas are not possible – ‘the invisible hand’ would not prevail if there was social disorder. The importance of justice was emphasized by Smith and as a philosopher you could say Smith’s job was teaching governments to think of themselves as the custodians of the invisible hand (Nicholas Phillipson, 2011). This would promote an environment in which individuals can strive to maximize their wealth which will in turn maximize the size of the economy. The third role Smith gave the state was to erect and maintain certain public institutions that would be advantageous to society. He was specific about what should be classified as a public good; if private agents did not have an incentive to maintain the good then it should be upheld by the state. Some examples of goods Smith believed the state should provide are transport infrastructure and basic education. He believed basic education should be a right and could be used to help reduce inequality. Smith said there was very little difference in the intelligence of the rich and the poor, so access to education would mean everyone had the ability to prosper.

Another role for the state was to administer taxation. In ‘The Wealth of Nations’ Adam Smith argued that taxation should abide by four principles: fairness, certainty, convenience and efficiency. He gives the state the role of administering taxation but to him the employment of tax accountants leads to a deadweight loss to society, so taxes should not be complicated and there should not be a huge amount of people employed in administering them. Generally, he thinks taxation should be proportional to how much a person benefits from living in society (Paul Mueller, 2016). However, he believes some taxes should fall disproportionally on the rich, such as taxes on luxuries. Smith does not want taxation to depress the self-interest of motivated workers, as he believes that will restrict the growth of the economy, so he wanted taxes to be as low as possible in order to meet the public needs of the nation. However, this does not mean he wants the poor to suffer. In ‘The Wealth of Nations’ Smith says, “no society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable”. Despite his advocation for ‘laissez-faire’ capitalism he was not on the side of the rich- smith stated the way to measure a nation’s wealth is the ‘wages of the laboring poor’. According to Smith, the unconstrained operation of the system of perfect liberty improves the conditions of the poor as wealth for rich tends to trickle down to the lowest earners in society. The case of the turnpike tolls show that Smith was prepared not only to slate the rich but to slate their preferences as well. His attack on luxury, indolence and vanity implies a philosophical standard which identifies fairness with function and not with even-handedness (D. A. Reisman, 1998).

Smith did give the state an exceptionally limited role in the economy but he gave it one overarching goal: preventing social disorder by providing an environment where individuals could work to maximize their self-interest; without this the invisible hand would be undermined. Smith did not believe that the government would promote national prosperity if they played an active role in the operating of the market – he thought market forces should control supply and demand. Smith thought limiting state intervention would lead to economic growth which would benefit all of society, including the people on lower incomes as money should ‘trickle-down’ through the economy. Smith’s principle belief that people acted in their own self-interest, especially in economic terms, is the main reason why he gave the state such a limited role in the economy, as the intervention would simply reduce self-interest and the ‘invisible hand’ was enough to encourage individuals to act in ways that would mutually benefit the rest of society. Smith is not opposed to the government, he is simply opposed to certain activities of the government at the time, and the limited role he gave the state is the way he thinks the wealth of nationals can be maximized.

References

1. Mark Skousen. (2009). The Making of Modern Economics. Retrieved November 2020 from https://krembol.ga/book.php?id=6sisXMv_AecC
2. D. A. Reisman. (1998). Adam Smith on Market and State. Retrieved November 2020 from https://www.jstor.org/stable/40752070?refreqid=excelsior%3A6aa4460c24561bffee9dea632bdd2625&seq=1
3. Todd Buchholz. (2007). New Ideas from Dead Economists. Retrieved November 2020 from https://ebookcentral.proquest.com/lib/exeter/reader.action?docID=5337961
4. Deborah Boucoyannis. (2014). Contrary to Popular and Academic Belief, Adam Smith Did Not Accept Inequality as a Necessary Trade-Off for a More Prosperous Economy. Retrieved November 2020 from https://blogs.lse.ac.uk/politicsandpolicy/adam-smith-and-inequality/
5. Werner Bonifield. (2013). Adam Smith and Ordoliberalism: On the Political Form of Market Liberty. Retrieved November 2020 from http://eprints.whiterose.ac.uk/67376/1/Adam_Smith_and_OrdoliberalismFinal.pdf
6. Paul Mueller. (2016). Adam Smith on Public Policy: Four Maxims of Taxation. Retrieved November 2020 from https://www.libertarianism.org/columns/adam-smith-public-policy-four-maxims-taxation
7. Arthur A Goldsmith. (1995). The State, The Market and Economic Development: A Second Look at Adam Smith in Theory and Practice. Retrieved November 2020 from https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1467-7660.1995.tb00568.x?saml_referrer

Democracy is a highly contest term and is constantly redefined by modern contexts. However, the success of a democracy always relied on its ability to ensure political equality and liberty. Yet the struggles in modern democracies such as US and UK highlight the difficulties in achieving these goals. Ronald Reagan (1982) once proposed that to foster the infrastructure of a democracy, there must be a system of a free press, unions, political parties, universities, which allows a people to choose their own way to develop their own culture, to reconcile their own differences through peaceful means. To achieve this, modern democracies must cultivate a sentiment called sympathy which was proposed by Adam Smith in the ‘Theory of Moral Sentiments’ (TMS). Smith explains that sympathy is the ability for one to make moral judgement through the process of imagination, reasoning and feeling. By engaging in the emotions of the fellow people, individuals can then form understanding and establish commonality. However, sympathetic sentiments are not without its risks and is capable to divide as it is to unify. This essay shall explore whether there is a need for modern democracies such as the US to cultivate sympathetic sentiment through 3 points of discussion. Firstly, the concept of sympathy propose by Adam Smith will be carefully examined and highlight its importance in the modern era due to the rise of multicultural societies. Secondly, the method of cultivating sympathy is discussed and contend that sympathy proposed by Smith is hard to cultivate in a modern democracy. Lastly, the effects of sympathy will be explored in a contemporary setting and contend sympathy has directly linked to the rise of populist and may create further divisiveness rather than unity. These three discussions will conclude and contend that whilst sympathy needs to be cultivated, the intention and conduct to cultivate sympathy must change as current practices erodes democratic norm.

Adam Smith’s concept of sympathy rejected the Hobbesian view of human nature and introduced an innate ability for people to form understanding and establish commonality. Hobbes saw human nature as pure self-interest. Where man has no regard for others and only operate under its own gains. Smith dismisses such notion and writes, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of other, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it” (Smith, 1759, p.1). Although Smith too, acknowledges that man can be selfish and motivated by its own desires. He also contends that man naturally holds regards for the happiness of others. Sympathy is a key part of Smith’s moral philosophy and as Choi (1990) has observed, it is the process where moral judgement is made. This process of moral judgement requires imagination, which is a spontaneous projection of our self onto others. Smith highlights we who have no immediate experience of what other men feel and cannot form an idea of the way they are affected. Only through our imagination, we than can form an understanding of their feeling and motives. Through this ability to gauge the emotions of individuals, Smith (1759) then suggests the idea of an impartial spectator, where the individual must step outside of itself and judge their actions and conduct from the vantage of a disinterested figure. This is crucial to Smith’s moral philosophy as unbiased judgement and social interactions establishes the idea of propriety. Not the rules of the sovereign as Hobbes have suggest controlling man from chaos, but the natural desire of man to earn approbation from those unlike as well as those like us. According to Smith, man is fundamentally motivated by the feeling of acknowledgement and the compassion from its fellow citizens. The fear of losing social acceptance and recognition prevents people to act out of socially acknowledged rules that are intrinsic to a society (Kelly, 2009).

As modern democracies in the 21st century has undergone major changes. No longer does it faces the same societal pressures as it were in the 18th century yet new social problems continue to arise. One of the biggest changes is the shift from homogenous societies to multicultural societies due to global interconnectivity. A multicultural society brings forth new challenges such as conflicting social values and beliefs. An example of so is the increasing notion around democracies to implement burka ban. The conservative Muslim culture which requires women to wear a burka has not been welcomed by many western democracies. France and Belgium are amongst others who has initiated a ban. Australia although has not legalized the ban, there has been on-going debate. Australian senator Pauline Hanson claim that wearing the burka is un-Australian and should not be allowed as it promotes Islam fundamentalism (Kelly, 2018). Whilst other who oppose protest the ban under religious freedom and civil liberties. This thereby reflects the difficulty in the accommodation of different societal values. Therefore, modern democracies must go forth and establish method to cultivate sympathy. Either it is through social movement or public discussions. Smith contend “the ‘delightful harmony’ or ‘certain correspondence of sentiments and opinions’ can therefore only occur when ‘there is a free communication’ between them based on ‘frankness and openness’” (Smith, 1976, VII. iv. 28: 337 as cited in Kelly, 2009, p.540). Clark (1992) in his analysis of conversation and the moderation of virtue contends that conversation moderates our passions and our virtues and teaches us to reconcile the interest of other with our own. Only through public discussion and the attempt to redefine propriety, can multicultural societies ensure political liberty and equality for all through the process of mutual understanding.

The cultivation of sympathy is always grounded in social interaction however due to the advancement in communication, the cultivation of sympathy as proposed by Smith may be difficult to achieve. Kelly (2009, p.541) in her commentary regarding the TMS observe judgements about sympathy that are grounded in propriety are always to some degree undertaken in public. However due to technological advancements, private interactions through direct messaging or online forums dominates modern communication. Smith (1970, p.159) argues that “our continual observations upon the conduct of others, insensibly lead us to form to ourselves certain general rules concerning what is fit and proper either to be done or to be avoided”. Whilst this is achievable through mainstream media and public interactions, in the digital age of anonymity, this becomes hard to inform. Within the online medium, anonymity is a privilege that is available for all who can access the Internet. Unlike face-to-face interactions, where if one act out of the social norm, public condemnation is identified to an individual and the shame that arises out of social discord is powerful force that prevents actions of impropriety. However online, the ability to remain anonymous, to adopt an unknown identity eliminates the fear of identification enables which certain individuals to act out of social norms. Whilst their feelings of shame may still arise out of disagreements, the feelings would be arguably significantly less as he is not humiliated in the public realm.

Furthermore, the access to online communication and forums discredits Smith’s concept of establishing propriety through the conduct of others. In theory, if one acts out of propriety, their actions are unable to generate sympathy. This in turn will not persuade and it is always mortifying not to be believed, and it is doubly so when we are supposed to be unworthy of belief (Smith, 1976, VII. iv. 25–26: 336 as cited in Kelly, 2009, p.540). By following this logic, individuals who are unable to find others who share their own ideals are then prompted to reconsider its beliefs. However, through the power of the Internet, global interconnectivity has enabled individuals of all ideals to locate one another with relative ease. The recent rise in anti-vaccination groups and white supremacist movement act as evidence. For these individuals who hold racist and anti-vaccine beliefs, the daily shame they experience in the public realm is alleviated online where they can reconsolidate their beliefs with others who can actively provide sympathy and compassion. These interactions reinforce their dangerous ideals and provide them with a sense of legitimacy as their once condemned beliefs become applauded by a community. Whilst it’s recognized, that online platforms are also capable in producing a positive cultivation of sympathy in areas such as climate change movements and civil movements promoting LGBT rights. The dangerous unchecked cultivation of sympathy approving of malicious intents is a salient concern that must be addressed.

Current day sympathy has transformed in a way that warrants greater levels of concern rather than reassurance. Instead of unity, the rise of populists and Brexit movement has all pointed to the erosion of democratic norms. Smith’s concept of sympathy is experiential rather than logical. Therefore, if the imagination of the people become distorted, corrupted, then our capacity for sympathy might be misdirected, particularly if we are deluded (Kelly, 2009). Smith has pointed out that sympathy may not always be accurate. In fact, man can go become self-delusional, where they are unable to accurately assess their action from the eyes of others. Thereby unable to identify what action are good or bad. Trump’s rise to power redefined how sympathy is defined. Instead of finding common grounds and similarities, trump turns away from conventional political character and creates an authentic image by disregarding democratic norms. Muirhead (Rubenstein, 2018) in his analysis proposed the popularity of trump lies in the trend where broad coalitions are unable to respond adequately to the diverse demands of voters. Middle class white Americans serve as a good example for his argument. Due to the inability of Washington elites to adequately propose policies that benefit their community (Rubenstein, 2018), facilitated a preference for Trump. Trump unlike other politicians refuses to adopt political correctness but focuses on facilitating an us vs them political climate. He appeals to its audience by validifying their anger and their resentment towards immigrants and the Washington elite through his xenophobic and racist undertone which reinforces the pure people vs the elites. Followed by how he sells America as an exclusive club whose greatness is achieved by keeping others out (Dovi, 2018), appealing to the feeling of superiority that brings satisfaction to those such as middle-class white American who believes they have been disenfranchised. Furthermore, Trump’s ability to express citizens’ frustration and anger with the status quo is crucial to his success. The way he can represent the frustration and rage of those who are who are disgruntled, alienated, and fed up with the politics as usual could not be emulated by another politician. These elements all made Trump attractive. However, the most important element to Trump’s attraction was his ability to provide compassion and affirmation to those who share socially unattractive views. Smith articulated that man learn what is right or wrong through social interaction yet that does not mean man is not stubborn. Act and beliefs against social norms may be condemned but that does not mean one can just abandon it. When their anti-democratic values suddenly become acceptable, this reinstalls confidence and reassurance for the values who were disregarded to be brought back into society.

Trump was able to cultivate the feeling of sympathy as a weapon for his own political gain by dividing the American population. Yet this process has undermined democratic principles of liberty and equality. This brings forth the question whether sympathy should be cultivated, and the answer is yes. However, the sympathy we must cultivate birth from liberal ideals such as peace and collaboration. To resolve a period of malicious sympathy, one must cultivate sympathy not through condemnation but through understanding and the introduction of new emotional satisfaction.

Whilst it is important for modern democracies to ensure political equality and liberty, it must also recognize the importance of cultivating sympathy. Sympathy is a moral concept introduced by Adam Smith which details the process of an individual attempting to understand the emotion of another through imagination. By doing so, individuals can judge a moral action against an immoral one. Sympathy needs to be cultivated in a modern democracy as it is necessary to integrate multicultural societies. However, the process of cultivating sympathy may be difficult and dangerous due to the usage of online communication. Lastly, the effects of sympathy may serve to divide rather than unify as shown in the case of Trump. However, despite the dangers, sympathy must be cultivated and in a way that can promote rather than erode democratic norms.

References

1. Clark, H.C., 1992. Conversation and Moderate Virtue in Adam Smith’s Theory of Moral Sentiments. The Review of Politics, 54(2), pp.185-210.
2. Kelly, D., 2009. Time for Sympathy: Some Thoughts on the 250th Anniversary of Adam Smith’s Theory of Moral Sentiments. New Political Economy, 14(4), pp.535-543.
3. Kellly, J. (2019). Pauline Hanson Labels Feminists ‘Pathetic’ on Burka Ban. [online] Theaustralian.com.au. Available at: https://www.theaustralian.com.au/nation/politics/pauline-hanson-labels-feminists-pathetic-on-burka-ban/news-story/370cc98ad66e0d9f2ab69cac412f0a81 [Accessed 27 Sep. 2019].
4. Reagan Library, 2016, President Reagan’s Address to British Parliament, June 8, 1982 https://www.youtube.com/watch?v=Gm35tFTtsuc [Accessed 30 Sep. 2019 ]
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6. Smith, A. (2019). The Theory of Moral Sentiments, Adam Smith 1759. [online] Marxists.org. Available at: https://www.marxists.org/reference/archive/smith-adam/works/moral/index.htm [Accessed 30 Sep. 2019].

Remember when like a year ago when ‘Toms’ were a must-have wardrobe staple? Well, where is that pair now? Where is that flared purse charm you wore just once to that music festival? We live in a world where fast fashion is momentary, and consumer behavior and trends change faster than manufacturers can keep up. Let’s traceback that one funny t-shirt you bought to wear just once to that office Christmas party. Why do you think it costs only 5 dollars at H&M? It was not made by a middle-aged 9 to 5 factory worker in America but probably by a twelve-year-old girl in Bangladesh skipping school to work 12 hours a day, paid next to nothing, only to keep up with our spontaneous fashion trends. One can be fast to point out the flaws of such a capitalist society that prioritizes profit over communal welfare, but who is to blame? What does the father of capitalism have to say about our unsustainable fashion choices? Before we are quick to attack Smith for the predicament we find ourselves in today, we must first turn to him, for without him it is impossible to find the root of the problem itself.

One important distinction we need to make between Smith’s idea of a free market and our popularized negative connotation to profit-oriented capitalism is that he argued against mercantilism and for a self-operating free market where people work according to their self-interests. To quote Smith himself, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”. The factory worker in Bangladesh does not make the t-shirt because she feels she owns us but merely out of her own self-interest. We all promote public interests throughout our own economic choices. This is the fundamental ideology of Adam Smith arguing for a self-correcting free market economy in Smith’s ‘The Wealth of Nations’.

So, what is in it for the low wage workers? If these low wages and horrible working conditions are so unfavorable, why are they not outlawed? What most of us fail to comprehend is the cultural and economic differences between middle-income countries and developed countries. People have chosen to work at these factories because they feel that it is better than the alternative. This is where Smith’s theory of division of labor comes into play. In a broader sense, the low wage worker contributes to the economy with his/her skills of stitching garments while someone else comes with the technology of dying the fabric or distributing it. By doing what we are best at, the economy reaches maximum efficiency. This is a form of voluntary trade that the workers opt to participate in since it is more favorable than the alternative, often agriculture or subsistence farming, which is a far more dangerous line of work. It would be unreasonable to compare the earnings of a garment worker in Bangladesh to that of a worker in the UK, for instance, because their economic situations are not the same. Not only is this favorable for the workers, but the garment industry also makes up the majority of export earnings for developing countries like Bangladesh. For countries like this, these industries allow for rural to urban migration, allowing room for a better standard of living, education, and livelihood. Their individual need for fulfillment can, in turn, lead to prosperity for the nation. So, what would Adam Smith have to say about outsourcing to cheaper countries? Well, he would say yes, it makes all the financial and economic sense to do that. In this theory about the specialization of trade and division of labor, he explains how this concept is mutually beneficial because by maximizing efficiency, we are maximizing profit, which is what it all eventually boils down to.

Some may argue, this was work was written in a pre-industrial revolution context in a country that was developing at a different pace and under different political dynamics than developing countries today, where the majority of the production is based today, which is why the outcomes are expected to be dramatically different today. Let’s look back at countries like the US, Japan, and German that have evolved out of low wage manufacturing toward high skilled labor. One might expect developing countries today not to have the same outcomes considering the government’s reluctance to step in and change production, but here is why Adam Smith might just have the answer to the question at hand. What happens if the government steps in and starts forcing the industries to change production? Starting from structural unemployment to inefficient production, the economy will no longer be practicing ‘specialization’. The worker will no longer be producing what they are best at, which is a substantial decrease in productivity, leading to a communal welfare loss. Developed countries will then have to take on the work of these sweatshops to keep up with demands, perhaps having to give up producing that country specializes at. This will be detrimental to both nations.

In this modern economy, Smith’s ideology of the economy working on its self-interest to fulfill our ‘needs’ seems almost hypothetical to some people. As consumers, we have now come a long way from fulfilling just ‘needs’ into creating ‘wants,’ and this change in consumer behavior was noticed around the end of the industrial revolution. Writing at the kick start of the industrial revolution, this change was unfamiliar to Smith. Some say not foreseeing the outcomes of the industrial revolution was one of his blind spots. He did not foresee the catastrophic consequences of low waged, unsustainable manufacturing, nor did he support it. Yes, he argued for maximizing profit but never prioritize it over communal welfare and so blaming him for out unsustainable fashion choices today would not be reasonable. In ‘The Wealth of Nations’, Smith puts emphasis on education and pushing beyond what is comfortable and conventional. Claiming people who live a stationary, or stagnant life ‘naturally loses’. So, it is reasonable to assume that Smith expects to these low wage manufactures to one day move to high skilled labor not necessarily through government intervention but over time through a change in consumer behavior and demand. Some may argue that his ideology would only hold the truth in an ideal economy, but these hypotheses are the foundation on which a modern-day capitalist free market economy is based on.

So, what can we do as consumers? Stop buying anything labeled ‘made in Bangladesh’? What exactly would that achieve? Smith would argue that any attempt to resist a free market would lead to detrimental effects for both parties. Let us start with the millions of garments workers that would now be unemployed and forced to return to agricultural labor in rural areas. Developing countries dependent on trade would face an economic crash, huge multinationals would be out of business, and with it, the employees would lose their jobs, and us consumers would be forced to buy clothes from a few stores still in business for unreasonable prices because they would now run a monopoly. Does this seem like a viable solution? Smith would argue that today’s fashion industry is not exactly ‘unsustainable’ as he thinks that society will correct itself in the long run by the forces of demand and supply. So, it really up to us, the consumers, to make sustainable choices, and the market will follow. If we as consumers are willing to pay higher prices for better quality products that we can utilize for more than a season, as we do with moth fast fashion brands, companies will be incentified to stop sourcing the lowest cost and start investing in technology and training for better quality sustainable alternatives. This would not only be beneficial for us, the environment, and the company but also the garment workers who are now being trained to produce high skilled products and can enjoy a better standard of living. As Smith repeatedly emphasized in his work, production is consumer-oriented, so perhaps we should be the change we wish to see in the world.

The market is something that we face every day we are either consumers or producers it’s something you can’t avoid. For example, you run out of apples and you decided to go to the market and get some more apples that automatically make you a consumer. It is everywhere supply and demand. But it all depends on how one perceives it. One quote I can relate in this essay about philosopher Adam Smith is his quote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner”. And what this quote means to me, it’s that we can all help each other by being interested in our benefit at the end of the day. We all are a large community and we all need each other to move forward just like a farmer sells its product at a fresh market. We also need to realize that as consumers we go there and buy it because we need it or maybe we want it, because if we didn’t, the farmer will never sell or be there in there in the first place. Furthermore, we as consumers demand this product. Even though the farmer is benefiting from the money he gets after selling his product we also need to realize as a consumer that we are demanding for it too. Moreover, he mentioned that “self-interest is only half of the picture”, and this is true. He explains that even though there are ruthless profit individual that would like to take advantage on certain situation on the market, it also has a way of being regulated back to normal, because if this ruthless individual decides skyrocket his product, society has a way to get rid of him. In other words, he would either end up with someone that’s either trying to compete with him in the same level by rising prices, but also would get to a point in which he could not raise the price of this product because no one would buy it. And if he decided to mistreat his employees by taking advantage, no one will like to work for him.

In conclusion, I think Adam Smith’s theory makes sense and society decides whether the market will go up or down. Different generations change the market depending on what is more fashionable or useful at that time. Products become popular or unpopular as technology advances.

Wealth is an abundance of valuable possessions or money. In other means such as the plentiful supplies of a particular resource. When one asks themselves, ‘What is wealth?’, people immediately think of money. They think of nice cars and big houses. People think of power and the ability to have control over others, and money is not the only wealth that can be obtained in life The one percent are the small percentage of people who are the people who have money and lots of it. The one percent tend to have riches, fame, and luxury. According to the definition of Adam Smith, economics is only concerned with wealth earning activities. Every human living in society needs wealth to fulfil their basic requirements. All human beings living in society or concern to earn more and more wealth. It means economics deals with production, distribution fusion, exchange and consumption of wealth.

Adam Smith is known as one of the fathers of economics. He is most known for his profound ideas and theories on capitalism presented in his book ‘The Wealth of Nations’. Adam Smith defined economics as follows: “Economics is the science of wealth”. In ‘The Wealth of Nations’ the ideal capitalist government and society relies on man being prudent and those assumptions and descriptions of the prudent man are seen throughout ‘The Wealth of Nations’. The prudent man is what Smith assumes makes a capitalist government successful and have a path of steady, but not rapid growth. The prudent man is content with what he has, he is a hard worker, and he is honest. The prudent man is guarded but maintains friendships.

‘Theory of Moral Sentiments’ is Smith’s look inside man’s thoughts and is more of a psychological thesis than an economic one. Smith claims man is self-interested and partakes in self-interested sympathy. The word ‘sympathy’ often brings thoughts of altruism and compassion, but for Smith sympathy is about one wanting to maintain their levels of happiness, Smith writes: “Upon these two different efforts, upon that of the spectator to enter into the sentiments of the person principally concerned, to bring down his emotion to what the spectator can go along with, are founded two different sets of virtues. The soft, the gentle, the amiable virtues, the virtues of candid condescension and indulgent humanity, are founded upon one: the great, the awful and respectable, the virtues of self-denial, of self-government, of that command of passions which subject all the movements of our nature to what our own dignity and honor, and propriety of our own conduct require, take their origin from the other” (23). Sympathy occurs when man sees a fellow man happy, which brings oneself happiness too. Sympathy also occurs when man sees another hurting or desolate because witnessing this pain brings man’s mood down. Smith also discusses a more abstract concept in regards to sympathy in the ‘Theory of Moral Sentiments’, the impartial spectator. The impartial spectator acts a third party judging a person’s behavior. Although Smith’s two books were written years apart, they have multiple connections between the two.

The assumptions and claims he makes about a man in the ‘Theory of Moral Sentiments’ seem to hold in ‘The Wealth of Nations’. Benefits from trade and globalization. In a protectionist society, profits fall while rents rise; to Ricardo, this was a catastrophe. In ‘A World of Ideas: Essential Readings for College Writers. 10th ed.’, Adam Smith says: “Upon Equal, or nearly equal profits, most men will choose to employ their capitals rather in the improvement and cultivation of land, than either in manufactures or in foreign trade” (327). The wars that England fought affected its food imports and the price of grains. This forced capitalists to pay higher wages, and British goods became more efficient on the international level. During the Corn Laws era, the capitalists dominated the economy while the landlords controlled the parliament. Ricardo’s iron law of wages states that wages must remain at a constant level of labor’s natural price, capitalists had to pay high wages to their workers; therefore, they found out that it was easier to start importing grains. On the other hand, landlords resented imports because they depressed the prices and profits of their grains.

Wealth is an abundance of valuable possessions or money. In other means such as the plentiful supplies of a particular resource. This topic is focused on the middle class, which he views as the most virtuous and therefore the most admirable. He finds it to be a huge flaw to admire the super-rich because although it is good to have wealth, they often do not have virtue, which is morally important. Humans often feel sympathy for the super-poor, however Smith advises on not admiring the poor even if they are virtuous. However, there are exceptions to all of these cases they are just recommendations on achieving wealth and virtue.

Adam Smith was an eighteenth-century scholar eminent as the dad of modern economics, and a noteworthy defender of free enterprise monetary arrangements. In his first book, ‘The Theory of Moral Sentiments’, Smith proposed the possibility of an undetectable hand—the inclination of free markets to manage themselves by several methods such as rivalry, free market activity, and personal responsibility. Smith is additionally known for his hypothesis of remunerating wage differentials, implying that risky or unwanted employments will in general pay higher wages to draw in specialists to these positions. In any case, he is most popular for his 1776 book: ‘An Inquiry into the Nature and Causes of the Wealth of Nations’.

Adam Smith gave a blue print to a model of social association based on the arrangement of flawless freedom. Private property and deliberate trade are the primary highlights of the industrialist economy. Smith offered a critical knowledge into the job of the division of work, rivalry, capital collection and private property in making a working and prosperous business society. He gave a dream of the general public all in all moving towards a far off yet plainly unmistakable objective of progress. He gave a dream of society where people are following their personal responsibility without state impedance or a focal arranging expert, through a system called political economy, or, in the present phrasing, financial aspects. In his laws of showcase he endeavored to settle the essential inquiry of how the private intrigue and enthusiasm of people can be driven toward a path that can bring predictable valuable outcomes for society overall. He was intrigued to investigate the instrument through which society is held together, regardless of everybody hectically following his or her personal circumstance.

He exhibited through his laws of market that opposition among self-motivated people will eventually result in the arrangement of products to society at market value that society is set up to pay.

Nonetheless, this is just conceivable for the situation when the market works under the state of immaculate freedom. Therefore, singular personal circumstance in a market economy, under the state of impeccable freedom, is watched through rivalry as opposed to any planning expert. Rivalry transmutes the childish thought processes of men through an automatic arrangement of the market framework for society’s efficient provisioning. Furthermore, the law of gathering and the law of populace move the efficiency of the market in a rising winding. In this manner, if amassing achieves its immersion point, where more interest for work expands the wages to the degree that they destroy the wellsprings of gathering, the law of population will bring the parity back (Heilbroner, 1999).

Over recent years, because of the monetary emergency, the western industrialist framework has gone under an extended and merciless assault in broad daylight banters on an amazing scale. Enduring caused by the ongoing financial emergency has driven researchers to trust that it is imperative for the general well-being and survival of free enterprise to survey the model of the industrialist economy and its supernatural forces expected by its unique creator. Generally private enterprise will be ruined or decimated by inside disappointments or outer weights. As indicated by Lewis (1977), Adam Smith appreciates an extraordinary position in monetary idea. Being a moral logician, he was a piece of a scholarly structure, in light of a more extensive good establishment of common rights. Be that as it may, the central purpose in financial idea has separated from Smith’s investigation of the free market from its moral establishment. Lewis contended that despite the fact that Smith supported the evacuation Filosofía de la Economía, of market confinement, expanded profitability and development, he had a more extensive, furthermore, increasingly inconspicuous reason for the market framework at the top of the priority list. Smith saw the advertise as pivotal instrument to spare common society through the manner by which it constrained men to perceive characteristic rights. That there has been little concern with these regularizing and political parts of Smith’s fundamental monetary ideas has an extensive impact on monetary hypothesis and strategy.

On the off chance that we look at, as to strategy, Adam Smith’s ‘abundance of countries’ with Karl Marx’s ‘capital’, the unequivocal and furthermore most clear contrast is this: while the previous is an endeavor to sum up for a fact (as found in authentic and factual records, yet additionally in discussions with Glasgow shippers) and to check those speculations by endeavoring to clarify an ever more extensive scope of exact marvels (as per the ordinances of Newtonian science), the last is – as the caption demonstrates – an evaluate of political economy which begins from the hypothetical presuppositions of middle class financial analysts so as to indicate how their classifications and laws somewhat uncover and incompletely cover up, however are basically unfit to clarify, the truth of the entrepreneur monetary framework.

For Smith, the perusing of prior and contemporary economic treatises served to illuminate his very own perspectives, however he had no need of mercantilist or physiocratic thoughts so as to clarify his own hypothesis. Whenever rather late in his work (in Book IV) he examines those thoughts, it is just to demonstrate the prevalence of his own framework. Marx, despite what might be expected, cautiously examined two hundred years of monetary writing so as to find the “life systems of common society” and presents as premises of his basic hypothesis (at the start of Book I) what he takes to be the essential classes and standards of “established political economy”.

Adam Smith is a well-known economist by numerous individuals to be the ‘Father of Capitalism’ whereas his partner, Karl Marx, is considered by numerous individuals to be the ‘Father of Communism’. The thoughts of these two men differentiate as a general rule, yet there is some similitude in the thinking behind a significant number of their thoughts. The primary contrasts incorporate their thoughts with respect to the division of work and how merchandise and enterprises ought to be esteemed and valued by makers while the fundamental closeness between the two includes their perspectives on the advantages of rivalry between the makers of products and ventures.

The hypothesis of the division of work is the possibility that if individuals from a general public practice into explicit professions or errands inside their work, at that point the yield of the general public will be a lot more noteworthy than if individuals somehow managed to work alone. Adam Smith depicted this enhancement in yield as the reason for expanded smoothness from learning, apparatus plan developments, and reserve funds in time because of not evolving undertakings. Smith contended that the division of work would be incredible regardless of whether all people were indistinguishable in view of that gainful limits are found out (Munger, 2018). Karl Marx saw this thought as what wasn’t right with society. He thought it was uncalled for to constrain men to contend and saw the division of work as the reason for a social chain of command. This social chain of importance was the reason for monetary contrasts caused through the specialization of various occupations which had unequal money related motivators for the work. He contended this disturbed society and made social issues through the opposition. Marx was especially against the social chain of importance that was made by financial disparity that he accepted was made by the division of work. Marx trusted that in a socialist society in which there was no division of work, all individuals would be monetarily equivalent and thus there would be no fluctuating social classes (North, 1969).

Adam Smith felt that organizations ought to have the capacity to create as a lot of their item or administration as they need and that they ought to have the capacity to charge buyers whatever value they accept spoke to the estimation of the great or administration. He trusted that shoppers would possibly buy a decent or benefit when the cost was at a point in which they trusted they would profit by. This would make the market move to a balance point in which the two makers and customers were profiting from each other. Adam Smith authored this the hypothesis of the ‘imperceptible hand’. The hypothesis additionally expresses that when left to their own gadgets, individuals will act in view of their own personal matters, along these lines making a decent harmony point. Karl Marx contended that enabling makers to set their very own value focuses was a principle contributing element in the abuse of specialists. Marx had confidence in the work hypothesis of significant worth, which expresses that “the estimation of an item can be dispassionately estimated by the normal number of work hours required to deliver that product” (Prychitko 2018). In light of this, Marx contended that charging customers anything more prominent than the estimation of the work put into the item by the laborers was misuse of the specialists. Marx believes that when specialists are paid at a rate that is not as high as that at which great men are sold, they generate additional respect. This surplus esteem is the thing that makes the benefits that go into the pockets of the organization proprietors.

Adam Smith and Karl Marx both trusted that opposition among makers was valuable for society all in all. Smith trusted that opposition between makers was gainful on the grounds that it gave the buyer a decision about where they needed to buy merchandise from, consequently keeping makers legitimate and reasonable towards buyers. As per Marx, “the sole barrier against the business people is rivalry, which as per the proof of political economy acts advantageously by both raising wages and bringing down the costs of items to the benefit of the devouring open” (Marx, 2018). In spite of the fact that Marx saw the advantages of rivalry among makers, he likewise observed the negatives of the opposition. Marx trusted that the opposition would in the end move to the other side and consequently lead to an imposing business model as one maker overwhelmed the rest.

To conclude, two of the real contrasts in the thoughts of Adam Smith and Karl Marx are based around the division of work and how to esteem merchandise and ventures. The comparability examined was their perspectives on the advantages of rivalry between makers. Albeit the vast majority of the thoughts and speculations of Adam Smith and Karl Marx vary, there are likenesses to be found.

As a laissez-faire economist, Adam Smith believed in the importance of the free, competitive market. However, he also recognized the importance of the state in maintaining order in society.

Adam Smith believed that it was the state’s duty to “protect society from the violence and invasion from other societies” (Sandmo, 2011, pp. 55). He analyzed four different stages of an economy and recognized that each stage required contrasting forms and levels of protection, more advanced economies needing the most. As Europe entered the industrial revolution, the rise of manufacturing meant that there was a definite need for government-funded defense. One reason why a professional army needed to be paid for was that a manufacturer could not leave his work. For members of the agricultural state of society, voluntary action was a possibility. If the war were to arise before the harvest, the men would not be away from work during a vital time (Smith, 1776). Unlike a farmer who can leave the weather to grow his crops, a manufacturer is the sole worker of his craft. If a carpenter, for example, leaves his woodwork to fight, it would never get finished. In addition to this, as the manufacturing industry developed, so did the art of war. Campaigns became longer and more challenging, which prevented workers easily being able to return to their career. Shepherds had a vast amount of spare time and could dedicate themselves to military responsibilities (Smith, 1776). On the contrary, the demanding hours of a worker in a commercial economy meant there was rarely a moment for relaxation, let alone for army training or war; a professional army would be far more skilled and ensure society’s protection.

An advanced economy is more likely to need national defense because it is far more likely to be invaded in the first place. As an economy develops, it becomes wealthier and more prosperous, qualities that are desired by potential invaders. Hunters, being the most primitive stage of an economy required no state-provided defense. As they rarely had any property or other assets, there was far less risk of being attacked (Smith, 1776). Smith recognized that having a skillful military is an invitation to be invaded (Reisman, 1998), but the pre-existing risk an advanced economy already faces makes it important that society is sufficiently protected. The evolution of more modern and dangerous firearms meant that more advanced training would be required in order to be under control of weapons. This level and intensity of training may only be viable for those whose sole career is the military (Smith, 1776). The scarcity of technical weapons during the earlier stages of society meant that training was not as vital. In addition to this, hunters in particular were exposed to similar tribulations to what they would face at war. Whether a hunter was defending his tribe or avenging the antagonist, a hunter was sufficiently protected by his own abilities and able to overcome these challenges. Thus, there was no need for a sovereign to prepare a hunter for war or assist him whilst he is fighting (Smith, 1776).

As much as Smith was in favor of the division of labor, he understood that there were damaging effects that would make the average worker “incapable of defending themselves” (Smith, 1776, pp. 698). In ‘The Wealth of Nations’, he goes onto explain that the monotony of a worker’s job could cause his “heroic spirit” to become “almost utterly extinguished” (Smith, 1776, pp. 541). Smith believed that it would be most effective if the state created a police force that obliged citizens to take part in the military to some extent or employ citizens to become a permanent member of the military (Smith, 1776). ‘The Wealth of Nations’ proves that a more industrial economy will require a professional military. The UK’s professional army is more important than ever considering the speed at which our economy is growing.

Adam Smith also thought that the state should be responsible for the administration of justice. He said in ‘The Wealth of Nations’ that the government should “protect, as far as possible, every member of society from the injustice and oppression of every other member of it” (Smith, 1776, pp. 708). Like defense, different stages of society required different kinds of justice, with more advanced economies requiring stronger degrees. In a rich and advanced economy, many people will own property, whether it be a home or land. Some people may own financial assets such as bonds. With wealth comes a risk of theft and other crimes such as fraud and therefore legal authority is very important. When society was made up of hunters, who owned little to no property, there was little theft and less need for a justice system. It was only “envy, malice, or resentment” that could “prompt one man to injure another in his person or reputation” (Smith, 1776, pp. 709). Shepherds, on the other hand, owned property and therefore, there was high inequality within the society. Civil government was created in order to defend the rich from the poor (Butler, 2007) who would band together to sabotage those who owned desirable assets. We could say that civil government is just a natural result of the conflict that arises when there is inequality within a developed economy (Butler, 2007). It was through the reassuring protection from the state that allowed the wealthiest of society to “sleep a night in security” (Smith, 1776, pp. 710). The UK is one of the most developed economies in the world and thus the legal authority is very important in ensuring each member of society is provided justice.

Adam Smith believed that the state should provide certain public goods. The state should be responsible for building and maintaining public works which are advantageous to society but not profitable to the individual. Public goods are non-excludable, meaning we are unable to stop someone from using this good and we cannot charge them to use it. A good example of a public good would be street lighting. It is important that the state should provide public goods due to the issue of the free-rider problem, where people can enjoy the benefit of a good whilst not paying anything towards it. There is no profit incentive for private individuals or groups of individuals to provide public goods due to the impossibility of charging the consumer; they can easily enjoy the good for free. If the government were not to intervene and supply them, these public goods would be under-provided or not provided at all (Sandmo, 2011) To illustrate his belief, Adam Smith compared the provision and maintenance of canals and roads. He suggested that canals may be sustained using the revenue gained by charging a small toll to all who choose to use it; the toll being proportional to the amount of damage the boat is likely to cause (Smith, 1776). If a canal is not maintained, it simply becomes impassable. If the public sector, whom is usually careless and inattentive, take on the responsibility of maintaining the canal, it will likely be left uncared for and unused. If a private owner maintains the canal, he can make a profit each time a consumer wishes to use it. It is for this reason that canals should be provided by the private sector. Roads, on the other hand, should be provided by the public sector. Unlike canals which are unusable if not managed, consumers will use roads even in their worst condition (Smith, 1776). Therefore, it is unprofitable to the private owner to maintain them properly. Smith also felt that the state should provide infrastructure for the education of the youth. The UK’s public sector today not only provides these educational facilities but is also responsible for implementing state education for every child. Although for the most part, the state provision of education is benefitting the UK, the government is struggling to afford the funding the sector needs.

In conclusion, we can determine that Adam Smith felt the state had three main responsibilities: national defense, administration of justice and provision of public goods. Although the UK’s public sector is perhaps larger than Smith’s ideal, today’s government has fulfilled each of his desired obligations. Smith believed that a minimal state is the best system for the efficient allocation of resources and I believe that the implication of Smith’s laissez-faire views is one of the leading reasons why the UK is one of the world’s most powerful economies.

References

1. Butler, E (2007) ‘Adam Smith: A Primer’. Institute of Economic Affairs.
2. Reisman, D.A. (1998). ‘Adam Smith on Market and State’. Journal of Institutional and Theoretical Economics (JITE).
3. Sandmo, A. (2011). Economics Evolving: A History of Economic Thought. New Jersey, VIC: Princeton University Press.
4. Smith, A. (1776) The Wealth of Nations: An Inquiry into the Nature and Causes of the Wealth of Nations (General ed.). Oxford, VIC: Oxford University Press.

In this paper, I will discuss the ideas of Adam Smith in his book ‘An Inquiry into The Nature and Causes of the Wealth of Nations’, specifically, chapter 11 in the first book which is called ‘Off the Rent of the Land’. The chapter is divided into four parts: off the produce of land which affords rent, the produce of land that could afford or not, the variations in the value of the produce, and digression concerning the variations of the value of silver. In this chapter, Adam Smith talks about the factors that determine the rent of land and the types of commodities produced within that period. Moreover, he ends the chapter explaining why the value of silver varied in an unprecedented way during the last four centuries. Essentially, the issues addressed in the chapter are interrelated. The connection between the demand for a good that is produced using the land, its rent and the discrepancy between the prices of different kinds of goods form a foundation for the chapter. In the subsequent paragraphs, each part will be explained concisely.

Adam Smith views rent as the price paid for the use of land which is equivalent to the maximum amount a tenant is willing to pay. In some cases, the tenant is charged less due to the incompetence of the landlord, while sometimes tenants tend to overpay due to their naivety. Rents are valued based on the profits generated from the use of land after the production of a certain good. Even if the tenants improved the land by their own money, the landlord would charge more for rent. These characteristics of rent lead to the belief that the price of rent is considered a monopoly price (Smith, 1776, p.116). Although the production of certain goods won’t necessarily guarantee rent. While other kinds of goods insure rent after their production. These factors are what determine the rent charged by a landlord and the good produced by a farmer.

The cost of labor to maintain the production process is what determines whether the process is profitable or not. The bigger the cost of labor, the lower the profits that are generated which in return isn’t favorable for the landlord. According to Adam Smith, the landlord is merely a lazy member of society since he earns money effortlessly. Some possible ways to use the land are growing a cornfield or raising cattle. Although the labor required to keep to production process going is different between these goods, it is certainly profitable enough to provide the rent for the landlord. This would happen because the food is an essential part of human life and it will certainly continue like that.

The profits generated from these different types of uses depending on the cost of production. If the land is further, then the transportation costs will increase the price of maintaining such goods. Essentially, this affects the supply of the good, therefore demand and pricing (Smith,1776, p.120). Landlords prefer to rent the land out to a tenant who is willing to produce a profitable good using the land. This will ensure that the surplus left after paying the costs of production is enough to pay the rent. Moreover, the location of the land would affect the rent since it could either decrease or increase the incurred costs. Therefore, the food industry would always afford rent to the landlord due to the need for it for subsistence.

In part two of the chapter, Adam Smith discusses why there are some commodities that won’t always afford rent. However, due to the need for it in society, it is a must to produce such goods. For instance, the demand for clothing is inconsistent because the supply is great. This would happen due to the fact that the skin of an animal would be used for clothes (Smith, 1776, p.131). Therefore, it would sometimes leave a surplus for the landlord as opposed to being unprofitable in specific cases. This depends on the amount of labor required, population, and supply of animals. In addition to clothing, silver mines, and coal mines are considered some of the industries that generally don’t always generate necessary profits to afford rent. Although sometimes it might be very lucrative to employ labor in these industries, it doesn’t necessarily mean that this is always the case. The quantity of silver and coal produced varies according to natural resources. One mine could generate a lot more than another even if the same resources are used in the investment process.

Moreover, the complexity of the demand and supply of these commodities would make it even harder for the landlord to predict if an operation would be profitable. This means that if one day the operations were successful enough to pay rents, it doesn’t guarantee another successful day. Even if the mining process was considered a success, the demand for these types of goods would ultimately determine whether rents are afforded for the landlords or not. Also, the demand for such kinds of goods would be affected by materialistic people that already satisfied their essential needs. This demand is inherently inconsistent and varies according to the needs of a certain group of people.

The third part of the chapter is concerned with the pricing of different types of commodities whether it could afford rent or not. In essence, the need for food to sustain life would only mean that the supply of food is abundant compared to different types of goods. Therefore, the demand for food will always be there. However, what determines the price of these goods would be the supply of it and the population in society. The upper class would definitely consume more than the lower class. What determines whether the price of goods such as wheat and meat is increasing is how much the supply of it is growing compared to the population. The demand for the food would react according to these two factors. On the other hand, goods such as clothes and metals would have a higher demand if the city advanced in general. Although the supply would grow in the same way as the demand in order to satisfy the demand. This doesn’t necessarily mean that profits would be generated from the use of land for such operations.

Eventually, Adam Smith would address the topic of the discrepancy of the change in the value of silver in the last four centuries. The unprecedented change in the value of silver throughout the period between 1350 and 1770 led to a revelation regarding the causes of it. The first period between 1350 till 1570, the price of grain and silver were going down. This was followed by a period of increase in the price of grain between 1570 till 1640. Therefore, Adam Smith was trying to prove that there is a relationship between the price of grain and the value of silver. Then during the third period that is between 1640 and 1770, the price of silver increased after the civil war that causes a low production of grain. This would lead to a higher price for corn. Later on, exporters of grain were incentivized to produce more due to the increase of the reward for doing it. This was followed by an increase in the value of silver after that period. Food is considered a necessity and is strictly utilitarian. However, commodities like gold and silver have an intrinsic value that would change the demand for it accordingly. The correlation between the price of grain and the value of silver was relatively relevant back then. In spite of that, this connection would be considered obsolete in modern economic thinking.

The supply of silver would change according to the productivity of the mines or to the demand of it by wealthy people. Furthermore, the quantity of silver available in the market and the demand for it would ultimately determine the value of it in the market. Essentially, Adam Smith was trying to find a relationship between the value of silver and the highly demanded goods such as food in the economy. He was disregarding the notion that economic prosperity would increase the value of silver and gold. There is a relationship between economic growth and the prices of such goods. Nevertheless, the different factors that determine the value of silver and the prices of goods would make this correlation somewhat irrelevant. In statistics, these factors would be called unknown variables in regression models. Therefore, the complexity of the markets would lead to an overestimation in the correlation between two variables due to the unknown important factors. Nowadays, the scrutiny of different markets would require market isolations to understand the pricing in such markets. When Adam Smith discussed the value of silver in an economy, he consequentially talked about inflation, deflation and purchasing power. This part of the chapter could be divided into two parts, each one would be analyzed on a macroeconomic level and microeconomic level respectively.

In conclusion, Adam Smith indirectly emphasizes the role of supply and demand in the markets. These forces not only would determine the value of rent, but also the commodities produced using the land. This revolutionary view of the markets would transition economic thinking regarding the prices of commodities and the use of land into a whole new level of thinking. Moreover, the way the value of silver varied would also prove the complexity of the silver markets. Even though the evolution of thinking regarding this topic has led to a vast difference in perspective, the interrelatedness of markets and consumers will always be crucial for economic analysis. Adam Smith’s contributions to economic thinking will live forever, due to his broad outlook on how markets work. In chapter eleven of his book, he discussed how the goods produced using the land might afford rent. Also, how these goods would be sold through markets according to factors affecting the prices. Therefore, Adam Smith discussed the complexity of lands, goods, and markets in an economy. He studied the cost side of the prices of goods. His work built a foundation for economic thinkers to make sense of how economies and markets would work.