‘15 Days of Economics’
Day 2: Adam Smith ‘The Father of Economics’
Adam Smith, a Scottish philosopher, was the pioneer of economics as one of the first economist. The philosopher, born in 1723, introduced the economic theory of absolute advantage - the ability of a group of people to produce a greater quantity of a good, product or service comapred to their competetors. Smith also introduced the theory of an economic free market to the world.
Born: 16 June 1723
Died: 17 July 1790
Education: Glasgow and Oxford University
The philosopher published ‘The Wealth of Nations’ (which is considered to be one of the most influencial books written) in 1776 describing capitalist ideas of an economic actor. He describes hypothetical events when an individual acts in his own self-interest which leads to an outcome they did not intent to occur by the infamous ‘invisible hand’. Essentially this outcome is positive or negative. He also explains that if that individual was acting in their own interest, they may be benefitting society more than if they were to act in society’s best interest. This essentially selfish action potentially can lead to greater innovation, productivity and wealth.
Smith links Macroeconomics (the study of individual and companies make decisions) and Microeconomics (the study of the total economy) through the individuals self interest to the benefits to society. This has pathed the way for thinking in modern econmics. As a philosopher, he studied an individual’s decision making lead to potential outcomes based on assumptions. Smith’s fundamental capitalist ideas influenced the ‘Founding Fathers’ of American constitution in 1776 - the same year as the American declaration of independence.
Interestingly, Adam Smith was considered to be quite an odd person by many of his peers and friends. He was known for speaking to himself and his imaginery friends. He was also very absent minded, on one occasion, distracted by his own thoughts, Smith went on a walk and ended up 15miles outside town wearing only his nightgown. Smith also was the first Scottish man to feature on an english Banknote.
Economics Vocab and facts:
Scare resource - A resource that is limited in its supply
Microeconomics - How people decide to deploy scare resources
Macroeconomics - The total decisions affect the total economy
Invisible hand - The unintended social benefits on a individuals self interested actions.
Economists state the obvious using the incomprehensibility of outcomes using mathematics - A.Knopf
