Who is the Father of Economics?
Last Updated On -29 Jan 2025
Adam Smith, the Scottish philosopher and economist is believed to be the father of economics. Economics has been an evergrowing subject due to the love of historians to bring about revolution. He influenced the establishment of modern economics.
An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, is a thought-provoking book written by Adam Smith, imprinted on citizens.
Why is Adam Smith the Father of Economics?
Adam Smith was one of the influential reasons behind modern economic theory and practice, his ideas were revolutionary and brought change in people’s knowledge and perspective.
Let us look at the key reasons for Adam Smith being the father of economics:
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He Introduced the nation to Classical Economics
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He gave the The Concept of Invisible Hand
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He Introduced the Division of Labour
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His works on Moral Sentiments and Economics
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He gave The Theory of Laissez-Faire
Introduction to Classical Economics
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The origin of theories of Classical Economics was from the book authored by Smith, “An Inquiry into the Nature and Causes of the Wealth of Nations”, in which he stated the fundamental concepts.
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According to Smith, free trade without the interruption of government, would benefit the economy most.
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In a community where everyone follows their own interests and will, producing goods for people would be better, and people spend money on goods that they want or need the most, making it a cooperative system.
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This whole supply and demand chain would pave the way for a self-regulating market and determine the prices and resource allowance.
The Concept of Invisible Hand
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The concept of the invisible hand was introduced by Smith, which is a metaphor for a free market economy, where freedom of production and consumption play in the best interest of society.
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It creates a mutual interdependence in society motivating producers to make what is socially necessary.
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The invisible hand metaphor generates two ideas, first free market produces unintentional benefits, and second these benefits are better than the regulated market.
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This helps to explain the value of goods and the difficulty in bringing them.
Division of Labour
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In the book “The Wealth of Nations”, Smith states that the division of labor is a motor for generating prosperity.
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The division of labor increases wealth, by dividing the work among people according to their specializations, making the cooperative society wealthier than the independent society.
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The amount and quality of production are higher with the division of labor.
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Division of labor is limited by the extent of the market, as the larger the market, the greater the potential for specialization and division of labor.
Moral Sentiments and Economics
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“The Theory of Moral Sentiments”, by Smith focuses on his understanding of human behavior and its impact on society.
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It talks about the concepts of sympathy, sentiments behind actions, and the collective moral feelings in a society.
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He argues that the birth of feelings and compassion for others originates from own feelings and experiences.
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According to this, when a producer puts his moral compassion into selling goods in the market, the outcome leads to social benefit and increasing worth.
The Theory of Laissez-Faire
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Laissez-faire is an economic theory that translates to “leave alone”, or “let you do”.
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It is a key feature of free-market capitalism that opposes central interference.
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It encourages self-responsibility and innovation.
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It faced criticism for the fact that the market needs a little bit of regulation for smooth operation.
Conclusion
Adam Smith as an economist put forth the idea of a self-regulating market and its impact on society. He brought into light the relation between moral sentiments and market operations, the production and selling of goods to people regulated by moral compassion. His insights are reflected in the policies of the World Trade Organization and the International Monetary Fund.
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Frequently Asked Questions ( FAQs )
What is the Invisible hand theory by Adam Smith?
The invisible hand is a metaphor introduced by Adam Smith, to describe a free market economy, where freedom of production and consumption play in the best interest of society.
What theories of Adam Smith were criticized the most?
The theory put forward by Smith states that the market does not need to be ruled by the government, a free market runs more successfully. However, according to critics, a market needs regular interference by the government to check for fraud or corruption.
What are Adam Smith’s major works?
Adam Smith’s two major works are:
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The Wealth of Nations ( 1776)
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The Theory of Moral Sentiments ( 1759 )