Who was 'Adam Smith'

Adam Smith was an 18th-century philosopher and free-market economist famous for his ideas about the efficiency of the division of labor and the societal benefits of individuals' pursuit of their own self-interest. In his first book, The Theory of Moral Sentiments, Smith proposed the idea of the invisible hand, the tendency of free markets to regulate themselves by means of competition, supply and demand, and self-interest. Smith is also known for his theory of compensating wage differentials, meaning that dangerous or undesirable jobs tend to pay higher wages to attract workers to these positions, but he is most famous for his 1776 book: An Inquiry into the Nature and Causes of the Wealth of Nations.

BREAKING DOWN 'Adam Smith'

Adam Smith was born in 1723 in a small Scottish town. At the age of 14, Smith went to the University of Glasgow, and he attended Oxford University at the age of 17. After years of school and traveling, Smith began writing his now-famous works.

The Theory of Moral Sentiments

Smith is more famous for his 1776-piece, Wealth of Nations, but his first major treatise created many ideals still practiced today. Released in 1759, the book provided a glimpse into ethics and morals. Smith argued that humans are self-interested but naturally like to help others. It was this piece that first began discussing charitable efforts. A natural sympathy seen by humans leads to wanting to help others.

The Theory of Moral Sentiments proves complementary with Wealth of Nations in that self-interested humans can live together peacefully and productively.

Wealth of Nations Becomes a Masterpiece

In 1776, Adam Smith released An Inquiry into the Nature and Causes of the Wealth of Nations. The title is commonly shortened to The Wealth of Nations and considered one of the most influential books ever written. Smith changed the import/export business, created the concept of what is now known as gross domestic product (GDP) and argued for free exchange.

Prior to the release of The Wealth of Nations, countries declared their wealth based on the value of their gold and silver deposits. Smith changed that forever by arguing that countries should prosper based on production and commerce and judge their value by that. This is now what is referred to as GDP.

Before Smith’s book, countries were hesitant to trade with other countries except if it benefited them. Smith argued that a free exchange should be created, as both sides trading become better off. This led to the increase of imports and exports and countries judging their value accordingly. The philosopher and economist Smith also argued for a limited government. He wanted to see a hands-off government in most sense, providing an open and free market. Smith did see the government responsible for some sectors, however, including education and defense.

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