Adam Smith and LIBERALISM theory

In this lesson from a TEACHER we offer you a brief summary of the theory of leconomic iberalism from Adam smith (1723 -1790), Scottish economist who is committed to economic freedom, against the intervention of the State in relation to the economy. This doctrine was born in enlightened Europe at the end of the 18th century. This economic theory is also known as free trade, and is based on the law of supply and demand.

Its main defender was Adam Smith and it lays the foundations of modern economics. Supporters of free trade, They advocated the elimination of commercial and productive limitations, in the face of state intervention in economic matters. If you want to know more about the Adam Smith's theory of economic liberalism, keep reading this lesson.

Index

1. Adam Smith and economic liberalism
2. What did Adam Smith defend? The labor theory of value
3. Subsistence wages for the worker and his family

Adam smith, who was Scottish, studied at Glasgow and Oxford, universities where he taught Logic and Moral Philosophy respectively. In 1776 he published his great work:

Smith was a staunch defender of the natural law, against the laws of human beings, ensuring that the selfishness, compassion, the right to Liberty, the right to property private, the job and the exchange, mainly, it was the engine of human actions. Only from the Liberty, the human being can help himself and the other. Thus, freedom and selfishness will promote, both the individual good as the common good.

The commercial exchange between people, therefore, will have to be free, in order to find the balance that benefits everyone. The selfishness, is essential for the common benefit. Only from selfishness is possible, both your own benefit and that of others. Because for Smith, when one acts motivated by selfishness,

“ands led by an invisible hand to promote an end that did not fit his purpose”

and this end is the common welfare. And continues, "nI have never known that those affections to work for the public good did a lot of good”.

His labor theory of value gives rise to a basic law of the free market: the law of supply and demand, without No kind of state intervention. On the other hand, he was concerned with the issue of the value of merchandise, and so, following Petty and Cantillon, elaborates his theory of value-labor.

In order to Adam smith, the origin of the value of a commodity is found in the work developed by the individual. In this way, he divides the value in two:

1. Use value: this refers to the usefulness of an object
2. Exchange value: It is related to the ability to be exchanged and the time spent doing the job.

Another of the great problems that Adam Smith encountered had to do with the rate at which humans reproduced, which was inversely proportional to that of the earth. Thus, sooner or later, there would come a time when food production would not be enough for everyone. That is why Adam Smith was betting on subsistence wages for workers and their families, since, otherwise, the population would increase, and with it, food production would decrease even more.

In addition, at this time, there had been a change from a type of production in which the craftsman himself took care of all the work, to the division of labour, where each worker was in charge of carrying out only one of the parts. In this way, the specialization at work, which increased, not only the production, but also the quality of work.

The Scottish economist stated that every producer should adapt your company to the division of labor if he wanted to increase his profits, and therefore, improve the world economy. Capitalism began, under the following maxim:

“In a laissez-faire system, the oil of self-interest miraculously keeps the economic gears running. You do not need a planner [...]. The market solves all our problems”.

Smith was convinced that the division of labor, freedomd and selfishness, would suppose the apogee of the economy to global level. Capitalism was beginning in England, laying, Adam Smith, the foundations of this economic system, so questionable today.

The question now is the following, will explode the capitalism, as claimed Marx due to its internal contradictions.

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Smith, A. The Wealth of Nations.Ed. Alliance. 2011