Modern economic philosophies have been built on past ideas developed by top scholars, and in my opinion, no past philosopher has influenced my beliefs on the economy like Adam Smith. The Scottish economist has published several books which have shaped the modern economic mind with his mind-transforming ideas. Particularly in the fundamentals of classical economics, Adam Smith is influential in shaping how the world views factors such as the gross domestic product (GDP) and the idea of free markets, which all develop under his classical economic growth. These two ideas remain relevant in the financial world today as Smith demonstrates the evolution of human economics from the hunting and gathering mindset to the idea of free markets developed globally.
Intrinsically, the classical economic growth philosophy is built upon several specific facts that Adam Smith chose to illustrate. According to his argument, population growth translates to an increase in wealth and resources until it reaches a particular stage where excessive population means a struggle for resources (Paganelli 115). Notably, Smith builds his theory on several assumptions, such as reinvestment, specialization, and innovation, which build the framework of his arguments. He focuses his argument on the scarcity of resources, which would be experienced with the nation’s increasing population. Again, his notion of free markets is also another demonstration of the superiority of his economic mind. He emphasizes minimizing the role of the government in determining market factors such as demand and supply. Further, he argues that the markets would be better off if the participants looked out for themselves.
Adam Smith poses top philosophical ideas, which are well explained by the arguments on which he bases the classical theory. I agree with his idea that division of labor and specialization create prosperity in particular nations. in the modern world, economies thrive due to the diverse sources of income in which citizens have invested their resources. When some governmental economic measures fail, the private sectors excel; hence, regardless of how it ends up, the economy thrives.
Nonetheless, I cannot entirely agree with Adam Smith’s classical theory arguments since he disregarded a couple of facts in his arguments. For instance, he assumed that the supply of resources in these specific nations would be limited for some reason. However, he does not factor in the changing nature of production prerequisites such as technology, which may warrant a constant supply of resources. Nations such as the United States have colossal population numbers, but there are still plenty of resources compared to some third-world countries, which have low population numbers yet experience scarcity. The technological superiority witnessed in the United States probably cushions the diminishing returns he projected in his philosophy.
Moreover, I am afraid I have to disagree with his theory on free markets due to some substantial facts he raised on the markets. For the exponential growth of the market, government interventions are integral. The government has the power to grant loans for market and business growth, which positively impacts their involvement (Huang et al. 149). His failure to factor in issues such as extortion and market security, which the government curbs thanks to their intervention in market operations. Further, if government regulations were lifted in the market, conflicts would emerge, and it would be impossible to carry out fair trade in such market environments.
Huang, Zhehao, Gaoke Liao, and Zhenghui Li. “Loaning scale and government subsidy for promoting green innovation.” Technological Forecasting and Social Change 144 (2019): 148-156.
Paganelli, Maria Pia. “Population as a GDP proxy in Adam Smith.” Journal of Scottish Philosophy 19.2 (2021): 115-123.