Essay About Adam Smith And Main Topics

Reaction Paper About Classical Capitalists
Maria Hitti               201400748Reaction PaperThe world has witnessed several economists who shared their ideologies with the world. Classical economists for instance, believed that the market is best when it is left alone with very little government interference and that the market regulates for itself when free of coercion. Adam smith is one of the most famous classical philosophers but he differentiated from them by that he believed that a society can be profitable and moral at the same time. He discussed 4 main topics in his very famous book “Wealth of The Nations”. First he talked about specialization then capital consumerism. After that he discussed how to praise the rich and finally he talked about how to influence the demand of consumers by educating and shaping their desires. In his idea of specialization he believed that the division of labor will increase their productivity and this will increase the output and lead to an increase in real income since the purchasing power of individuals increased. Moreover, he believed that technological change is at the root of division of labor. In addition to that, he thought that we can also have the social division of labor via decentralized trade and social planning mechanism. All of this leads to a virtuous spiral of economic development which is positive and is the secret of the wealth of the nation. However, no legislative or institutional restrictions should exist. With respect to the theory of value he believed that the value of a product is directly related to how much labor worked to produce it. In fact, labor is embodied in the commodity. Moreover, there is a market price and a natural price that we will never be able to attain. He then added that there is value added accounting where we account for the profits of the capitalist, the rent of the land and the wages of the labor. Finally, Smith uses the concept of balance sheet to measure the wealth of the nation.  Another classical philosopher is Thomas Malthus. He came after Adam Smith and supported his fallacy but he believed that it is utopian and can’t be realized. It is always at the expense of someone else. His main argument was that human population will always increase at an exponential rate but food is subject to diminishing return and is limited. So if population is not regulated by natural phenomena or preventative methods the society will eventually live in misery, we should find a way to stabilize it.  David Ricardo was also a capitalist and he believed that machinery would affect negatively the working class if their wage fund is decreased to buy new equipment. Due to that, workers might lose their jobs and thus unemployment will rise. In addition to that, he agreed with Malthus’ idea of over population, he thought that we should not give food to the poor since we would create over population. Moreover, we would be competing with local food production and this depresses the agricultural sector. In addition to that, he believes that market interest is different from moral interest.