Adam Smith 1723 – 1790 He Describes the General Harmony Of

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Adam Smith 1723 – 1790 He describes the general harmony of human motives and activities under a beneficent Providence, and the general theme of “the invisible hand” promoting the harmony of interests. The invisible hand: There are two important features of Smith’s concept of the “invisible hand”. First, Smith was not advocating a social policy (that people should act in their own self interest), but rather was describing an observed economic reality (that people do act in their own interest). Second, Smith was not claiming that all self-interest has beneficial effects on the community. He did not argue that self-interest is always good; he merely argued against the view that self- interest is necessarily bad. It is worth noting that, upon his death, Smith left much of his personal wealth to churches and charities. On another level, though, the “invisible hand” refers to the ability of the market to correct for seemingly disastrous situations with no intervention on the part of government or other organizations (although Smith did not, himself, use the term with this meaning in mind). For example, Smith says, if a product shortage were to occur, that product’s price in the market would rise, creating incentive for its production and a reduction in its consumption, eventually curing the shortage. The increased competition among manufacturers and increased supply would also lower the price of the product to its production cost plus a small profit, the “natural price.” Smith believed that while human motives are often selfish and greedy, the competition in the free market would tend to benefit society as a whole anyway. The market functions as a self-correcting mechanism that returns itself to equilibrium, or as an organism that returns to homeostasis. Meritocracy: Meritocracy is an important factor in the work. Smith emphasizes the advancement that one can take based on their will to better themselves. People would want to do things with a strong mindset without the interference of the outside norms. Smith, also, points out the fact that the outside forces lead to infancy in the division of labor, therefore, slowing the economic growth of an economy. Because of the idea of self-improvement is very strong, meritocracy efficiently moves the outcomes of the division of labor, ultimately leading to more efficiency in the economy. .

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