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Adam Smith

Adam Smith, a Scotsman, was born in 1723, and attended both Glasgow and Oxford Universities. He never married, an eccentric character, who after returning from France became very close to his mother, He was also a firm believer in the Church of Scotland, a practising Christian. After travelling extensively through France and Switzerland for two years, he returned home, and on a sizeable life pension earned at the service of the Duke, he decided to retire and write his book ‘The Wealth of Nations’ at the dawn of the Industrial Revolution in 1776. In his book he came up with many sayings to describe the goings on in everyday economics such as the Invisible Hand. The invisible hand is a term used by Smith to describe the natural force that guides free market capitalism through competition. Each participant in a free market, according to Smith, will try to maximise self-interest and the interaction of market participants leading to more exchanges of goods and services. No regulations would need to be in place to ensure that this system was working properly since the invisible hand would ‘guide’ market participants to trade on the most mutually beneficial terms. This term is still relevant today, as the majority of countries still operate free market (no intervention by the government), capitalist societies.

Another term that he derived in his book ‘laissez-faire’ literally translating as ‘you let to do’ is the opinion that an economic system should be driven by free market forces, not government intervention. In some cases this would work, and this term is more relevant to the days in which Smith was writing (mid 18th Century). Nowadays, such as in America with the $700bn deal to rescue the economy over there, otherwise it would send the whole country into turmoil, it is necessary for the government to interact in some cases. Smith had a strong view of human cognition, not human motivation believing that ordinary people know how to cope financially with their...