Who is the Father of Economics?
Adam Smith is considered to be the Father of Economics because of his book "Theory of Moral Sentiments" and "An Inquiry into the Nature and Causes of the Wealth of Nations". He became the father of modern economics.
The academic field of economics as we know it now had its roots in Adam Smith's The Wealth of Nations. He elaborated on the division of labour and discussed how rational self-interest and competition might promote economic growth in this work and other ones. Smith was divisive in his own time, and writers like Horace Walpole frequently parodied his basic philosophy and writing style. Smith established the fundamental principles of traditional free market economics.
Adam Smith: Early Life
Smith entered Glasgow University at the age of fifteen to pursue a degree in moral philosophy under the tutelage of "the never-to-be-forgotten" Francis Hutcheson. He enrolled in Balliol College in Oxford in 1740 but gave up his exhibition in 1746. He started giving public lectures in Edinburgh in 1748, but he soon changed the subject to "the progress of opulence." It was at this point, when he was in his mid-to-late-20s, that he first outlined the economic theory of "the obvious and simple system of natural liberty," which he would later expound in his Inquiry into the Nature and Causes of the Wealth of Nations. He first met David Hume in about 1750, and the two became great friends.
Before enrolling at Glasgow College at age 14 in 1737, Adam Smith completed his basic education at a two-room "burgh" school in Kirkcaldy, Scotland. Smith received a scholarship at Balliol College in Oxford after graduating in 1740, where he spent six years studying. Adam Smith majored in social philosophy while attending the Universities of Glasgow and Oxford's Balliol College. He was one of the first recipients of scholarships established by fellow Scot John Snell. He collaborated with David Hume during the Scottish Enlightenment after delivering a series of well-received public lectures at the University of Edinburgh after receiving his degree.
The Theory of Moral Sentiments was written and published by Smith while he was a professor of moral philosophy at Glasgow. Later in life, he accepted a tutoring career that allowed him to travel around Europe and connect with other intellectual titans of the day.
Father of Economics
Adam Smith FRSA was a Scottish economist and philosopher who is regarded as the father of political economics and a prominent player in the Scottish Enlightenment. His two major works are "An Inquiry into the Nature and Causes of the Wealth of Nations" and "The Theory of Moral Sentiments." Other names for him included The Father of Economics and The Father of Capitalism.
The father of economics is regarded as Adam Smith. He is the pioneer who gave economics as a brand-new discipline a clearly defined form. The book "Wealth of Nations" was written by him. The founding father of macroeconomics as a distinct field is John Maynard Keynes.
Founder of Modern Economics
The founder of modern economics is regarded as Adam Smith. Smith opposed mercantilism and was a strong supporter of laissez-faire economic principles. Smith put out the concept of an invisible hand in his first book, "The Theory of Moral Sentiments," which described how markets tend to self-regulate through competition, supply and demand, and self-interest. Modern capitalism and modern economics were both born with the publication of "The Wealth of Nations."
Theories by Adam Smith
The Invisible Hand
In his writings from the 1700s, Adam Smith discussed the idea of an "invisible hand," emphasising that selfish people are responsible for this mechanism's advantages to the economy and society.
The invisible-hand idea is frequently presented as a natural phenomenon that, through supply and demand and competition for limited resources, steers capitalism and free markets toward efficiency rather than as something that promotes the happiness of individuals. This framework is made up of organisations like the legal system that serves to safeguard and advance free and fair competition.
Without interference from the government or other parties, the market is able to find equilibrium without being forced into abnormal patterns. Oversupply and shortages are avoided when supply and demand balance naturally. Self-interest and the freedom of production and consumption are how society can function in its best advantage.
Philosophy of Free Markets
The Adam Smith theory of free markets places a strong emphasis on limiting the influence of taxation and government involvement in the market. Smith supported a small government but believed that the government should be in charge of a nation's defence and education systems.
Summary
Adam Smith is known as the Father of Modern Economics. He published The Wealth of Nations in 1776. His idea of an invisible hand directs someone attempting to maximise their individual well-being to provide the best overall result for society as a whole. He is remembered for his best written book named “ An Inquiry into the Nature and Causes of the Wealth of Nations.”
FAQs on Father of Economics: Adam Smith's Contributions
1. Why is Adam Smith called the 'Father of Economics'?
Adam Smith is known as the 'Father of Economics' because he was the first to transform economics into a distinct and systematic field of study. His 1776 book, 'An Inquiry into the Nature and Causes of the Wealth of Nations', provided the first comprehensive account of political economy and laid the groundwork for classical economics by introducing foundational concepts like the division of labour, free markets, and gross domestic product (GDP).
2. What are the key contributions of Adam Smith detailed in 'The Wealth of Nations'?
Adam Smith's most significant contributions to economics, as outlined in 'The Wealth of Nations', include:
- Division of Labour: The concept that breaking down production into specialised tasks dramatically increases productivity.
- Laissez-Faire Economics: The principle that economies function most efficiently with minimal government intervention, allowing free trade and competition.
- The Invisible Hand: A metaphor for the unobservable market force that helps the supply and demand for goods in a free market reach equilibrium automatically.
- The Labour Theory of Value: The idea that the value of a commodity is determined by the amount of labour required to produce it.
3. How does Adam Smith's 'invisible hand' concept work in a free market?
The 'invisible hand' is a metaphor explaining how individuals pursuing their own self-interest can inadvertently lead to positive and widespread social benefits. In a free market, when a consumer buys a product, they are acting in their own interest. This purchase signals to the producer to create more of that product to earn a profit. This interaction, driven by self-interest on both sides, helps the market self-regulate supply and demand without central planning, thus serving the broader interests of society.
4. What did Adam Smith mean by the 'division of labour', and why is it important for an economy?
The division of labour refers to the process of splitting a complex production process into a series of smaller, specialised tasks, with each task performed by a different worker. Using his famous example of a pin factory, Smith argued this was crucial for economic growth because it:
- Increases skill and dexterity in workers.
- Saves time by eliminating the need to switch between tasks.
- Encourages the invention of machinery to perform specific, repetitive tasks.
Ultimately, this specialisation leads to a massive increase in overall productivity and the wealth of a nation.
5. How does Adam Smith's earlier work, 'The Theory of Moral Sentiments', complement his economic theories in 'The Wealth of Nations'?
'The Theory of Moral Sentiments' provides the ethical and social foundation for the economic system described in 'The Wealth of Nations'. While the latter focuses on self-interest as a driver of economic activity, the former explains that human behaviour is also shaped by 'sympathy' and a natural desire for social approval. Smith argued that this moral compass creates a self-regulating society where individuals' pursuit of self-interest is naturally tempered by their consideration for others, preventing pure greed from dominating the market.
6. What are the main modern criticisms of Adam Smith's classical economic ideas?
While foundational, Adam Smith's theories face several modern criticisms. Critics argue that his model of a perfect free market often fails to account for real-world complexities such as:
- Negative Externalities: Free markets may not account for social costs like pollution or resource depletion.
- Market Power: Unchecked capitalism can lead to monopolies and oligopolies, which suppress competition.
- Income Inequality: The pursuit of self-interest can lead to significant disparities in wealth distribution.
- Irrational Behaviour: Smith assumed rational economic actors, whereas modern behavioural economics shows that human decisions are often influenced by emotions and biases.
7. How did Adam Smith's theories lay the foundation for the field of microeconomics?
Adam Smith is considered a forerunner of microeconomics because his work was the first to systematically analyse the behaviour of individual economic agents. His focus on how households and firms make decisions, how supply and demand interact to determine prices in specific markets, and how individual self-interest drives market outcomes are the core building blocks of modern microeconomics. His analysis of price determination and resource allocation at the individual level created the entire framework for the field.
8. Is there a 'Father of Economics' for India, similar to Adam Smith's global title?
While Adam Smith is the global 'Father of Economics', India has its own key figures. In ancient times, Chanakya (Kautilya) is considered a pioneer for his treatise 'Arthashastra', which details economic policy and military strategy. In the modern context, M. Visvesvaraya is often regarded as the 'Father of the Modern Indian Economy' for his contributions to engineering and industrial planning, while P.C. Mahalanobis is recognised for architecting India's post-independence Five-Year Plans.
