Dr. George Crowley’s publication, “Adam Smith: Managerial Insights from the Father of Economics,” reaffirms the belief that Adam Smith’s Wealth of Nations continues to remain influential in modern management practices. By allowing economies to be fluid, Dr. Crowley argues societies are better off when businesses and consumers are free to pursue the opportunities in the free market without boundaries or restrictive government interference. Contemporary businesses are more complex and globally intertwined than they were at the beginning of the Industrial Revolution. Fundamentally managers face similar challenges as their eighteenth century counterparts, but there are more dynamics taking place in the twenty-first century economy. Academic scholars continue to debate over Adam Smith’s theories, but as Dr. Crowley correctly establishes, Smith’s economic principles provide a blue print in today’s managerial decisions.
Adam Smith's Wealth of Nations was published in 1776, coincidently the same year as the Declaration of Independence, is considered by many economic scholars to be the early framework of capitalism. Smith’s “invisible hand” metaphor explains how the motivation of the individual, a strong workforce and a decentralized market are the driving forces for economic prosperity. According to Dr. Crowley:
The invisible hand succeeds at aligning individual incentives with societal prosperity. An important consideration in determining whether incentives will be aligned, then, is the extent to which the ‘hand’ is able to freely operate. …When the institutions allow the invisible hand to align interests, wealth is created; when the rules of the game get in the way, however, less desirable outcomes are created.
Contemporary managerial thinking must formulate the relationships between inputs, outputs and current market conditions to achieve maximum productivity. Dr. Crowley believes that businesses operating in a free market create the greatest efficiencies of the flow of goods and services at the greatest economic advantage for the buyer and the seller. In a rapidly changing global economy, achieving maximum productivity at profit levels requires the contemporary manager to constantly make adjustments to keep expenses down. Labor is one of the largest and in certain sectors the most expensive component in the production of goods. Stable labor costs are important for long term revenue projections to be relied upon by managers because it is a precursor of where a company is trending financially.
Dr. Crowley’s article offers a simplified overview of Smith’s views on the Specialization and the Division of Labour, but he does not expand on the theory’s application to a global economy. In order for a business to thrive in a worldwide economy, managers must embrace the idea of using the skills of workers from other countries. Outsourcing acknowledges the labor cost to produce a particular product is cheaper if the manufacturer were to produce that...