Early Economics Essay

1651 words - 7 pages

Some of the earliest theories about what causes economic growth were developed by renowned economist Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, and even Karl Marx. Theories formed during their time were largely cultural in nature. They placed great emphasis on the importance to economic growth and how it related to culturally conditioned attitudes towards certain values such as diligence and hard work, ambition for higher standards of living, respect for other?s property rights, inventiveness, and efficiency. Theories were also developed regarding government?s roles in planning and control versus the free market system and what combination of the two will be most beneficial to economic growth. Some economist, namely socialist and communist, argued that an economy that was totally planned and controlled by government would grow more rapidly than a capitalist economy. Additionally, a socialist educational policy would be more successful in educating in the masses and would greatly increase the supply of what is now called human capital. Economists who supported a free market system agreed that investment in human and non-human capital was indeed important for rapid economic growth; however, they deemed that a capitalist economy was necessary to allocate economic resources most efficiently. It is inarguably though, that each of these great economists all made valuable contributions to theories on economic growth.Adam Smith was born in Scotland in 1723 and is best known for his book, An Inquiry into the Nature and Causes of the Wealth of Nations, in which Smith gives his explanation of how rational, self-interest in a free market system leads to economic well being by acting as an ?invisible hand? which leads people to unintentionally promote society?s interest while pursuing their own. Smith believed that more wealth to common people would benefit the nation?s economy and society as whole. He described wealth, produced in a self-regulating market, would remain self-regulating because people would produce goods beyond what they needed for themselves and trade or sell the surplus to whomever would buy. The freedom to trade was part of the self-regulating market. He felt the primary advantage of trade was that it opened up new markets to sell goods and also provided imported commodities at a lesser cost. Free markets would lead to competition, which was also an essential part of the self-regulating market.Competition allows for market equilibrium between buyers and sellers. Sellers want to serve themselves by charging more for their products while buyers want to serve themselves by paying less for products. This conflict of interest creates a market in which most sellers and buyers are satisfied. Competition is an important factor, because without it, monopolies would be formed. Smith was opposed to monopolies and favored government intervention to prevent them. Although Smith was opposed government interference within free market...

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