Adam smith economic theory of wealth creation
Here is about Adam smith economic theory summary. Adam smith was one of the first economists to imagine a system for creating wealth through the promotion of entrepreneurship. Rather than divide fixed resources among competing groups and individuals, Smith envisioned creating more resources so that everyone could become wealthier. The year was 1776. Adam smith named his book An Inquiry into the nature and causes of the wealth of Nations; it’s often simply called The wealth of nations.
Adam smith was the father of capitalism. Capitalism is an economic system in which all or most of the means of production and distribution ( for example land, factories ,railroads ,and store ) are privately owned ( not owned by the government ) and operated for profit. In other words Adam smith believed that business people could see economics reward for their effort,receive more money in the form of profits,they would work long hours. As result of those efforts,the economics would prosper with plenty of food and products available of all kinds.
***** The Invisible Hand ****
How is it that people working in their own self interest can produce wealth for others ? it become clear to Adam Smith that the only way farmers could become wealthy would be to sell some of their crops to others. To become even wealthier, the farmer would have to hire others to produce more food. As a consequence, people in the town would have plenty of food and some would have jobs on the farm.
A shoemakers might see that farmers had become wealthy by producing as much food as possible. That meant working long hours and hiring others. so shoemakers would do the same thing as a farmers.They would work longer hours and hire others to make shoes. As a consequence, people in the town would have plenty of shoes and even more would have a jobs.
Soon there would be hat makers and furniture makers and house builders who would follow the same pattern. they would work hard and hire others in order to become wealthy. As a consequence,nearly everyone in the town would have home,furniture, and so on – and everyone who was willing and be able to work would have a job. who or what was enabling everyone to to have a job and to buy what they wanted ?
Adam smith called the mechanism for creating wealth and jobs an invisible hand.Under his system of capitalism, business people don’t deliberately set out to help others. In fact,they work only for their own prosperity and growth. Yet,like an invisible hand through people trying to improve their own situation in life, an economy grows and prospers through the production of needed goods, services and ideas.