Adam Smith Social Contract Analysis

In his Wealth of Nations, Adam Smith celebrated capitalist society. The central thesis of The Wealth of Nations is that capital is best employed for the production and distribution of wealth under conditions of no governmental interference, or laissez-faire, and free trade. In Smith's view, the production and exchange of goods can be stimulated, and a consequent rise in the general standard of living attained, only through the efficient operations of private industrial and commercial entrepreneurs acting with a minimum of regulation and control by governments. To explain this concept of government maintaining a laissez-faire attitude toward commercial endeavors, Smith proclaimed the principle of the "invisible hand": Every individual in pursuing his or her own good is led, as if by an invisible hand, to achieve the best good for all. Therefore any interference with free competition by government is almost certain to be injurious. The division of labor is another crucial component of capitalist society. According to Smith, division of labor benefits society in three ways:

Capitalism is an economic system that dominates the world, some claim it is the key to a better world, taking the poor out of poverty and building an closer world, while other believe it is an exploitative system that oppresses billionS of people. Capitalism and the free market began to take from around the industrial revolution and came as a result of philosopher and economist Adam Smith and David Ricardo. Adam Smith’s book the wealth of nations was the template for many modern western nations. The free market is Adam Smith’s brainchild; the revolutionary theory was based on the antithesis of the mercantile system that was in place in its prominence during the 16 - 18th centuries. The convention was for nations building their wealth overseas through a complicated system of protectionism. Mercantilism adhered to a zero sum game ideology and was centred around the belief the nation’s wealth was based on its holding of precious metals or resources and its duty to protect their interests, which meant the government needed to implement restrictions and regulations on trade with other states. In order to protect their economy and in what they feel would increase their wealth, policies like tariffs on foreign goods, duties, bounties, etc. Smith argued against the mercantilist framework from a number of positions; trade restrictions and regulations interfered with natural prices, reduced the specialisation within industries, reduced the country consumption and had an ineffective

“Capitalism is an economic system with the right of a business to make its own decision and operate with a profit motive and individual rights to possess and dispose of goods, services, and resources”. (1). The government who choose to use capitals system were democratic. Adam Smith is from Scottish. He was one of the great philosopher during his time. Because of his great work on capitalism, he is also known as the father of the capitalism. He published a book named The Wealth of Nation in 1776.His book had so much influence on economic thinking at that time and as well as at this time. The thesis of the book is “The best way to increase the wealth of nation is through individual decision making with minimal government interference”(2). This quotes simply states that in order to make richer and better society, there should be individual decision making.

In Adam Smith’s The wealth of Nations it is indicated that capitalism is threatened by privileges extended to certain members of the economy at the expense of others. Thus, it is pertinent to have the rights to private property, profits, freedom of choice, and competition for capitalism to function properly.

On the other hand, in complete opposition, and with a philosophy that coincides with my own, is that of Smith. According to Smith’s socio-economic views a “free society” is entirely able to coexist with Capitalism. Smith believes that essentially free, lassez-faires market equates into a free unrestricted society, wherein individual desire and drive is allowed to prosper and flourish. Unlike Marx, Smith does not view the capitalist mode of production, as a restricting process. Smith incorporates a “Trickle down” notion into his socio-economical philosophy. This “Trickle down” notion is effectively the acceptance that despite private owners of industry, capitalising on low labor wages and maximising a surplus value, there will be a general

The advent of the ideal of capitalism is often attributed to Adam Smith. Sometimes called “The Father of Economics,” Smith was an 18th century moral philosopher from Scotland. Smith is perhaps most known for writing the book “An Inquiry Into the Nature and Causes of the Wealth of Nations.” In this book Adam Smith considers and advances the ideas of the division of labor, the invisible hand, the pursuit of self-interest, the proper role of government and the idea of a Laissez-Faire (or noninterventionist) economy. Each of these ideas were considered heavily during the establishment and development of the United States. Because of their adoption into the new American government, the United States became the forerunner to the free-market.

Adam Smith was a British economist who helped to create the system of capitalism that we use today. Adam Smith was one of the major critics of the old system of mercantilism as was seen in his book The Wealth of Nations. He was against mercantilism because he felt like the people worked to make the place where they lived rich and not themselves. Mercantilism was based on a few major points, most important was that the state must have a favorable balance of trade, which means that they must export more than they import. As you can see in our nation today our balance is not in our favor but yet we remain to be the richest country ever. Mercantilism also focused on the idea of bullionism, which was having hard currency in gold and silver to back up trade. Smith’s idea was that they would take parts of mercantilism and create this new system capitalism. He felt that in a society with free enterprise people would be able to pursue profit themselves, and this would also benefit the society as well. Smith advocated the new system of capitalism to replace mercantilism. Smith created this idea of the “invisible hand” which was a theory that

Social contract theory is a willful agreement among societal members to delegate their authority to a governmental body for protection, welfare provision, and regulation of relations among the individuals. In such

Smith made this the backbone of his economic framework; profitability leads to fulfilling of the needs and wants of the society, in turn leading to increasing the national income to its maximum capacity. Thus, for this reason and following human rights to give individuals the liberty to do what they seek, the competitive market was the best tool for profit maximization and optimum allocation of resources (DA Irwin, 1996). Smith believed that the government did not have any direct role in dictating terms for market processes, nonetheless, the administration was fundamental for supporting the market systems as a social foundation for the market to work more viably.

Adam Smith believed there should be a free market by allowing every individual to act freely. This allows for self-interest and drives one’s to gain profit by motivating one to increase productivity in a natural way. Smith’s idea of economic growth led to idea where everyone gains wealth by the means where the government is limited, this allows for competition and even the poor have a chance to gain wealth. The profit motive is one wants to gain a fortune. Productivity spreads through the division of labor and a rise in capital accumulation.

In this paper, I will examine the economic theory of Adam Smith, a historic and highly renowned economist and philosopher during the 17th century. Smith is often referred to as the father of economics, and is considered the first theorist of what we commonly refer to as capitalism. I will discuss his economic theory in relation to, and as illustrated by one of his original works. The Wealth of Nations was published in 1776, and is considered to be one of the backbones or modern economics. In this book, Smith explores the nature and causes of wealth in a given society. He emphasizes key economic concepts capable of sparking economic growth and progression. I plan to shed some light upon the encompassing elements of Smith’s theory, such as a division of labor, market exchange methods and the overall coordination of market activities. It is important to keep in mind the emphasis Smith places on the respect for individual liberty within a respective society when examining the elements of his theory. Once this has been accomplished, I will then elaborate as to why I believe Smith’s economic theory is philosophically superior to other economic theories that also aim to create the most economically functional type of society.

A social contract between society and business represents an understated understanding within society about the proper

By examining Darwin's theories of evolution, which explain the process by which the phenomenon of evolution occurs, we get a grasp of a broad picture of the natural world with all its relationships and dynamics. Likewise, Adam Smith explains the economic world of Laissez-Faire capitalism in abstract, holistic terms, creating a general picture of its components. In studying both systems---one, the law of the wild, and the other, a system imposed by humanity---we can see how similar they are in their mechanisms, despite the fact that they apply to completely different settings. Therefore it is no surprise that Smith's capitalist system brings human society closer than ever to

He believed that minimal role of state in the economy and whether people act out of self-interest will benefit to the society. “Invisible hand” will regulate the market which at once satisfies self-interest and the needs of the community. Hence Smith's considered political economy “as the study of wealth generation”. (Babe 2009: 14)

Firstly, the relationship between business and society has changed. This is happening because of social and environmental problem around the world. Because of these conditions, business and society came