ADAM SMITH (1723-1790)
A . n Inquiry Into the Nature and Causes of the Wealth of Nations, 1776 1. Established the "classical" school of economics 2. Became the father of liberal economics B. Proposed that only the market and competition be the regulator of economic activity 1. The "invisible hand" of the market would insure that resources flow to their best consumption and their most efficient reward 2. The economic self-interest of each person and nation, acting in a fully competitive market, would bring about the greatest prosperity 3. Specialization of labor a pillar of the market mechanism (example of the pin factory) "The greatest increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many." - The manager, in order to gain productivity, must rely on the division of labor 4. Awareness of the dysfunctional consequences of labor specialization "The man whose whole life is spent in performing a few simple operations... naturally loses, therefore, the habit of (mental) exertion, and generally becomes stupid and ignorant as it is possible for a human creature to become.... His dexterity at his own particular trade seems...to be acquired at the expense of his intellectual, social, and martial virtues." - Government, through public education, is to overcome the debilitating effects of the division of labor 5. Division of labor concept benefits all society and provides and economic rationale for the factory system England found in the market ethic an economic sanction for ...private initiative rather than mercantilism ...competition rather than protection ...innovation rather than economic stagnancy ...self-interest rather than state interest as the motivating force
A . n Inquiry Into the Nature and Causes of the Wealth of Nations, 1776 1. Established the "classical" school of economics 2. Became the father of liberal economics B. Proposed that only the market and competition be the regulator of economic activity 1. The "invisible hand" of the market would insure that resources flow to their best consumption and their most efficient reward 2. The economic self-interest of each person and nation, acting in a fully competitive market, would bring about the greatest prosperity 3. Specialization of labor a pillar of the market mechanism (example of the pin factory) "The greatest increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many." - The manager, in order to gain productivity, must rely on the division of labor 4. Awareness of the dysfunctional consequences of labor specialization "The man whose whole life is spent in performing a few simple operations... naturally loses, therefore, the habit of (mental) exertion, and generally becomes stupid and ignorant as it is possible for a human creature to become.... His dexterity at his own particular trade seems...to be acquired at the expense of his intellectual, social, and martial virtues." - Government, through public education, is to overcome the debilitating effects of the division of labor 5. Division of labor concept benefits all society and provides and economic rationale for the factory system England found in the market ethic an economic sanction for ...private initiative rather than mercantilism ...competition rather than protection ...innovation rather than economic stagnancy ...self-interest rather than state interest as the motivating force
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