What Contribution Did Adam Smith and John M. Keynes Make to the Study of Economics?
Adam Smith was the founder of economics, as we know it today. His thoughts have shaped modern ideas about the market economy and the role of the state in relation to it. Smith laid the intellectual framework that explained the free market (which still holds true today) and laissez-faire. Both are connected with the underlying theme of economic growth. Smith's analysis is not confined to showing the interrelation between the different elements of a continually maintained system. It also explains how the system can generate the continual accumulation of wealth. And since, according to Smith, this process is most successful when left to the play of natural forces, his analysis leads him to urge governments to let well alone.Laissez-faire government believes commerce and trade should be permitted to operate free of controls of any kind; there should be no tariffs or other barriers. The direct translation from the French language is "leave alone to do", which is self-explanatory.He is most often recognized for the expression "the invisible hand," which he used to demonstrate how self-interest guides the most efficient use of resources in a nation's economy, with public welfare coming as a by-product. It simply encourages bu
Keynes on the ownership of resources and property: Keynes specifically rejected the need for public or government ownership of the means of production. But a fall in demand would lead to less output and rising unemployment. Without the police stopping competition, he said, monopolies cannot survive for long. He argued that there would be unemployment and depression from time to time in the absence of corrective government policies. But the institutions that resulted from the conference, the International Monetary Fund and the World Bank--two agencies that survive into the 1980s--bear much stronger marks of the orthodox theories of the United States Treasury of that time than of Keynes's thinking. This might well mean running a budget deficit : in other words, the government spending more than it receives in taxes. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. It was necessary for the government to intervene, to 'fine-tune' the economy by running demand-management polices; these were to counter current trends in the trade cycle - to speed up activity when there is too little, to slow it down when there is an excess. There are valuable human activities, which require the motive of moneymaking and the environment of private wealth-ownership for their full fruition. To underscore his laissez-faire convictions, Smith argued that state and personal efforts, to promote social good are ineffectual compared to unbridled market forces. Thus he was the real father of privatisation and other 20th century reforms based on market economics under rule of law.
Common topics in this essay:
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Wealth Nations,
John Keynes,
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own advantage,
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