Rabu, 06 Oktober 2010

Adam Smith Economic Thought

Adam Smith was born in Kirkcaldy, Scotland in 1723. smith studying the laws of nature, ethics and logic, jurisprudence, and political economy at the University of Glasgow, which then continued in Oxford. He is a disciple of Frances Hutchenson, friends David Hume and Quesnay. Smith is a professor in the philosophy of science at the university of Edinburgh, who was famous in those days and he was also an expert and pioneer in the classical school. Before writing his famous book, The wealth of Nations, he had known in advance with his book The Theory of Moral Sentiments, about the origin of ethical behavior who seek approval and disapproval.  In his book, he also revealed the things about the ego and super ego.
Adam Smith, as a thinker has a systematic framework and are interested in human behavior (human conduct). As a moral philosopher Smith interested in economic issues, as evidenced in the records between the years 1760-1764 lecture about moral philosophers, there are several points that pertain to economic problems. At that time, many writers interested in writing a history and philosophy. For those who are interested in the philosophy course will learn about jurisprudence (law). Studying jurisprudence can not be separated from issues of legislation, a problem of legislation would not be separated from public affairs. And the government will always be associated with economic policy issues.Thus, Smith's study of philosophy would make him also learn about the political economy.
According to Adam Smith's view, human behavior is driven by six naturally consideration of motivation, namely self-interest (which basically there is an element of sympathy in the relationship between fellow human beings), the human tendency to be kind, desire to act freely, work habits, the tendency of humans in
 modern world for transporting goods, and the tendency to make buying and selling.
Smith argues that each was highly influenced induvidu anything of interest to him. So that it appears there will be conflict and competition between individuals. However, it is free competition that ultimately membawahasil with most good for society as a whole, so that the community is developing in the direction of progress and prosperity.
Adam Smith had the idea that every person will naturally appreciate each other (rational) so that he thinks humans are free beings who know its communal values. This kind of thinking is very dangerous because in reality people do not like the notion of Adam Smith (rational, there are some humans that is irrational). Without the rule of human will eat each other and suppress the effect is the law of the jungle. Smith who appreciate the natural properties of human and disappointed at the impact of mercantilism hate government intervention but without any government interference, life in the state will not be able to walk by itself.
Adam Smith also explained the labor division. With this division, the labor productivity is increasing and people do not depend on others.And people always strive to meet their own needs first. After their needs are met they will do the trades. Smith explained the theory of absolute advantage and in essence, the two parties involved will make trade specialization toward the level of efficient production.

Laissez-faire principles
In a small portion of Smith's interpretation, he includes the principle of laissez faire because he thought it very necessary in a political freedom. The physiocrat interpret it differently, they claim that laissez faire is the mind of the physiocrat that has changed with the insistence of the bon prix for agricultural products.
Smith subsequently view policy issues as seen from the factors and forces affecting the economy. The conclusion is that policy should be based on the principle of freedom, both in production and trade both within and outside the country. The division of labor and specialization will bring efficiency and optimal results for society, vast market will open up opportunities for two things above.(Laissez faire Laissez Passer).

The Theory of Value
The rationale in the theory of value based on Petty and Cantillon (fisiokrat which bases its thinking on the agricultural sector. According to Smith, labor is the source of funds that would naturally supply of each country. Wealth of Nations (state property) by Smith depends on two things: level of labor productivity and the amount of labor used. Smith began his analysis of labor because she was hoping to find the principle of transformation of use values and exchange values.
Smith describes the theory of value. Value according to Smith can be divided into two ie value in use and value in exchange. Value in use is the utility value of the goods while the value in exchange is the exchange value of goods itu.Labour according to Smith is the source of all commodity value of this statement is an excerpt from one of the points Ibn Khaldun's thinking about labor. Smith's theory of the labor theory is the addition of Petty and Cantillon with supply and demand version of John Locke.

The Theory of Capital and Distribution
Smith explains that the real value of a commodity must contain three components, namely wages, rent and profit. And stated also that the three components are in balance with the amount of labor required to produce those commodities.
Smith also explained the revenue. He said revenue could be divided into two types namely: wages, wage deductions and subsistence. Wage deduction in the subsequent development is used as the central point of Marx thought.
Smith also rejected mercantilism on the role of a coin. 
The number of gold ownership of a country is not a measure of national wealth, because the national wealth must be sourced to the job.
Smith developed a dichotomy between the real price / market and natural price, which is determined by the interaction between supply and demand in the short term. The market price of every commodity is regulated through a comparison between the quantity, which obviously is on the market, and demand to be paid to the natural price of those commodities.


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