The Importance of Adam Smith's Work to Economic Thought Essay

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The Importance of Adam Smith's Work to Economic Thought

Adam Smith is widely regarded as the father of economics as a social science, and is perhaps best known for his work The Wealth of Nations. Throughout this work Smith states and informs towards his belief that society is not at its most productive when ruled over by rules and limitations with regards to trade, and that in order for markets to maximise prosperity, a free trade environment should be made accessible. In this essay I intend to asses the way in which many of Smiths theories taken directly form his works can be applied to past and current situations, first from an economic then social, and then a political point of view. I will also outline some of Smiths major theories
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This division of labour theory stated that a workforce, when broken down and assigned separate tasks within production, could become specialised increasing production and often quality of goods. Smith also argued that this specialisation would increase the ratio of productive workers against unproductive workers, lowering costs of production as a whole. This theory has been crucial in the development of economic thought in that it has been followed closely and been adopted by many large firms within industries, and proven successful in lowering costs and increasing production.

From an economic point of view Smiths theories on the division of labour have been used to good effect within markets. As a general consensus, the division and specialisation of labour means that everything becomes cheaper than it was under mercantilism. If tariffs are imposed upon imports, part of this tariff will be passed on to the consumer upon purchase of the good. This means that a higher price is demanded by the supplier. Under the free market situation, and with division of labour forces being imposed, the same good can be produced at a much cheaper price, and so therefore can be purchased by the consumer much cheaper. Smith stated that with specialisation comes an increase in ‘skill, dexterity and judgement’ within the workforce. This in turn will
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