In 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of the Wealth of Nations , which was taken by many to be a theory of economic growth. Smith, however, was clearly concerned with economic development. The classical school of economic thought, predominantly modeled after Smith, is largely geared toward understanding and explaining economic development. Smith presented a supply driven model of growth, where output was related to labor, land, and capital. Thus, economic growth, which is the increase in output, was related to population growth, investment, land growth, and increases in productivity. According to Smith, society was dependent on the economy’s ability to sustain its increasing workforce. Investment was dependent on the rate of savings. Land growth was dependent on the ability to acquire more land (through conquest) or on the increase in the productivity of existing land. He also believed in the division or specialization of labor as a key factor in economic growth, enhanced by improved machinery and international trade. Smith argued that increased specialization would increase productivity and reduce per-unit costs, leading to increasing returns. However, he also thought that, in spite of increasing returns, such an economy would ultimately stagnate, wherein capital accumulation and population growth will approach zero. Smith believed that the extension of markets was the key to economic growth largely through the role that market extension played in creating greater specialization. Smith emphasized specialization as leading to greater productivity. He also argued that the mercantilist system was holding back England by limiting its market and, hence, limiting the division of labor. The mercantilist system, while it promoted the expansion of markets beyond the more limited markets of feudalism, restricted and regulated markets in many ways that Smith found objectionable. give the point of view of the following classical economists on economic development and explain the pros and cons.

In 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of the Wealth of Nations , which was taken by many to be a theory of economic growth. Smith, however, was clearly concerned with economic development. The classical school of economic thought, predominantly modeled after Smith, is largely geared toward understanding and explaining economic development. Smith presented a supply driven model of growth, where output was related to labor, land, and capital. Thus, economic growth, which is the increase in output, was related to population growth, investment, land growth, and increases in productivity. According to Smith, society was dependent on the economy’s ability to sustain its increasing workforce. Investment was dependent on the rate of savings. Land growth was dependent on the ability to acquire more land (through conquest) or on the increase in the productivity of existing land. He also believed in the division or specialization of labor as a key factor in economic growth, enhanced by improved machinery and international trade. Smith argued that increased specialization would increase productivity and reduce per-unit costs, leading to increasing returns. However, he also thought that, in spite of increasing returns, such an economy would ultimately stagnate, wherein capital accumulation and population growth will approach zero. Smith believed that the extension of markets was the key to economic growth largely through the role that market extension played in creating greater specialization. Smith emphasized specialization as leading to greater productivity. He also argued that the mercantilist system was holding back England by limiting its market and, hence, limiting the division of labor. The mercantilist system, while it promoted the expansion of markets beyond the more limited markets of feudalism, restricted and regulated markets in many ways that Smith found objectionable. give the point of view of the following classical economists on economic development and explain the pros and cons.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter16: Creating An Environment For Growth And Prosperity

Section: Chapter Questions

Problem 14CQ

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In 1776, Adam Smith ([1776] 1936) published his treatise, An Inquiry into Nature and Causes of the Wealth of Nations , which was taken by many to be a theory of economic growth. Smith, however, was clearly concerned with economic development. The classical school of economic thought, predominantly modeled after Smith, is largely geared toward understanding and explaining economic development. Smith presented a supply driven model of growth, where output was related to labor, land, and capital. Thus, economic growth, which is the increase in output, was related to population growth, investment, land growth, and increases in productivity. According to Smith, society was dependent on the economy’s ability to sustain its increasing workforce. Investment was dependent on the rate of savings. Land growth was dependent on the ability to acquire more land (through conquest) or on the increase in the productivity of existing land. He also believed in the division or specialization of labor as a key factor in economic growth, enhanced by improved machinery and international trade. Smith argued that increased specialization would increase productivity and reduce per-unit costs, leading to increasing returns. However, he also thought that, in spite of increasing returns, such an economy would ultimately stagnate, wherein capital accumulation and population growth will approach zero. Smith believed that the extension of markets was the key to economic growth largely through the role that market extension played in creating greater specialization. Smith emphasized specialization as leading to greater productivity. He also argued that the mercantilist system was holding back England by limiting its market and, hence, limiting the division of labor. The mercantilist system, while it promoted the expansion of markets beyond the more limited markets of feudalism, restricted and regulated markets in many ways that Smith found objectionable.

give the point of view of the following classical economists on economic development and explain the pros and cons.

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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