Who was Adam Smith?
Discussion about Adam Smith’s Invisible Hand and Pin Production
The economic system based on the capitalism concept was completed by the Scottish economist Adam Smith. Leveraging the work performed earlier by the Physiocrats, and in particular Francois Quesnay, Smith completed his famous book, The Wealth of Nations, in 1776 at the beginning of the Industrial Revolution in Britain.
Some believe that his main contribution to economics is centered on free enterprise. Introducing the concepts of liberal capitalism and entrepreneurial capitalism, Smith is “known as an architect of our present system of society.”
Smith concentrated on the growing manufacturing and trade industries. In particular he studied the division of labor in the manufacturing of pins, which was beginning to incorporate new machines. His central argument in The Wealth of Nations is based on the concept of what he called the “invisible hand.”
He believed that human self-interest is the basic psychological driver behind economics, and that a natural order in the universe makes all individual, self-interested endeavors add up to the social good.
He also studied the competitiveness of nations and multinational trade. His major theoretical achievement was to take the first steps toward a theory of the optimal efficient allocation of resources under conditions of free competition.