Adam Smith and the Concept of Free Markets - Essay Example

?Economic theories Adam smith and the concept of free markets Adam Smith argued that in free market, there are many sellers and buyers and there no one cares about their personal staffs. All they care in the free market is about the prices, sales, and the goods that have been sold. Moreover, the important things in the free market is the different types of free market philosophy which include the concept of unrestricted free market philosophy, and the competitive free market philosophy. The Philosophy of the unrestricted free market means that the market of the goods does not need permissions of importations from other parties even from the ministry of the commerce. In addition, the philosophy of the unrestricted free markets does not deal with the language of the fixed price because the price of the goods on it changes in part. The unrestricted free market decides the prices of the goods in order to create a fair price for both the customer and the seller (Smith 2013, 23). The Rules that the unrestricted free markets follow is the right to control property, transfer property one by one voluntarily, refrain from using force, and the right to establish contracts. The unrestricted free markets nowadays are popular in that they exist in every place. Good examples of the unrestricted free market are the oil free market, and the black market. For instance, concerning the oil free market, it is referred to as unrestricted free market because the oil has variable values that changes from period to another depending on the events that happens every day in the political or economic world so it is not restricted with the policy of the free market. The idea of invisible hand is applicable to the man’s natural behavior towards self-interest. Therefore, by allowing every person freedom to generate and exchange services and goods as they want, and opening all markets to fair competition, the business will thrive. In turn, this will bring universal populace since every effort from the people would be appreciated. Smith argued that in order to bring about prosperity, people needed to work hard and enlightened because this act of enlightened self-interest was common to majority of individuals. In addition, Smith needed people to have the potential to think about long-term business since it would curb customer exploitation (Smith 2013, 32). Explain why in Smith’s view the division of labor would benefit society and bring prosperity to workers and capitalist producers The focus of Adam Smith ideas rested on economic growth. According to Smith, economic growth is entrenched in division of labor. The idea of division of labor relates to specialization of labor particularly downsizing large jobs into many tiny units. When there is division of labor, each laborer or worker becomes an expert in one area of production, which in turn increases the workers efficiency. Division of labor benefits the society since the fact that workers do not need to switch or change tasks during working hours saves money and time. However, Smith warned against forcing or coercing people to perform repetitious and mundane work because it led to dissatisfied work and ignorance among workers. In a response to this, Smith urged governments to offer education to employees so that they could acquire necessary skills and expertise in specific works. Education was significant because it could curb the deleterious influences of industry life. Division of labor meant giving each employee a specific work that marches or suits them. Adam Smith asserted that having employees perform specialized works led to increased productivity this is because it is easy to allocate tasks in accordance with worker’s specific skills. For example, an employee who is skilled in dealing with numbers performs better on inventory control than a worker who is not (Smith 2013, 78). In addition, division of labor leads to technical efficiency because it decreases transition time between work and tasks. Division of labor increases dexterity in the workplace because it decreases every man’s business to simple management. Explain in your own words what Smith considered the three functions of Government and the term Non-interventionism. Also, include in your explanation how capitalists and capitalism may have been unfairly supported by some or all of these functions Adam Smith argued that the roles or functions of government is limited to provision of universal education, defense of the country, punishment of crime, enforcement of legal rights and public works such as roads and bridges. The government would intervene when individual acted on their short-term priorities, and would enforce policies against fraud, robbery and other crimes that might cause moral decadence in society (Smith 2013, 99). Adam smith warned against bigger bureaucratic governments since they could enforce authoritarian regimes. In addition, the government had to produce a solid currency to drive the economy. It was not good for governments to engage in wasteful expenditures such as wars instead they had to adhere to the free market philosophies by permitting free trade via removal trade tariffs, and keeping taxes low. Smith saw taxes and tariffs making life costly for individuals while oppressing industry and trade. It should create laws that are equitable and fair, whether they are based on universal laws or bound within the context of a given country. These principles should establish what should be regarded as "fair share" of the assets that belong to the public, while principles of restorative or retributive justice ought to shape the response to acts that are against a society's regulations of "fair play." The government is required to come up with fair rules and ensure that citizens adhere on those rules. Most citizens usually frame justice in fairness terms and invoke fairness and justice principles to explain their dissatisfaction or satisfaction with their government. These institutions should treat them fairly and carry its operations in accordance to fair and just rules expressed through various justice principles (Smith 2013, 114-120). The government of the people for the people should act as an essential mechanism to realize important values. It should offer citizens with particular benefits and services. It also aims to promote vital values that are good and suitable for every individual. This role of the government as the insurer of central democratic values is what forms national political institutions. Reference Smith, A, 2013, The Wealth of Nations. New York: Simon & Brown. Read More