Explain an Evaluate the Principal Features of Adam Smith's Treatment of Value and Distribution - Essay Example

He agreed with government expenditure on public goods, such as, enforcement of the law, infrastructure and security. He also acknowledged what he thought to be drawbacks in development of economy, whether they were in the form of public spending or taxation except only the taxation of value of the land. He also put into consideration the relation between price and value. His conclusion was that that the cost of production is equivalent to the price of the product. He reasoned that when the quantity supplied to the market is enough to meet demand in the market and no extra, then the selling price may be said to be either near or exactly to the natural price, which is the cost of production1.

He took this result as an outcome of market bargaining. Adam Smith argued that in a stable economic system and evaluation; many people would react to the enticement of earning extra specializing in their production. These people without intervention of the government they would be of significant value in industry and this will make the economy to be more productive and wealthy2. Adam based his argument on that by protecting specific producers will result to inefficient production and hence there will a rise in price.

He asserts that when people are trading they value what they are going to buy in comparison to purchased goods’ value. . The prices will be used to estimate and compare the value of the commodities. Adam Smith allowed for the difference of speed and skill a person has in doing a certain job. He argued that value based on demand is totally subjective. This is because some individuals will pay more amounts on a certain commodity while others will pay less on the same commodity. Smith’s analysis on value should be is considered under circumstances as one of his main purpose.

He would make sure that workers were safe from being exploited by their self-interested employers who their main concern was to maximize profits, and hence paying his employees low wages. Given this situation, Adam said, the quality of output will be uniform to the labour they have used. He tried to uplift society significantly, by putting emphasis on free enterprise. He recommended that in a free market each individual is directed in making decisions by an imperceptible hand. This unseen hand guides people to formulate decisions that are of importance to the people and society at large without its knowledge.

Every person labours so that he or she may provide revenue to the society. The person might not be intending to promote the interest of the public neither does he or she know by how much he has promoted it. The invisible hand is the one which makes the person to promote some part which was not of his objective. By chasing his personal interest he regularly improves that of the society more effectually and efficiently than when he had the intention to support it. In the theory of Adam Smith of how the economy is interrelated he shows how industries and labours function, and the way each one plays a crucial part in the production of goods in the industry3. The