Adam Smith's main contributions to the field of economics were to lay the conceptual foundations for measuring a nation's wealth not by its gold or silver reserves but by its levels of production, and also to champion free-market capitalism as the most effective economic system. Smith was very much in favor of a laissez-faire approach to economies, wherein governments intervene as little as possible in business practices and trade.Continue Reading
In other words, Smith was in opposition to government policies that impacted upon the freedom of business, and therefore upon a country's economic health.
Although he advocated self-interest as a driving force in capitalist economies, Smith was against the poor treatment of workers — despite many unscrupulous employers appealing to his work as justification of child labor, long hours and unsafe working conditions. In fact, according to one of his students, John Millar, Smith much preferred to lecture on ethics and theology than he did on economics.
Adam Smith's most important work was his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations." More commonly known as "The Wealth of Nations," this text has been hugely influential, not only during his own time but right up to present day studies of political economics.Learn more about Economics
The law of variable proportions is an economics term that describes when a business increases one factor of production while keeping another factor constant, causing the increase of production levels created through these changing factors to decrease gradually. In essence, this law describes changing the proportion of two or more factors in a process used to create the same product to increase returns, eventually resulting in lesser output.Full Answer >
Some benefits of capitalism are abundance of wealth, free trade, democratic compatibility, consumer choice and better living standards. Capitalistic markets are characterized by open trade and consumption of goods and services. In this system, goods and services are privately owned, and the government plays a limited role in controlling the flow and exchange of currency.Full Answer >
Modern capitalism traces its origins to the 13th century, with the increasing wealth and influence of a merchant class in Italy and the Netherlands, and to the inception of the first great banking families in 14th century Florence. Modern capitalism began to take recognizable shape at the onset of the Industrial Revolution, especially once stock broking became popular. Another important event in the history of capitalism is the South Sea Bubble.Full Answer >
Some weaknesses of capitalism include the potential for monopoly power, a lack of focus on negative externalities and the creation of social division and wealth inequality. Capitalism is an economic system characterized by a lack of government intervention and private ownership of the means of production.Full Answer >