Question

"History of Economic Thought" short answer question

Why is Adam Smith considered to be such an important figure in the development of economic thinking, and what are the major strengths and weaknesses of his contributions? Discuss.

Answer 1

Adam Smith contributed to economic thought massively. He advocated the role of market system in economic growth and development. he believed in invisible hand and fellow feeling of human being. thus, he did not support intervention of government in economic activities.

He believed that government intervention creates inefficiencies in system. Government intervention must be avoided. Further, Adam Smith popularized concept of division of work and labor value theory.

But theory initiated by the Adam smith were not free from criticisms. His theory was severely criticized by karl marx who believed that free market system is exploitative in nature. Further, Policy prescriptions of Adam Smith could not work during the great depression in 1929. Eventually, government had to make intervention to restore equilibrium in economy.

Despite these shortcomings, the contribution of Adam smith is massive in development of economics as discipline.