Question

Adam Smith (1723-1790), widely known as the father of modern economics, placed markets at the center of the political economy (i.e., the study of how a country is managed or governed, taking into account both political and economic factors). Drawing on Smith’s 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, construct an detailed viewpoint explaining multiple points that takes Smith’s thoughts and extrapolates them to a current or recent episode in history, OR a current Canadian policy issue.

Essay Question: What would Adam Smith say about the state of markets today? What would he change?

Answer 1

The ideas of the Adam Smith mainly focuses on the central theme of self-interest and moral judgement of the human being acting as a base factor of allocating the scarce resources and finally attaining the welfare stage. His thoughts has immense effect on political and economic systems running in the market today and also acts as good parameter to solve many international economic issues. Let us discuss the points of thoughts explained in his book "An Inquiry into the Nature and Causes of the Wealth of Nations" supporting current market trends and also the canadian policy issue.

Adam Smith's ideas mainly insisting on the self-interest of all the people in the country to spend more money on buying goods and services in all the markets.  In turn, it encourages the market to produce more goods and services effectivley by using the effective factors of production namely land, labour, capital and organization. The thoughts of smith also propogates that less intervention of government policy paves the way of free-trade.

But the current market trends are witnessing the massive slowdown in development stage. For example, US and China has faced trade war by increasing the tariff rate on each country's export of all goods and services. It also affected many other big economies of countries like UK and Canada. Due to trade war, US country has faced trade deficit and the rate of export surplus was reduced in the such effect that it cannot able to counter-part the tariff fixed the chinese country. So rate of production was decreased drastically. It affected mainly the production of oil resources companies in Canada. As US country determined to reduced the rate of oil sources from the Canada, the exchange reserve value of canadian currency also declined gradually. Apart from oil field, other fields like Automobiles, Information sources faced the trade gap between the two countries.

We can use the ideas of Adam Smith to disband the issues prevailing in both the countries (US and Canada). People can start to spend on more scarce resources in the domestic market. But the Government should not pose any restriction on any spending activities of the people in the canada. There should be a free-trade policy to be adopted in all canadian productive fields. Free-trade policy need to follow the positive move of improving the market condition in such a way that the tariff rates for imports as well as exports for the goods and services should be reduced. The Price mechanism should act as active role in determining the comfortable market position. The above relevant points of Adams theory will support the current markets to run effectively and the changes for the good market will witness the positive signs of economic condition.