Adam Smith
Biography
I was born in Kirkcaldy, Scotland on the 5th of June 1723. I was raised by my widowed mother an my father who was a lawyer passed away when I was really young. I joined the University of Glasgow on scholarship when I was fourteen. I went to Balliol College at Oxford when I was about seventeen. At both schools, I studied social philosophy. I am most famous for writing this two books called 'The Theory Of Modern Sentiments' and 'The Wealth Of Nations' I am recognized as the founder of modern economics
My major publications and ideas on economics
Firstly I am going to introduce one of my theory called the'Invisible Hand.' To help you understand this theory, I wrote some examples here: It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect out dinner, but from their regard to their own interest. By selling products that people want to buy, the brewer, the butcher and baker seek to earn money. If they are effective in meeting the demands then they receive a financial profit. They are supplying products that are wanted by people, they are producing them to meet the demand and also earn money. I believe that this kind of system creates wealth for the whole nation and not just for those who supply the goods. It is only beneficial for the nation when all the people work productively for their financial needs. I also noted that a man would invest his wealth in the enterprise most likely to help him earn the highest return for a given level of risk.
Secondly I want to explain my second theory which is the 'Absolute Advantage.' I believe that if one country can produce the same amounts of goods with fewer resources than the other country, the country has an absolute advantage over the other country. For example, USA produces 500 cars per year with 50 labors and Canada produces 500 cars per year with 100 labors. This means that USA has an absolute advantage over Canada.
My other theory is called as 'Theory of International Trade' My theory states that the division of labour leads to quantitative and qualitative production improvements. This will lead to an increase in output, technological development is stimulated, and worker's skills and productivity are enhanced. Therefore economic growth is promoted and national wealth increases.
I was born in Kirkcaldy, Scotland on the 5th of June 1723. I was raised by my widowed mother an my father who was a lawyer passed away when I was really young. I joined the University of Glasgow on scholarship when I was fourteen. I went to Balliol College at Oxford when I was about seventeen. At both schools, I studied social philosophy. I am most famous for writing this two books called 'The Theory Of Modern Sentiments' and 'The Wealth Of Nations' I am recognized as the founder of modern economics
My major publications and ideas on economics
Firstly I am going to introduce one of my theory called the'Invisible Hand.' To help you understand this theory, I wrote some examples here: It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect out dinner, but from their regard to their own interest. By selling products that people want to buy, the brewer, the butcher and baker seek to earn money. If they are effective in meeting the demands then they receive a financial profit. They are supplying products that are wanted by people, they are producing them to meet the demand and also earn money. I believe that this kind of system creates wealth for the whole nation and not just for those who supply the goods. It is only beneficial for the nation when all the people work productively for their financial needs. I also noted that a man would invest his wealth in the enterprise most likely to help him earn the highest return for a given level of risk.
Secondly I want to explain my second theory which is the 'Absolute Advantage.' I believe that if one country can produce the same amounts of goods with fewer resources than the other country, the country has an absolute advantage over the other country. For example, USA produces 500 cars per year with 50 labors and Canada produces 500 cars per year with 100 labors. This means that USA has an absolute advantage over Canada.
My other theory is called as 'Theory of International Trade' My theory states that the division of labour leads to quantitative and qualitative production improvements. This will lead to an increase in output, technological development is stimulated, and worker's skills and productivity are enhanced. Therefore economic growth is promoted and national wealth increases.
Dear Mr Smith, did you consider the countries that have slight disadvantage compared to other countries? Did you consider any opportunity cost involved? From what I can tell, "absolute advantage" clearly is less efficient because you only consider who can use the least amount of resource to make a product, you only consider self-benefit profits. - David Ricardo
Dear Mr Ricardo, I am pretty sure that even the poorest country (a country with the lowest GDP) has some resources. Liberia who has the lowest GDP in the world has adequate natural resources such as diamonds, iron ore and gold. Then they can focus on just producing one item and this will be beneficial for both exporting and importing countries.
Dear Mr Smith, well even though they can make products, they can never able to compete with other countries, they can not specialise simply because the better countries' product can outnumber the poorer countries' product. If we can make some sort of deal between countries, calculate their opportunity cost, we can make both countries specialised in some products, both countries win. Comparative Advantage for the win.
Diamonds, iron ore and gold are limited resources. Once they run out, they are gone forever.... and while these minerals can give Liberia some good profits, it will destroys the environment, and the sites will become wasteland, but again, we can use my 'comparative advantage' to see which country is better for mining, and do the least damage to environment. - David Ricardo
Dear Mr Ricardo, I am pretty sure that even the poorest country (a country with the lowest GDP) has some resources. Liberia who has the lowest GDP in the world has adequate natural resources such as diamonds, iron ore and gold. Then they can focus on just producing one item and this will be beneficial for both exporting and importing countries.
Dear Mr Smith, well even though they can make products, they can never able to compete with other countries, they can not specialise simply because the better countries' product can outnumber the poorer countries' product. If we can make some sort of deal between countries, calculate their opportunity cost, we can make both countries specialised in some products, both countries win. Comparative Advantage for the win.
Diamonds, iron ore and gold are limited resources. Once they run out, they are gone forever.... and while these minerals can give Liberia some good profits, it will destroys the environment, and the sites will become wasteland, but again, we can use my 'comparative advantage' to see which country is better for mining, and do the least damage to environment. - David Ricardo