Adam Smith's Theory Of Economic Prosperity

A central theme to Adam Smith’s idea of economic prosperity is derived from the cooperation of civilians to contribute to the welfare of all. When describing the complexity of the division of labor and its inherent ability to increase one’s standard of living, Smith states, “Without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided the easy and simple manner in which he is commonly accommodated” (Smith 20). Smith believes that the exchanging of goods is paramount to a flourishing economy, and even declares that it is of human nature to desire such transactions among other fellow citizens. The cooperation of the people – galvanized by the ambition of self-interest – is what

The role of self-interest is heightened when Smith says, “It is not from the benevolence of the butcher that we expect our dinner, but from their regard to their own interest” (22). The butcher does not supply his assortment of meats based on his gregarious intentions; rather, he sells his supply in order to accumulate profit. If his quality of service is inadequate, then his demand will reduce, and he will not gain any profit. Hence, the butcher has to procure quality meat and sell it at a reasonable price to secure both parties’ satisfaction with each good. This pursuit of the individual profit motive is hindered by a misconception between value, and how its real and nominal values are suppressed by other social influences. Before delving into the actual meaning of value and its influence, one must understand the difference between real and nominal commodities. Nominal value is a reflection on the rate at which a currency can obtain a certain good, whereas real value focuses on the most precise measurement and estimation of labor and its commodities. In essence, real value is a direct correlation to the amount of input, or labor, that one has exerted in the production of his good or service. While the individual cannot solely determine his nominal value at any given time, he can calculate the real value of

From the cooperation among civilians by a division of labor, to the limitations of government in an effort to achieve a free and competitive market, to the prioritization of the individual profit motive and accumulation of personal wealth, Smith argues that society can succeed in such an environment. Even though Smith’s economic platform revolved around a pre-Industrial Revolution era, his solutions to economic prosperity via the free economy allowed for an adaptable and flexible system. Nowadays, the idea of pursuing one’s own self interest is viewed as narcissistic, and oftentimes overlooked due to the accumulation of personal wealth. Government regulations force wealthy individuals to give a higher portion of their wealth for the betterment of the society, which some may view as unproportionable to their benefits from living in society. Simpler, fairer ways of devising a tax regulation have been proven to promote economic growth, however the current economic platform is seen to be arbitrary and obscure. Regardless, it is evident that the basic principles of Smith’s economic society are prevalent among certain aspects of today’s