Adam Smith helped understand a better view of economics. As the author Wealth of Nations (1776), Adam Smith writes about the trading system that existed at the time he was alive. Throughout the way, Adam Smith thought of a brilliant way of how the economic system is based on human nature and dynamics. Adam Smith was the person that started capitalism bh his writings and other information that combines research with his thoughts. Throughout his writings, he gives evidence from the observations that he has done throughout the nature of economics. But three major elements of capitalism that present in Adam Smith’s Wealth of Nations were high level of self-interest, competition, and the invisible hand.Order now
The first characteristics of capitalism in Adam Smith’s Wealth of Nation is self-interest. Self-interest simply means that someone seek their own personal gain. For example, if a person goes to work to buy the things they desire want. Most of the economic activity a person recognizes around is what is called self-interested behavior. Adam Smith described it this way in his book the Wealth of Nations “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” (Smith para.15). And example could be a baker choosing to cook to his self-interest and the reason behind it could be the baker wants to earn enough money to feed his family. But also, maybe buy the things he wants which the most effective way he could do it is to work. The baker’s bread has to be good enough and the service good enough that the person is receiving it with happiness which they are willing to give up money they have in exchange for his bread.
The focus in the United States seems to be on the needs of other people, rather than on the needs and desires of the president or people close to him. In China, the focus seems to be more on what is best for business. Today, the people in the United States try to make new products to satisfy the needs of a person. In China, the government takes control of how the products should be. Although the United States produce more expensive labor-intensive goods because of its more expensive labor and developing countries. It produces more expensive human and physical capital-intensive goods due to their relative scarcity of these inputs. Self-interest can lead to corruption and also lead to cheating between companies.
Competition is another characteristics in Adam Smith’s Wealth of Nation. Most often, corruption and cheating are held by competition. Back to the baker example, The only way he would be able to earn money is to produce bread that is better, cheaper or more convenient than the bread produced by the other bakers in town. If he was to raise the price too much, other people would likely buy bread from the other person that sells bread. If the baker were to treat his customers poorly when he enter his store, the customer would likely buy from his competitors. In order to earn money his money, it must provide a high quality of good or service at an affordable price. Competition is a check on self-interest because it restrains abilities to take advantage of customers. In Adam Smith’s Wealth of Nations, he states:
….As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labors to render the annual revenue of the society as great as he can. (Smith para.10)
In other words, what Adam Smith really meant was in this quotes is that anyone can work to earn his wealth in to support existing companies and to make companies improve in making money so they can earn more money in labor. Not only will competition not allow companies to provide better quality for their goods and services to sell to their consumers, but also increase the products in the economy.
In the United States, competition exist in companies such as samsung and iphone. Iphone’s continue to be a stronger competitor by just a slight margin due to the feature the phone has and overall pick. Some feature are better on the samsung like the camera, water resistance, and games, but the iphone is known for the style, speed, and features it contains within and iphone. While we see many firms compete amongst each other in the United States, China struggles to have competition exist in its own cellular company such as motorola. Today we see United States as a competition of phones between samsung and iphone devices that are coming up with new designs and features to bring what the customer’s want. China’s motorola company are investing in their own businesses, however they will not have as much competition with foreign nations like the United States anytime soon.
Lastly but not the least, the third characteristic in Adam Smith’s Wealth of Nations is the invisible hand. The invisible hand is meant for social benefits of individual self-interested actions which result from the operations of a free market economy. Adam Smith described the opposing forces of self-interest and competition as the invisible hand. For example, when someone has a job, their goal is to save up money when they get their paychecks. So they actually provide a valuable good or service that benefits others and society. The interesting part of it is that it involves minimum government control. In Adam Smith’s Wealth of Nation, he states:
….The statesman who should attempt to direct private people in what manner they ought to employ their capital, would not only load himself with a most unnecessary attention, but assume and authority which could be safely be trusted, not only to no single person, but to no council or senate whatever, an which would nowhere be so dangerous as in the hands of a man who had folly an presumption enough to ancy himself fit to exercise it…. (Smith para.11)
To put it differently, lawmakers should not have the authority to direct citizens in work and what they should do with the money they make. It could lead to the action of powers not going into the hands of what the people that think they are worthy.
It started in 1995 in the United States when the google company organized information to let stanford university members access to it. Google expanded by silicon valley when it was exposed to the academic community. This followed in a variety of products to be produced which led selling phones, laptops, and games. Whereas in Russia, everything is scarce with it’s resource in the 1990’s. Today, the United States has gotten advanced not only with social media but increased the number of businesses. Today, Russia has been improving with its resource such as creating programs and websites.
In conclusion, the three major elements of capitalism that present in Adam Smith’s Wealth of Nations were high level of self-interest, competition, and the invisible hand. The capitalist economic system include the promotion of individualism and innovations. Which markets work through bringing together the buyers and sellers through the guidance of supply and demand which drive the system to function efficiently. One main disadvantages of a capitalistic system is a huge discrepancy in the rates of wages. The significant differences in income, money in a capitalistic system is distributed unevenly. Capitalist economies generally have a substantial group of residents living near or below poverty level. It has left job being insecure in a capitalistic system and periods of high unemployment are common.