Summary of Capitulo IV. Adam Smith.

00:00:00 - 00:25:00

Adam Smith was a Scottish economist and philosopher who is considered the father of modern economics. He wrote two seminal books, "The Theory of Moral Sentiments" and "An Inquiry into the Nature and Causes of the Wealth of Nations." In his first book, Smith discusses how human beings are motivated by both egoism and a sense of moral obligation. In his second book, Smith discusses how the commercial practices of his contemporaries in Scotland led to the development of capitalism. Smith's theories about the natural propensity to trade and the role of competition in the market economy are still studied and debated today.

• 00:00:00 Adam Smith, the father of modern economics, was a moral philosopher rather than a scientist. In his book "The Theory of Moral Sentiments," he discusses how human beings are motivated by both egoism and a sense of moral obligation. He predicts that, as capitalism replaces feudalism, the latter's system of liberty will spread throughout the world. Smith's second book, "An Inquiry into the Nature and Causes of the Wealth of Nations," is considered the first book in modern economics. In it, he discusses how the commercial practices of his contemporaries in Scotland led to the development of capitalism.
• 00:05:00 In the early 1800s, in England, a period of great productivity and discoveries in science led to the understanding that phenomena can be understood by human reason. The Divine foundations of the Middle Ages lost credibility, and scientific explanations were demanded in all fields of social relations. Influenced by these currents, the social sciences sought objective laws that governed social relations at any time and place. In the course of capitalist development, social foundations are steadily undermined, destroying traditional social customs and relationships based on religious control. At the same time, in Europe there were different forms of production, with artisans producing goods in their workshops, the barista with his machines and tools manufacturing all kinds of furniture, and a merchant buying and selling the products of the various craftsmen. Here, the means of production still belonged to the worker, who traded the products of the artisan and even provided the necessary materials for the artisan's work. The distinctive form of production of the era was manufacturing, the main change being related to the organization of production. Instead of working in their workshops, artisans gathered together under one roof under the orders of a new actor, the industrial capitalist. This is the owner of the machines, tools, and materials and tells each worker what task to perform in a factory producing needles
• 00:10:00 Adam Smith believes that the benefits of industrial activity over agriculture are more beneficial to society, as it allows for more subdivision of labor throughout the year. One person can engage in farming, harvesting, and digging, for example, which is different from the traditional division of labor where one person does one task throughout the year. Technip argues that despite seeming chaotic and lacking organization, capitalism is governed by a set of laws that ensure economic and social progress. These laws also provide the perfect environment for the development of individual liberties. Smith's theory of natural propensity to trade is extended to explain how the growth of the market is necessary for the accumulation of wealth by society. According to Smith, the engine that propels this increase in wealth is human nature, as humans are naturally inclined to buy and sell. This natural tendency to trade is exemplified by the emergence of transportation systems that allow merchants to travel long distances and reach new markets. With large markets already in place, people are encouraged to dedicate themselves entirely to producing a product. They are confident that they will be able to exchange the products they produce for the goods they need, without the need for market intermediaries. Schmidt summarizes Smith's theory by saying that it is the most complete expression
• 00:15:00 In this video, Murray Rothbard discusses Adam Smith's theory of the natural price of goods. Rothbard claims that the natural price of goods is the amount of labor needed to produce the good, plus the rent paid to the landowner. He also argues that the natural price of goods is not always the market price.
• 00:20:00 Adam Smith discusses the role of competition in the market economy and how it drives prices up and down. He also discusses the benefits of free trade and the disadvantages of protectionism.
• 00:25:00 In this video, Adam Smith discusses the role of labor in the economy, noting that both the people and the government benefit from entrepreneurship. The construction of infrastructure, such as roads and schools, helps to boost the welfare of the entire population. Additionally, Smith suggests that an "invisible hand" may be responsible for the prosperity seen in the economy, as it helps to promote social justice.