The Wealth of Nations is Smith key work which tries to illustrate the European industry growth and business development (Sobel, et al, 2010). Smith published the book in 1776 when England is a leading capitalistic state, and economic was not so advanced as today. In The Wealthy of Nations, there are many main opinions that is advanced not only in that period, but also in modern society (Alvey, 1999). As the big differences between that society and modern society, it is a problem that if the main opinions in this book are valid today (Peil, 1993). This essay will firstly discuss Smith's main points of the wealth of nations. The author chooses the hypothesis of economic man, and three main opinions in this book: individualism, the economic freedom, and price mechanism. Following this, it will analysis the background of Smith's main points. Finally, it will discuss the current society environment and if the opinions are valid today.
2.0 Discussion and analysis
2.1 Introduction of Smith's main points of The Wealth of NationsEconomic Man
The hypothesis of "economic man" is the base of The Wealth of Nations. The so-called "economic man" means that the people are hoggish (Fitzgibbons, 1997). In Smith's opinion, on one hand, the "economic man" is the people who are hoggish, and for them, pursuing their own maximum interests is the motivation of the economic behavior. Everybody is continuously to find the most favorable use for the capital he has. On the other hand, Smith thought the "economic man" refers to the lower middle class people in 18 century. They are not only self-interested, but also have sympathy and compassion to other people, and their economic behaviors is restrained by the principle of laws, social justice and fair (Young, 1993), and finally, the greediness of their own interests will be translated to the interests of the whole society.
Based on the hypothesis of "economic man", there are many main ideas in The Wealth of Nations.
Individualism refers to that the growth of the society and the market should emphasize the growth of individuals. And the construction of economic system should regard the survival and growth of people as the principle. If everyone can develop oneself adequately, the whole society will develop well (Machan, 1993).
Smith put forward this opinion when he criticized the feudal system and the mercantilism hinders the economic growth seriously. The economic freedom contains two respects: free competition and free trade. The former refers to that the domestic economy is not interfered by government, and it operates itself according to the social supply and demand, the specific performances are: the labor and land transactions are free, and domestic trades are free. The latter refers to the trades among countries are free; do not need tariff and reward to influence trades. In Smith's consideration, the "economic man" pursuing their own maximum interests, and simultaneously lead to the maximum social interests, and in that situation, the individuals are guided by an invisible hand that called the market. That is to say, the economic behavior of "economic man" can promote the social interests. The countries should not intervene with individual economic behavior. To promote the wealth of nations, the best policy is economic liberalism, but meanwhile, there should be many regulations to ensure the order of market (Forsgren, et al, 2010).
According to the hypothesis of "economic man", Smith considered price of goods are decided by the market. The market is called the invisible hand, and it adjusts price appropriately, and collocates resources effectively. Smith advocated that government should not interfere with price which should be decided by market.
In a word, in Smith's opinion, based on the hypothesis of "economic man", everyone pursues his own interests, and also has sympathy to others. The social benefit reaches maximum in the process of individuals pursuing their own benefit. So the growth of individuals is important to the society. And in the free trades, individuals can get their own maximum interests in the guidance of individual rationality, and in this process, there is an invisible hand leads the marketing activities, so the price is appropriate and the resources are reasonably allocated, and social benefit is also maximum. But Smith did not recognize the contradiction between personal interests and collective interests, so he thought the social benefit would be maximized when individuals pursued their own benefit.
2.2 Introduction of the background of Smith's main points
Smith put forward those opinions in about 1773 to 1776. In that period, enlightenment just started. it was time to resist the privileged class and squire for the populace. It was the time of "commercial society" or "civil society". In England of that era, the industries that mercantilism rewarded, are all those wealthy people managed, however the industries that operated for poor are ignored (Elliott, et al, 2001). The lower middle class had no privileges, not status, and they could not go into the upper class. They were opposed to the privileged class. The upper people among the populace became the bourgeoisie, and they were called “the urban intelligentsia ". That was the "economic man". They like thinking, exchanging opinions, discussing social problems. They educated themselves but hated corruption. What is more, they pursued their interests, and they abided by laws and social norms.
One the other hand, the England was a leading capitalistic state at that time. It was not only the world trade center, but also the leading industrial country. The economic developed very fast. In early days of 18 century, the countries like France and Germany were staying in the stage of handicraft industry. However, England had come into primary stage of capitalism. The so-called handcrafted factories had come into many cities. In that situation, it is a new time for the development of capitalism and industries. As the development of economic and industry, countries were getting increasingly connected.
According to the economic environment and the requirement of society at that time, Smith proposed the hypothesis of "economic man", and he advocated individualism that individual development was important for the social economic. It was the voice of lower middle class what was the "economic man". The growth of capitalism demanded free trade not only in the domestic market, but also the international trade. Simultaneously, in Smith's opinion, government was responsible for the social order, and the order of economic activities, but market should be free, and the price of products should be decided by market.
Smith's thoughts are suitable to the social demands. They are the results of the time, and they gave a great push to the economic development.
2.3 The analysis of current social environment
In the modern society, the economic gets a sufficient development. After the third revolution of science and technology, the technology has a big progress. The communication among different countries become more and more frequently, so the world becomes a whole. Because the distribution of resources is not balanced, the trades are necessary to countries. And the markets include the domestic market and international market, so the international deals are pervasive. Moreover, the market economic develops well, so it supplies a chance for international trades. On the other side, people in most countries are equal, and they have the same rights in the modern society.
As is known above, the society is much more different than before, so if Smith's opinions are valid today? Smith considered the people are "economic man". They are rational, and can use limited resources to seek for the biggest interest. The hypothesis of "economic man" is used today. It is also an important hypothesis in economics. It is the base of economic, and based on this hypothesis, the economic activities of individuals can be analyzed. So this hypothesis is also important today. But the hypothesis is not ideal because people are not so rational generally. And then, Smith advocated economic freedom and price mechanism. In modern world, it is not doubt that the trades should be encouraged. But some countries make staff to manage the development of domestic economic. Staff is a important policy to influence the import and export. However in 18 century, the communication is not so frequently, and Smith came up with that the staff should not be permitted to encourage the international trades. So Smith's opinion about economic freedom is partly valid. And then, Smith proposed that the government should not influence in market, and the price of products is decided by the market itself. However, as is known after the first economic crisis, market is not almighty, and it may be out of work sometimes. Not all the people obey the market order. And the phenomenon of forcing up price exists in the market. So it is necessary for the government to control the price when the market is out of work. But government should not control market too much. The market is an invisible hand, and the government is a visible hand. The two hands regulate the market together (Altman, 2000).#p#分页标题#e#
In conclusion, Smith's theory about nations' economic is original and advanced. And his opinions are not only advanced at that time, they are also important today. However, Smith ignored the contradiction between individuals and collectivity when he raised the hypothesis of "economic man" and his opinions. However，there are no better hypothesis than the "economic man" when analysis economic activities are considered. So the limitation of this hypothesis is not because of differences between modern society and before, but because of the complexity of people themselves. And then, the trades should be free, and the staff is not favorable for the communication among countries. And at last, the invisible hand and the visible hand may promote the development of market together. What is more, government should pay more attention to the order of market, and punish the people who do not obey the laws and social norms. But the market should pay more attention to the allocation of resources. These two hands concern different respects. It is needful for government to intervene in when the market is out of work. As society develops continuously, Smith's opinions should be optimized, and modern economists can develop their latent assumptions based on Smith's theory (Farmer, 1997).
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