Adam smith definition:and criticism of his defition

Adam smith in his book discussed economics “an enquiry into the nature and causes of wealth of nation” According to smith in economics primarily we are concerned with wealth. We studied all those activities which are concerned with earning and spending of wealth. Adam smith discussed the word wealth through four (4) aspects.

1.                 Production of wealth:

This shows that how goods services are produced. It produced by the combination of four factors of production. The entrepreneur combines four factors of production.

Example:

If a producer wants to produce sugar will combine the four factors of production. First of all, he purchase land, build the building then he invests money in the business in the form of capital and purchase raw material and machinery. Then he employs laboures on wages and organizes his business.

2.                 Exchange of wealth:

There are many producers of goods and services in a society every producer goods and service more than his personal requirement. The producer exchanges his surplus goods and service with the surplus goods produced by others examples in a barter economy producer of cloth exchanges his surplus cloth with the surplus soap. Furniture etc produced by the other.  

3.                 Distribution of wealth:

The four factors of production produce goods and service in the process of production. They are then compensated by the producers. E.g rent to the land lord. Wages to the laboures interest to the capital owner and what is left is his profit.

4.                 Consumption of wealth:

Goods are produced, because they are consumed. It in that the utility which are put in goods and services during the process of producing are acted during the process of consumption to satisfy wants. Thus consumer’s goods and vices in order to fulfill their needs and requirements.

Thus, from the above explanation of wealth and its four aspects. It becomes clear that Adam smith and the view that economics studies the wealth of nation. Beside this he also explains as to why and how wealth.

5.                 Criticism on Adam smith:

When the definition was given in1776 British society was a religious society. Therefore, religious minded peoples criticized the subject of economics on the ground that it will make the society as well as the individual materialistic and will make them away from spiritual values. Friendship, brotherhood, love etc. this will make them selfish, greedy due to pursuit for materialism.

Two social reformers Carlyle and Ruskin were the main criticize economics. They raised hue and cry against it. They called economics a “dismal science”.

A science of materialism and a science of butter and bread and it promote selfishness and need.    

Main point of criticism:

1.                 Too much importance to wealth:

Adam smith in his definition stress on the word wealth. But the fact is that the study of mankind is more important than wealth.

2.                 Narrow meaning of wealth:

Classical economist used the term goods like chair, table etc. but in economics we use the term wealth in a wider sense.

3.                 Concept of economic man:

According to Adam smith, mankind work for self interest, his social interest is ignored. Dr Marshal was of the view that in economics we studied an ordinary man and women.

4.                 Ignore human welfare:

Adam smith totally ignores human welfare. Wealth is not to be all and end of all human activates.

5.                 Do not discuss important branches of economics:

Adam smith ignore important branches of economics like economics planning, economics developing etc. in recent time these are the most important branches and we must studied them in economics.