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The economy has been discussed in a very simple and systematic manner by eminent economists.
Their main goal is to determine such a way for economic policy making, by which the wealth of the nations can be increased.
There is a great deal of similarity in the ideas related to economic development presented by the economist Adam Smith David Ricardo of the prestigious school. Their combined ideas are called the iconic theory of economic development.
This iconic theory of economic development can also be called the elementary theory of development.
Adam Smith is considered the leader of the prestigious sect. His great work "An Inquiry in to the nature and Causes of wealth of notions" published in 1776 is itself an explanation of the importance of economic development.
Adam Smith's Theory of Economic Development
The main ideologies of Adam Smith's Theory of Progress can be classified as follows:-
Free courage and competition -
According to Adam Smith, free courage and free competition are essential for economic development. The only legal system determined by them (nature) is the highest means of development. The meaning of the just legal system is taken from the system in which the right of every person to pursue his own interests free from pressure from other members is protected. If the economy is left free to be operated by invisible hands, then an integrated and profitable economic system can be established. By invisible hands, Smith refers to the forces arising in free competition which keep on making necessary adjustments in the economy.
Work division -
The production capacity of labor increases through division of labor. Through division of labor and specialization, the skill of the workers increases. The time taken in the production of goods is reduced and good machines and toiletries are invented. Productivity increases. But the process of increasing productivity through division of labor has three limitations:-
The division of labor begins with the desire of man to get another thing in exchange for one thing.
Capital accumulation is necessary for the initiation or expansion of the division of labour. Saving for capital accumulation and saving or capital increases with economy and decreases with extravagance and mishandling.
The third limitation is the size of the market. If the market is narrow and the opportunities for producers to exchange their surpluses are limited, then a person will not produce more than he needs by staying in one employment. Thus the benefits of division of labor in a narrow market would not accrue.
development process
Due to the system of capital accumulation, division of labor arises, which increases the level of productivity, which in turn leads to increase in national income and population. This process of economic development moves slowly and spreads from one sector of the economy to another.
Fixation of Wages :- The fixation of wages depends on the bargaining ability of workers and capitalists.
Profit Determination:- In the process of development, profits and wages keep on increasing and decreasing till that time there is sufficient increase in population as per requirement. Ultimately, the economy reaches a stable stage where both the process of capital accumulation and economic development come to a halt.
Fixation of rent:- The reward of monopoly on land is rent.
Agents of Growth: - According to Adam Smith, farmers, production and traders are the messengers of economic progress and development.
the order of development
Agriculture is the first in the process of development. After agriculture, commerce develops at the end of the manufacturing process.
Although Smith did not express his ideas in the form of the theory of economic development, but his ideas later have an impact on the theory of economic development. The importance of capital accumulation, the idea of a stable economy and the disdain of cooperative intervention in the development process have been recognized by the later eminent economists as well.
steady state :- But this progressive stage does not last forever. Lack of natural resources hinders development. When the economy has fully developed its resources, competition for employment among workers reduces wages to subsistence levels and competition among traders reduces profits. Once the profits decrease, they keep on decreasing so that investment – investment also decreases – capital accumulation also stops – population stagnates – profits start minimizing – wages reach the subsistence level – per capita Income stagnates and the economy reaches a state of stagnation. Which Adam Smith named steady state.
The economy has been discussed in a very simple and systematic manner by eminent economists. Their main goal is to determine such a way for economic policy making, by which the wealth of the nations can be increased.
There is a great deal of similarity in the ideas related to economic development presented by the economist Adam Smith David Ricardo of the prestigious school.
Their combined ideas are called the iconic theory of economic development. This iconic theory of economic development can also be called the elementary theory of development.
Adam Smith is considered the leader of the prestigious sect. His great work "An Inquiry in to the nature and Causes of wealth of notions" published in 1776 is itself an explanation of the importance of economic developmen
The economy has been discussed in a very simple and systematic manner by eminent economists.
Their main goal is to determine such a way for economic policy making, by which the wealth of the nations can be increased. There is a great deal of similarity in the ideas related to economic development presented by the economist Adam Smith David Ricardo of the prestigious school.
Their combined ideas are called the iconic theory of economic development. This iconic theory of economic development can also be called the elementary theory of development. Adam Smith is considered the leader of the prestigious sect. His great work "An Inquiry in to the nature and Causes of wealth of notions" published in 1776 is itself an explanation of the importance of economic developmen
