“If Adam Smith were still alive, he would be having a birthday today, June 16. The man credited for founding the discipline of economics was a man of curiosity, vision and wisdom. Smith’s insights about the functioning – and malfunctioning – of markets are still valid, and deserve to be repeated and celebrated.
Born in 1723 in Kirkcaldy, Scotland, he became a professor of moral philosophy and a leading figure of the Scottish Enlightenment. At the age of 36, he published The Theory of Moral Sentiments, a book that made him an academic superstar. Only then did he start to study economics and, in particular, the mechanics of national wealth creation.
For hundreds of years before Mr. Smith, technology had not changed significantly and patterns of production and consumption were relatively stable, determined mostly by tradition. But with the beginning of the Industrial Revolution in the mid-1700s, economies began changing quickly. As technological developments in some sectors outpaced those in others, and many new products were created, adjustments had to occur. Costs and prices bounced around, and so did wages. In response, labour and capital shifted across sectors and regions,” wrote Christopher Ragan for the Globe and Mail on June 16, 2015.
Ragan continued, “His deepest insight was how thousands of decentralized and mostly self-interested consumers and producers, none of whom had a plan for the overall economy, interacted in markets to produce a remarkably co-ordinated overall outcome. Increases in the demand for one product generate the market forces that bring forth the supply; decreases have the opposite effect. His most famous metaphor to describe this co-ordination was the market’s “invisible hand” of resource allocation.”
Read the full article here.
Raymond Matt, CFP, CLU, TEP, CHS
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