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Английский для Экономистов Агабекян

Unit_2_Text 1

ADAM SMITH

Economics, like every other intellectual discipline, has its roots in early Greece and Rome; but economics was first considered as a branch of domestic science (home economics) dealing with such matters as the management of slaves and the allocation of manure among alternative agricultural uses. In the revival of learning that followed the Middle Ages, economics emerged as a branch of moral philosophy concerned with such issues as the ethics of loan interest and the «justness» of market-determined wages and prices.

By the beginning of the eighteenth century, the subject had lost most of its theological overtones and had taken shape as an academic discipline, largely as a branch of political theory dealing with problems of government intervention in economic affairs.

Then in 1776 the Scottish moral philosopher Adam Smith published the first edition of his monumental «Inquiry into the Nature and Causes of the Wealth of Nations», and economics soon became an independent science.

The Vision of Adam Smith

Smith lived in an age when the right of rulers to impose arbitrary and oppressive restrictions on the political and economic liberties of their subjects was coming under strong attack throughout the civilized world. As other men of that time were arguing that democracy could and should replace autocracy in the sphere of politics, so Adam Smith argued that laissez-faire could and should replace government direction and regulation in economics. The «should* was so mixed with the «could» portion of Smith's analysis that much of his book seemed almost as much a political tract as a work of science. What gave the book lasting significance was the Smith's strong arguments that the economic activities of individuals would be more effectively coordinated through the indirect and impersonal action of natural forces of self-interest and competition than through the direct and frequently ill-considered actions of government authorities. Smith opened minds to the existence of a «grand design» in economic affairs similar to that which Newton had earlier shown to exist in the realm of physical phenomena. The impact of Smith's ideas upon his contemporaries was widespread and immediate. As one modern scientist observed: «Before Adam Smith there had been much economic discussion; with him we reach the stage of discussing economics. »

That Smith's vision of the economy should ever have been considered original might seem strange to modern minds, but that would be because we now see economic phenomena in the light of his conception. As two leading scholars recently remarked, «The immediate «common sense» answer to the question, «What will an economy motivated by greed and controlled by a large number of different agents look like?» is probably: There will be chaos.» That is certainly the answer that would have been given by most of Smith's contemporaries — before they read his book. The greatness of Smith's accomplishment lies precisely in the fact that he, unlike his predecessors, was able to think away extraneous complications and so perceive an order in economic affairs that common sense did not reveal.

It is one thing, of course, to say that Smith's conception of economic phenomena is original, another to suggest that it corresponds to contemporary experience. According to Smith, society in its economic aspect is a vast concourse of people held together by the desire of each to exchange goods and services with others. Each person is concerned directly only to further his own self-interest, but in pursuing that aim each «is led by an invisible hand» to promote the interests of others. Forbidden by law and social custom to acquire the property of other people by force, fraud, or stealth, each person attempts to maximize his own gains from trade by spe-cializing in the production of goods and services for which he has a comparative advantage, trading part of his produce for the produce of others on the best terms he can obtain. As a consequence, the «natural forces» of market competition — the result of each person attempting to «buy cheap and sell dear» — come into play to establish equality between demand and supply for each commodity at rates of exchange (prices).

The economic system (so Smith and later writers argued) is a self-regulating mechanism that, like the human body, tends naturally toward a state of equilibrium if left to itself.