A Note on Two of the Main Contributions of Adam Smith ECO-4406-01 April 25, 2017, A Note on Two of the Main Contributions of Adam Smith was born on 1723 in Scotland. By 1751, he was a renowned professor of Moral Philosophy at the University of Glasgow (Campbell, 2014). In 1759, Smith published his "Theory of Moral Sentiments" while in 1776, he published "An Inquiry into the Nature and Causes of the Wealth of Nations" which was hailed as a masterpiece (Campbell, 2014). Adam Smith is credited with being the first economist to differentiate clearly between profits that accrued to wages, industrial capital, rents, and profits on merchant capital (Campbell, 2014). In addition, Smith is also credited as being the first economist to realize the difference in social classes which existed in the capitalist system such as "free" laborers, landlords, and capitalists (Smith, 2013). Below are two main contributions of Adam Smith.
Smith come up with a historical approach to the social, and economic development of societies occupied by humans with regard to the "stages" humans went through and formulated his "theory of value" for various conditions of society. Smith divides human history into four main stages. The first stage is referred to as the hunting stage (Campbell, 2014). Smith argues that this stage is the "rudest" in history because, at this stage, there was no sovereignty whereby every individual was a hunter and warrior. Smith draws a comparison of this stage to natives who hailed from North America during his lifetime. The second stage is the Pasturing Stage (Campbell, 2014). Smith argues that this stage is more advanced compared to the hunter's stage. However, the man still behaved like a warrior as well as a nomadic. Smith draws a comparison of this stage to the stage of Arabs and tartars. The third stage is the agricultural stage (Campbell, 2014). This stage is credited with men beginning to settle down, practicing farming and becoming self-sufficient. However, during this stage, there existed little trade among foreign territories. The last stage is the capitalist stage (Campbell, 2014). According to Smith, this was the highest stage nations could reach and not surpass. For instance, civilized societies like England would likely fall into this stage.
According to Smith, "Laws of nature" dictate that conflicting classes eventually narrow down to a "benevolent harmony" between themselves (Skousen, 2016). In a capitalist society, Smith argues that an individual's property is not determined by his income but by the different classes that exist in the society (Skousen, 2016). Consequently, Smith concludes that in market societies, where capital and land are yet to be possessed by different classes, "the whole produce of labor belongs to the laborer." Smith writes that neither gold nor silver is responsible for purchasing the world's wealth, but labor is (Smith, 2013).
Smith argues that the class struggles that exist between classes...