23. THE TEACHING OF ADAM SMITH

Adam Smith (1723-1790) - An eminent English scientist-economist. He developed theory of reproduction and distribution, the actions of these categories are analyzed on historical material and their application in economic policy.

On A. Smith, the economy of a weak country increases the wealth of the people not because this wealth is money, but because it must be seen in the material resources that make up everyone’s annual labor.

Smith condemns mercantilism. He says that the nature of wealth is exclusively labor. Only technological progress is the basis for the growth of wealth of any country. In his opinion, it is not trade and other branches of the sphere of circulation, but the sphere of production that is the main source of wealth.

Central to research methodology A. Smith It has concept of economic liberalism, which is based on market economic relations. He says: "Market laws can best influence the economy when private interest is higher than public interest, that is, when the interests of society are considered as the sum of the interests of its constituent individuals."

In the development of this idea Smith introduces concepts such as "economic man" и "invisible hand" "The essence of economic man is that it is not from the benevolence of the butcher or the shopkeeper that we expect to receive our dinner, but from the observance of their own interests. We appeal not to their humanity, but to their selfishness, and we never tell them about our needs, but about their benefits.

Meaning of "invisible hand" consists in promoting such social conditions and rules under which, through the free competition of entrepreneurs and through their private interests, the market economy will best solve social problems and lead to the harmony of individual and collective will with the greatest possible benefit to everyone.

According to him, market mechanism of management - this is an obvious and simple system of natural freedom, it will always automatically balance due to the "invisible hand".

State, in his opinion, should fulfill three important responsibilities:

1) costs of public works;

2) costs that ensure military security;

3) the costs of administering justice. Considering the structure Trade, Smith he put domestic trade first, foreign trade second, and transit trade third.

Fifth book in "An Inquiry into the Nature and Causes of the Wealth of Nations" directly devoted to the analysis of the state budget and public debt.

Problem government spending and taxes smith interpreted from the standpoint of the ideologist of the progressive bourgeoisie. He justified only those expenses of the state that are made in the interests of the whole society. He put forward the thesis of a "cheap state", which was accepted by all subsequent representatives of classical bourgeois political economy.

Smith laid the theoretical fundamentals of the tax policy of a bourgeois state. He wrote that taxes should correspond to the “strength and abilities of citizens”, be determined for each capable person, and levying a tax should be as cheap as possible.

Author: Tatarnikov E.A.

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