Adam Smith, David Ricardo And Thomas Malthus Essay

Adam Smith, David Ricardo And Thomas Malthus Essay

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Adam Smith, David Ricardo and Thomas Malthus have all greatly influenced how people thought about modern economics, especially in areas relating to markets, in terms of the economy and whether certain things affected population rates. In this essay I will cover each of the three topic areas and how each economist interpreted these areas in order to explain why certain phenomena occur within British economics, most of which are still widely accepted today.
Adam Smith was the first person to publish ideas about the markets. He suggested that a free market was the most viable and sturdy option for the economic system, as it meant that there could be no governmental regulation. This was an advantage as selfishness of the individual creates competition within the system. An effect of this is that the consumer will receive the best possible product for the lowest possible price. This occurs due to overpriced and poor versions of the product being rejected by consumers, so they are pushed out of the market in favour of better quality and lower priced goods. Smith also believed that at some point the market would reach a supply and demand equilibrium in which goods are only produced at the rate of which consumers are buying them, which decreases waste as a market by-product. Smith also said that markets create and develop a division of labour, which is good for society as it leads to specialisation of jobs and makes processes more efficient. This increase in productivity leads to profit which can then be reinvested, consequently improving technology and expanding business opportunities. In the Wealth of Nations, Smith stated that “Labor… is precisely equal to the quantity of ' labor which it can enable them to purchase or command.” This h...


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...hat there was an issue with the use of finite resources. They also put emphasis on how scare land was, which they saw as the main restraint on economic growth. Their previous arguments regarding population are again valid here as they stated that if the population increased then the land for farming and food production would become increasingly infertile or unavailable due to demand. This puts a strain on economic growth as only the rich could afford to rent the land, leaving the poor to work for pay that only just exceeds subsistence level, meaning they have no spare money to buy products in order to stimulate the economy. Malthus then furthered this idea by arguing that the economy could enter a state of stagnation if there’s a lack of demand. If wages are less than the total cost of goods production then industry output will be too high, causing prices to plummet.

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