Answer to Question #158858 in Economics for jessica

Question

Compare Adam Smith's view of a nation's wealth with that of modern economists who rely on gross domestic product. Would Adam Smith agree that gross domestic product is the best way to measure a nation's economic output? Why or why not?

Answer 1

According to Western experts, the central theme of "The Wealth of Nations", which deserves unconditional attention today, is the creation of such a social order in which an individual, seeking to satisfy his own personal interest, will inevitably take care of the welfare and satisfaction of the interests of the whole society, that is, the relevance of ideas Adam Smith is primarily due to the development of general economic theory, in particular - the problems of monopolistic and government subsidies and the possibilities of centralized economic planning.

Subsidies from the state and capitalist associations are a fundamental theme articulated in The Wealth of Nations. Smith, as has been noted many times, defends the thesis that a country that really cares about increasing its own wealth should create such a legislative framework that can provide conditions for maximum economic freedom for every individual and every producer.

The criticism of the monopolies in The Wealth of Nations consists mainly of three main components. The first critical direction is related to the author's assertion that high market prices, monopolized by associations of capitalists, reduce consumer welfare.

This situation entails such negative consequences as ineffective overall economic management, which Adam Smith sees as the second reason for criticism of monopolies. "Monopoly is the enemy of good governance, which can never be universal," Smith wrote. This meant that managing the economy in conditions of free competition could not simultaneously satisfy the interests of both monopolists and the masses of small entrepreneurs, who, nevertheless, were forced to turn to the state for help in order to protect themselves.

The third direction of criticism of monopolies in the study of Adam Smith is associated with the general assertion that the activity of monopolies leads to the spontaneous enrichment of some individuals to the detriment of the interests of others, thereby exacerbating property and social differentiation in society. In accordance with the ideas of the author, the development of capitalist monopolies - ideal for society as a whole and all its citizens individually - could only be ensured with the help of the government.