Economic Theories. Explain the key theories of Adam Smith relating to Essay

Economic Theories. Explain the key theories of Adam Smith relating to the free market the 'invisible hand' non-intervention - Essay Example In addition, the philosophy of the unrestricted free markets does not deal with the language of the fixed price because the price of the goods on it changes in part. The unrestricted free market decides the prices of the goods in order to create a fair price for both the customer and the seller (Smith 2013, 23). The Rules that the unrestricted free markets follow is the right to control property, transfer property one by one voluntarily, refrain from using force, and the right to establish contracts. The unrestricted free markets nowadays are popular in that they exist in every place. Good examples of the unrestricted free market are the oil free market, and the black market. For instance, concerning the oil free market, it is referred to as unrestricted free market because the oil has variable values that changes from period to another depending on the events that happens every day in the political or economic world so it is not restricted with the policy of the free market. The ide a of invisible hand is applicable to the man’s natural behavior towards self-interest. Therefore, by allowing every person freedom to generate and exchange services and goods as they want, and opening all markets to fair competition, the business will thrive. In turn, this will bring universal populace since every effort from the people would be appreciated. Smith argued that in order to bring about prosperity, people needed to work hard and enlightened because this act of enlightened self-interest was common to majority of individuals. In addition, Smith needed people to have the potential to think about long-term business since it would curb customer exploitation (Smith 2013, 32). Explain why in Smith’s view the division of labor would benefit society and bring prosperity to workers and capitalist producers The focus of Adam Smith ideas rested on economic growth. According to Smith, economic growth is entrenched in division of labor. The idea of division of labor rel ates to specialization of labor particularly downsizing large jobs into many tiny units. When there is division of labor, each laborer or worker becomes an expert in one area of production, which in turn increases the workers efficiency. Division of labor benefits the society since the fact that workers do not need to switch or change tasks during working hours saves money and time. However, Smith warned against forcing or coercing people to perform repetitious and mundane work because it led to dissatisfied work and ignorance among workers. In a response to this, Smith urged governments to offer education to employees so that they could acquire necessary skills and expertise in specific works. Education was significant because it could curb the deleterious influences of industry life. Division of labor meant giving each employee a specific work that marches or suits them. Adam Smith asserted that having employees perform specialized works led to increased productivity this is becau se it is easy to allocate tasks in accordance with worker’s specific skills. For example, an employee who is skilled in dealing with numbers performs better on inventory control than a worker who is not (Smith 2013, 78). In addition, division of labor leads to technical efficiency because it decreases transition time between work and tasks. Division of labor