Adam Smith was considered a major force that economics is the way it is today, but why? What where the significant ideas that made him so unique? These questions can be answered by looking into the many points he makes in his book The Wealth of Nations. In this book some of the key topics are a laissez faire approach on mercantilism, the reasons why monopolies are bad, unions and, centralized economic planning.
One of Adam Smiths" major ideas is that the government should not interfere with the economic market. He believed that we should leave it up to the "invisible hand". This theory says that the individuals "disposition to truck, barter, and exchange" will cause the self-interest of the individual to promote the larger interests of society. Adam Smith was against "the navigational acts" which stated that any surplus made by the colonies could not be sent to any other country but England. He believed that the government should be limited to "the power to tax, borrow, regulate commerce, pass uniform bankruptcy laws, coin money, establish post offices, post roads and grant patents.".
Adam Smith was also against monopolies. He stated that a monopoly could not persist without the assistance of government. He believes that monopolies are not good for the welfare of the public because they keep their stock under supplied so that they can increase the cost of the product over the natural price. This reduces the welfare of customers because customers buy from the cheapest supplier, because it is in their best interest to pay less. By the monopoly charging more they are working against the interest of the public. Smith also stated that monopolies have poor management, this is because of two reasons. When there is only one supplier there is no competition so the monopoly has nobody to compare its practices against. Poor management also arises because the monopolies also use their resources not to manage their company but as a self-defense resource to keep them on top.
