The work of Adam Smith had a huge impact on classical economic theory. First of all, the merit of the author was the kind of clear system that he gave to the economic structure of society.
Idea of economic freedom
The most popular ideas of Adam Smith are in Europe during the formation and development of capitalist relations. The interests of the class of the bourgeoisie consisted in granting it full economic freedom, including oriented to buying and selling land, hiring workers, using capital, etc. The idea of economic freedom in practice, undoubtedly, was a progressive moment in the development of society, since it restrained the arbitrariness of the monarchs and gave great opportunities for the development of productive forces in the economic system.
The ratio of the roles of the individual and the state in the economic system
The philosophical foundations on which the theory of Adam Smith was based concerned primarily the system of obtaining and distributing profits, the socio-ethical norms of economic activity, the role of the state in regulating economic processes, as well as the role of individual entities (groups of entities).
From the position of Adam Smith, the state should act as the so-called. "Night watchman." It should not establish and regulate economic processes, its main function is to carry out the judicial, constituent, and also protective functions in society. Thus, the role of government in the economy, from Smith’s point of view, should be minimized.
As for the role of the individual, here we should turn to the idea of an “economic person”. Smith's “Study of the Nature and Causes of the Wealth of Nations” characterizes an individual in the framework of the economic process as a person with an egoistic orientation, guided in his actions by considerations of personal gain. The actions of the “economic person” are built on the principle of equivalent compensation. This principle forms a system of economic exchange, which is the foundation of a market economy that is natural for human life.
The law of the "invisible hand"
In addition to the state and individual individuals, economic processes in society are governed by certain economic laws. Adam Smith calls them the "invisible hand." The effect of such laws does not depend on the will and consciousness of society. However, the management of economic processes is carried out an order of magnitude higher than management at the state level. In turn, each individual, guided by his own benefit, can bring much more benefit to society than if he was oriented to the benefit of society initially.
The system of wealth of peoples
The “Study on the Nature and Causes of the Wealth of Nations” by Adam Smith singles out as the basis of wealth the number of working entities in the state and the productivity of these entities. The source of wealth, in turn, is determined by the annual labor of each individual nation, people, counting on its annual consumption.
The division of labor is a prerequisite for labor productivity. Thanks to her, in the labor process, working skills for a particular operation are improved. This, in turn, determines the saving of time necessary for workers to move from one operation to another. The division of labor at the micro and macro levels, as defined by Smith's “Study on the Nature and Causes of the Wealth of Nations,” is different in origin. In the course of the work of the manufactory, the specialization of the workers is determined by the manager, meanwhile, the above-mentioned “invisible hand” functions in the national economy.
The lower limit of the wage of the worker must be determined by the cost of the minimum funds necessary for the existence of the worker and his family. Also, there is an influence of the material and cultural level of development of the state. In addition, wages depend on economic characteristics such as labor supply and demand in the labor market. Adam Smith was an active supporter of the high level of wages, which should improve the situation of the lower strata of the people, motivating the material worker to increase his labor productivity.
Essence of profit
Smith offers a twofold definition of profit. On the one hand, it represents a reward for the entrepreneur; on the other, a certain amount of labor not paid by the capitalist to the worker. In this case, the profit depends on the size of the capital employed and is not related to the amount of labor expended and its complexity in the process of enterprise management.
Thus, the “Study on the Nature and Causes of the Wealth of Nations” by Adam Smith formed a special idea of human society as a gigantic mechanism (machine), the correct and coordinated movements of which should ideally provide an effective result for the whole society.
Subsequently, Smith's idea that in order to make a profit each individual should proceed from his own interests, was refuted by the American mathematician John Nash. From his point of view, there are situations in which there is a “disadvantage” (a negative amount or a mutually beneficial relationship). At the same time, Nash notes the fact that this behavior of economic entities meets cultural standards (non-violence, treachery and deceit). The trusting atmosphere between the entities was considered by Nash as a necessary condition for the economic welfare of society.