Adam Smith (1723-1790)

Adam Smith (1723-1790) is considered the father of modern economic theory. He was a British philosopher and economist. He was born in Kirkcaldy, Scotland. He was educated at the universities of Glasgow and Oxford. In 1751 he was appointed Professor of Logic at Glasgow University.

In 1776, Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, which took about ten years in the to write. From the publishing, he is considered the founder of the science of political economy. The basic doctrine was that labor was the only source of a nation’s wealth. He stressed the importance of individual enterprise and he argued the benefits of free enterprise. He believed that the true wealth of a nation was not in gold but in the achievement of an abundance of the necessities of life. He warned against unnecessary intervention by any country, or laissez-faire, and tree trade. To explain the concept of laissez-faire he proclaimed the principle of the "invisible hand": Every individual in pursuing his or her own good is led, by an invisible hand, to achieve the best good for all. Therefore, any interference with free competition by government can only cause harm.

A Mixed Economy

The United States economy operated primarily under the principles of free enterprise. However, it is not the "pure" market economy that Adam Smith had envisioned. What we have today is something called a mixed economy. A mixed economy is some element of state control over the economy mixed in with the free enterprise.

Not all businesses in the United Stares are privately owned. Many units, such as electricity, natural gas, and water, are legal and public monopolies. In some cases competition does not exist because it is not practical. In a few cases, monopolies can be a good thing. It is more efficient to have some utilities provided by just one company instead of several companies. It seems to be common sense to almost everyone and sometimes these monopolies are called "natural".

Many local services are not conducive to free enterprise. For example, the public ownership of the public library. Many communities own the public schools, libraries, and parks.