The Market as a Social Institution — Sociology STD 12 Humanities — Question
CBSE BoardEnglish MediumSTD 12 HumanitiesSociologyThe Market as a Social Institution4 Marks
Question
What is the economic philosophy of Adam Smith?
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Answer
Adam Smith who wrote “The Wealth of Nations” in which he attempted to understand the market economy that was just emerging at that time.
Smith argued that the market economy is made up of a series of individual transactions, which automatically create a functioning and ordered system.
This happens even though none of the individuals involved in the millions of transactions had intended to create a system.
Each person looks only at their own self-interest, but in the pursuit of this self interest, the interests of all seem to be looked after.
Thus, there seems to be an unseen force at work that converts what is good for each individual into what is good for society.
This unseen force is called the ‘invisible hand' by Adam Smith.
Smith argued that capitalist society is driven by individual self-interest and works best when buyers and sellers make rational decisions that serve their own interests.
According to Smith, this system wherein everybody looks after their own interests stimulates the economy and creates more wealth.
For the reasons, Smith, supported the idea of Laissez faire, a French phrase which means let it be or free market without any regulation from the state otherwise.
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