What are the Contributions by Adam Smith?

There were many contributions by Adam Smith in the world of Economics. Adam Smith's greatest contribution to economic growth was his work, The Wealth of Nations.

Summary of Wealth of Nations by Adam Smith

The Wealth of Nations was the first complete book on political economy. It was the first major work to explore the idea of laissez-faire economics. And the Wealth of Nations was the work that explained the forces that were changing Europe from a feudal and trade based economy into one of capitalism and free enterprise.

Wealth of Nations notes

One of the features that made Adam Smith 's book, the Wealth of Nations, so different from all that preceded it was his historical approach. Economic theories before him had been based on problems of the immediate moment, like:

• a crisis in banking or credit, or
• a shift in the balance of trade.

Others were speculative in nature - they were based on ideas and propositions that couldn't be supported by facts or evidence.

Other contributions by Adam Smith and the Wealth of Nations

The second major contribution of The Wealth of Nations was Smith's theory that wealth is the labor of the people who produce it. The Wealth of Nations book opens with a famous passage in which Adam Smith describes a pin factory. There are ten people in this factory, each specializing in different tasks, and together they turn out 48,000 pins a day, compared with the few pins, maybe even only one, that each could produce alone.

These workers - the people of a nation - were what Adam Smith saw as its real wealth, along with the land and its products. Wealth was not the same as money. It was not the gold or silver that a country possessed, but the labor, services, skills, and goods. This view is what became his famous "labor theory of value."