Adam Smith was a key figure in the 18th and early 19th centuries of the Scottish Enlightenment. He was an economist who pioneered the initial foundations of a classical political economy, a moral philosopher, as well as an esteemed author who produced two renowned works in The Theory of Moral Sentiments and his magnum opus, An Inquiry into the nature and causes of the Wealth of Nations, these were seen as critiques of the most prevalent political-economic system of the time, known as mercantilism. This political theory, when put into practice, relied heavily on state intervention to accumulate scattered resources at the expense of other countries, through methods such as imperialism. Although his ideas in these books have not been without criticism from scholars such as David Ricardo and Karl Marx, his influence should not be underestimated. This essay will aim to discuss the most important contributions made by Adam Smith to classical political economy, as well as to explain why his later influence was so great. This will be done by examining the ideas he presented in the two books mentioned, while then analyzing why the influence of these ideas became so great. These ideas include some of his revolutionary economic theories such as; the invisible hand, the labor theory of value, the division of labor, as well as the role of the State in an economy, among others. Classical political economy is a school of economic thought that developed in the late 18th and early 19th centuries, primarily in Britain. The main principle being to attempt to understand society in terms of its economic base. “A branch of the science of statesmanship, aimed at providing its citizens with abundant or subsistence income and sufficient revenue to the State for public service. He proposed to enrich both the people and the sovereign. This is Adam Smith's description of classical political economy in his book The Wealth of Nations, and for many it is considered the origin of it, a clear example of how Adam Smith influenced this theory. One of the main points that Smith makes in his book is that he believes that our society should be based on a market consisting of three main characteristics of production, namely: capital, land and labor. When these features of production are implemented, they will create three main classes within our society: capital owners, landowners, and workers. These classes will receive income independently, independent of each of the other classes, the main theory being that each class would benefit from the increase in market reach. However, a complication would arise if the free market were to be disrupted in some way. path. It was important that there be no disruption to the free market due to one of Smith's most influential ideas, the "invisible hand." This concept is still controversial among economists as to how to interpret what Smith meant by it, but the consensus is that it refers to a metaphor to describe how scarce resources are issued in a free market. For a market to qualify as free, there must be no government intervention, which would allow market prices to be dictated by the relationship between supply and demand. Buyers and sellers involved in this process would be acting solely in their own self-interest, Smith asserted. Smith also said suppliers are able to freely select the products theyprovide, as well as determine the cost and quantity of these products, while consumers are free to decide where they purchase their products. This would only be possible if there was an absence of government intervention. This concept is extremely influential to this day and is considered one of the cornerstones of capitalism. He also made an extremely important contribution to classical political economy as he was in direct opposition to the leading economic theory of the time, mercantilism, which relied heavily on government intervention, one example being human rights. customs on imports. However, this is not to say that Smith believed that no government intervention was the most ideal theory. Say no to plagiarism. Get a custom essay on “Why Violent Video Games Should Not Be Banned”?Get Original Essay Smith was a proponent of the graduated income tax and specifically named a tax on luxury goods as well as a rent tax, among others. Smith assumed that this theory would primarily benefit consumers, since they would purchase products in their own interest, choosing from the cheapest suppliers. As a result, this would lead suppliers to introduce competitive prices, which would be a way to acquire the greatest number of customers to increase their profit margin; the result of operating in their own interest. In order to gain these customers, suppliers should be efficient with their resources in order to have these competitive and cheap prices. If they were to be inefficient, their prices would not be able to compete and, therefore, they would lose their market position, thus going bankrupt. This was a hugely influential idea and was a revelation at the time. Examples of this can still be seen in our modern economy, such as the Toys 'R' Us company which filed for bankruptcy in September 2017. This was due to the company being unable to compete with the rise of large retailers such as than Walmart and the eventual challenge from online retailers like Amazon, these two companies introduced more competitive prices that Toys 'R' Us could not match due to their lower efficiency. For suppliers to be competitive, they will need to be more efficient with their resources, while also ensuring that consumers receive their products at the highest quality and/or at the most competitive price. The supplier who is most efficient in meeting these requests and maximizes their utility will enjoy the greatest profit margin. Smith expressed that individuals maximizing their utility would lead to growth in society's utility, and that the free market would be the best way to distribute scarce resources. These theories of the free market and the "invisible hand" are among Smith's greatest contributions to classical political economy. Their influence is most clearly visible through the current economic structure of the United States of America, which is based primarily on those concepts that lay the foundations of capitalism and constitute the most accurate representation of it today. However, it is questionable whether this is the most efficient and successful method of distributing resources or reducing prices. Another important contribution Smith made to the Wealth of Nations was his theory on the division of labor. This hugely influential idea applies to dividing distinct sections of a production line, based on equipment and/or worker skills. Smith firmly believed that if you applied this theory to a production process, youwould greatly benefit by allowing more efficient use of sparse materials, also reducing the manufacturing price. Additionally, Smith believed that this theory would greatly increase the number of products that a supplier and/or worker could generate. Workers would now be extremely competent and specialized in a certain skill; downtime during changeover of a production process would be greatly reduced and workers would begin to innovate and invent new machines that would greatly increase the efficiency of their work, allowing them to complete tasks that would typically take longer of a worker. All these questionable improvements were due to Smith's theory, the division of labor. Reducing the number of tasks assigned to a worker during a production process makes them more specialized in a certain area, significantly increasing their skills and performance. This is because the worker never has to change tasks, resulting in more time being spent on a certain area of ​​the production process. However, the idea of ​​a production line makes it easier for suppliers to rely on machines rather than workers because machines only need to perform one task, which is much more efficient than employing human workers. Not only are they faster, but they also reduce production costs; the fewer workers there are, the fewer wages to pay. This idea was adopted by factory owners in the 18th century and became extremely important to their production lines during the Industrial Revolution. This theory made an enormous contribution to classical political economy and is still visible in more modern economic schools of thought. Another major contribution by Smith was the idea we know today as gross domestic production (GDP). Through the theories he presented in Wealth of Nations, Smith changed the way a country's wealth was judged. Previously, a country's wealth was based on the amount of valuable assets it owned; gold and silver. Smith was very critical of this mercantilist approach; he believed that a country should be judged by its levels of production and trade. This basic idea has been so influential that it is today the measure by which we judge a country's prosperity in the modern economy. This measure was introduced due to the growing popularity of free trade. Smith believed that if countries were to import and export into a market without government intervention, the value of those countries should be judged accordingly. Smith's influence became so great due to his contributions to classical political economy that his theories became the foundation for many other economic thinkers and influenced figures like John Maynard Keynes, Karl Marx, Friedrich Hayek, and David Ricardo . These theories were so influential because they were adapted to an industrialized world. With technological advances related to the Industrial Revolution, travel and transportation of goods became much easier and suited to economic policies that encouraged free trade, rather than the mercantilist approach of seizing and hoarding assets of value, which was more relevant during the previous period. the era of imperialism. As previously noted, Smith's influence became so significant because his theories were well suited to the industrialized world. As we have seen, his theory of the division of labor was adopted by factory owners during this.