adam smith cums

Question 1

influences of smith

Answer 1

• Hume’s Treatise of Human Nature
• philosophy teacher Francis Hutcheson

Question 2

key analysis of labor

Answer 2

“Division of labor is the great cause of the increase of public opulence, which is always proportioned to the industry of the people, and not to the quantity of gold and silver, as is foolishly imagined.”

Question 3

physiocrats

Answer 3

believed that people could thrive if they understood the laws of nature (nature rules)

Question 4

physiocrat laws

Answer 4

• wealth came from production, not from acquisition of gold and silver
• only agriculture produced wealth

Question 5

tableau économique

Answer 5

economic model of physiocrats –> the body politic as three naturally interdependent classes: farmers, artisans, and proprietors

Question 6

what were physiocrats right about

Answer 6

wealth comes from production, not hoarding precious metals

Question 7

what were physiocrats wrong about

Answer 7

they argued that manufacturing, commerce, and the service industry are unproductive (sterile shifters of wealth)

Question 8

how did physiocrats want to make agriculture more productive

Answer 8

lift trade restriction –> artificially keep agricultural production low

Question 9

smith on self-interest

Answer 9

humans have natural drives to better their conditions –> society should exploit these natural drive

Question 10

why did smith’s self interest shi not lead to anarchy

Answer 10

people’s differing self interests still lead to paths in social harmony that help them out

Question 11

invisible hand

Answer 11

prices/profits signal to owners –> encourages production according to the tastes of consumers/society

Question 12

3 ways division of labor increases output

Answer 12

• each worker develops more skill in their particular task
• workers waste less time changing from one task to another
• specialized workers are more likely invent machinery to help with the particular task they focus on daily

Question 13

5 reasons why one group of workers paid more than others

Answer 13

• disagreeable conditions
• required special training
• irregular or insecure job (weather conditions for construction)
• high degrees of trust (diamond sellers)
• when probability of success is low (lawyers)

Question 14

absolute advantage

Answer 14

the producer that can produce the most output (nations should import only those products in which another country has an absolute advantage)

Question 15

why did smith not fw with central planning

Answer 15

no central planner gonna get all the information to be able to decide production

Question 16

what did hayek say on self interest

Answer 16

individuals know their wants best → people look after their own interests

Question 17

profitsmaxxing w/ trade restrictions include what

Answer 17

• geographical indicators (french champagne, italian parmesean, etc.)
• high barriers to entry
• when merchants band together –> help from governments to control market entry

Question 18

self criticism

Answer 18

feared an assembly line could rob workers of their intelligence/spirit –> suggests public education as remedy

Question 19

why did smith and friedman defend markets as it relates to hierarchical discrimination

Answer 19

smith –> only under a market system can the poor and politically weak prosper
friedman –> argues market system reduces racial/ethnic discrimination since signals are prices

Question 20

labor creates economic growth, especially when

Answer 20

• labor supply increases
• labor is subdivided
• labor quality rose through new machines

Question 21

role of government according to smith

Answer 21

• providing national defense
• administering justice through court
• maintaining public institutions and resources
• dignity of the sovereign

Question 22

what was smith’s warning against legislators and why

Answer 22

special interests –> they destroy measures that increase the wealth of nations

Question 23

smith’s take on international trade restrictions

Answer 23

hated tariffs and quotas –> governments forcing people to subsidize domestic producers –> pay higher prices (like sugar)

Question 24

infant industry

Answer 24

asks for “temporary” tariffs just for the early years of development