Unveiling the Hidden Truths About Adam Smith: You Won't Believe What They Didn't Teach You!

 Unveiling the Hidden Truths About Adam Smith: You Won't Believe What They Didn't Teach You!

Adam Smith was not a staunch advocate of the free market. He acknowledged the drawbacks of liberal capitalism, particularly the unequal distribution of power between employers and workers. Smith understood that the concept of "division of labor" is constrained by the size of the market it serves. In other words, technological advancements alone cannot propel economic growth.

I was first introduced to the concepts of Adam Smith through my economics textbooks during my school years. I was taught that his understanding of economics is considered outdated, and modern economists adhere to the definition put forth by Paul Samuelson. Additionally, various newspaper articles led me to believe that Smith, with his concept of the 'invisible hand,' advocated for the virtues of free markets. This misconception is not limited to India but extends globally.

While the exact date of Smith's birth remains unknown, historical records from the parish register of Kirkaldy, a Scottish town, indicate that he was baptized on 5th June 1723. As we commemorate his 300th birth anniversary, it is an opportune time to delve into the prevailing perspective on Smith, his economic theories, and their relevance in today's world.

Invisible Hand and the Role of Free Markets

It is widely believed that Smith championed the idea of free markets, advocating for minimal government interference in economic matters. This viewpoint has firmly entrenched itself in popular economics textbooks, both at the school and college levels. To illustrate, let's consider an excerpt from Gregory Mankiw's Principles of Microeconomics