Comparing Adam Smith's And John Maynard Keynes Contributions To Economics
In this essay I will outline Adam Smith’s and John Maynard Keynes contributions to economics. Both have made many contributions but I will only write about some of them that I feel are very influential in modern economics. I will first discuss Adam Smith’s contributions, focusing primarily on his theory on Division of Labour and International Trade. I will then discuss John Maynard Keynes contributions focusing on his theory of the multiplier effect and why cutting interest rates during a recession may not always work.
Adam Smith
Adam Smith was a Scottish philosopher and is considered to be the father of capitalism. It could be argued that he has had the largest impact in economics than any other figure. He is however not seen as the founder
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Smith argues that international trade helps to educate a nation by exchanging knowledge and technology between different countries. This new knowledge of technology could lead to increased productivity and thus to increased economic wealth.
When Smith was writing about international trade, his concern was for Britain and he favoured that Britain should trade with France instead of Portugal because it was “superior opulence”. I believe what Smith was saying is that it is more beneficial to trade with a country that has a more mature economy as it has a bigger market. Hence a wider market is necessary for economic development.
Smith also believed that foreign trade should be treated the same way as domestic trade, self-regulating without any interference from the government. A policy of ‘laissez faire’ would lead to better outcomes for all countries involved.
International trade influences economic growth in so many positive ways that Smith spoke about. Exports adds to the earnings of an economy, and has helped so many developing economies like India and Central Africa. It is has eliminated the shortage of goods by allowing countries to import. It also aids price stability because if a price of a product is very high then it can be
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