Classical Economic Thought: Adam Smith

Classical economics is the name given to the school of economic thought that dominated from the late 18th century to the mid-19th century, founded above all by the Scottish philosopher Adam Smith (1723–1790). Smith's 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, is usually treated as the starting point of economics as a distinct academic discipline — which is why Smith is called the 'Father of Economics.'

Smith's central argument was that an economy organises itself efficiently without needing detailed government direction, provided individuals are left free to pursue their own self-interest in a competitive market. He illustrated the productivity gains from specialisation with his famous pin-factory example: a single worker making an entire pin from start to finish might produce only a handful of pins a day, but ten workers each specialising in one step of the process (drawing the wire, straightening it, cutting it, sharpening the point, and so on) could together produce thousands — because splitting a task into simple, repeated steps lets each worker become fast and skilled at that one step. Smith called this the division of labour, and treated it as the single most important source of a nation's rising wealth. …