Adam smith vs Karl marks philosophy economics contribution Essay
To begin with, Smith came up with the concept of the ‘invisible hand’ (Communist (1848)). This concept was to explain that seeking self interest is not necessarily bad but it sought to explain the reality that people tend to act in their own self-interests.
When individuals pursue their self interests, they promote without their knowledge the good of the community at large and so it can be said that an individual who wants to maximize their revenue maximizes the revenue of the society too. This liberty to customers to buy freely what they want and for the producers to produce what they want without any pressure enables the market to settle on a product distribution and prices that are beneficial to all individual members of the community. This liberty to both producers and consumers and the greed to maximize their interests, drives them into a behavior that is beneficial to all in that particular community.
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Due to this, producers are forced to employ methods of production that are efficient with an aim o maximize their profits. This leads to low prices that are meant to out do their competitors and this forces investors to go for firms that wants to maximize their profits and hence this works as mechanism of balancing. The invisible hand concept acts as the root of modern economics. A good example is the general equilibrium which states that if the economic forces are balanced in the absence of external influences, then the economic variables will not change. This requires that everything in the market beginning with pricing to production be controlled by the players in the market but not by other forces.
These external forces may include among others the regulations that are imposed by the government or other organizations that may have a say on the market. According to the general equilibrium, when the prices are very low, then there is surplus supply and when the prices are very low, then there’s a shortage in supply. As a result of this, the situations tend to control themselves without the need for any regulator from outside. These outside forces in the market slow the rate at which the economy grows and they also lead to infancy in the division of labor.
As a result of that need for self improvement, efficient division of labor is realized as well as improved efficiency in the economy. This concept is very much in use even in today’s economy . The modern market structure borrows greatly from the earlier ideas of natural monopoly by Adam Smith.( The Poverty of Philosophy >human nature) The division of labor Division of labor is a clear indication of qualitative step towards increased productivity and so it acts as an engine that drives towards realization of economic progress. Smith realized that labor division and for that matter labor specialization would improve greatly on the concentration of workers on the duties they perform.
This concentration would come as a result of doing a single task many times or repetitively. The need for improvements in productivity of the work force is said to be the root cause for labor division. According to Smith, labor division can lead to increased productivity. This productivity from the workers can be attributed to specialization in one task since specialization leads to greater skill on their particular subtasks compared to what would be accomplished by the same number of workers performing a broad task.
For maximum productivity from workers, skills that they have should be matched with the corresponding equipments. Most of today’s increase in productivity can be attributed to the matching of technological, human and physical capital and mostly in the manner in which they are organized. This means that laborers need to be equipped with the right skills so as to be effective in what they do compared to when there would be no job specialization and hence anybody could perform any job. Todays economics has borrowed greatly from these ideas from Adam smith.
Many organization have realized the need to equip their employees and some even hire unskilled ones but pay for their acquisition of skills. Another outcome of labor division according to Adam smith is minimization of time that is wasted by employees when moving from one task to the other. A lot of time is wasted when people keep on relocating and this proves expensive to the company in the long run because they have to pay the employees. Through labor division, this time wastage is minimized . The modern concept of scientific management borrows greatly from Adam Smiths ideas .Scientific management emphasizes on the connection between activities and the transformation that occurs within the process.
This is also supported by William Petty who notes and demonstrates its importance in the construction of Dutch ships. He admits that people with a particular task to perform had discovered new ways of doing their work which were later observed and justified by political writers on economy. (An Inquiry into the Nature and Causes of the Wealth of Nations (1776)>specialisation) The wages of labor Wages of labor are dictated by mostly by the availability of job vacancies and also by the availability of workforce. When there are many workers and the available vacancies are few, the amount of money the workers are paid usually fall.
Likewise, when employers compete against one another and the labor supply is limited, the wages paid to the employees usually rises but its worthy noting that this process is made possible by unity among laborers and masters. This kind of unity enables laborers to come together and stop biding for jobs against each other hence making the employers increase the wages paid to them. Likewise when employers come together in unity and stop binding against each other, the wages fall.
However, in places where the amount of labor is more compared to the amount of the amount of revenue that can used to pay for waged labor, the competition among the employees in greater than the competition between the employers. Smith argues that the amount of revenue must keep on increasing constantly compared to the amount of labor so that wages may remain high. Profits of stock too have an impact on the wages because the more money is spent on compensating labor; little is left for personal profit. This is clearly shown in countries where competition amongst employees is great compared to competition among employers, profits will be much higher.
Due to these views, Smith attacks people who are politically aligned and try to use their political influence to manipulate the government and other powers into their bidding. Smith feared that people of this class could form a powerful block and take advantage of their closeness with the authorities into manipulating the state into enforcing certain regulations meant to serve their interests against the general interests. These would maker other players vulnerable and have no say in the way businesses were being conducted.
According to other people the level of specialization brought about by division of labor was externally determined but in the contrary, Smith argued that it was the dynamic engine towards economic progress. Surprisingly, Smith himself criticizes the division of labor arguing that it leads to mental mutilation of the workers hence rendering them ignorant and insular because their lives are limited only to doing a single task many times. These ideas by Smith are incorporated into today’s discussions on economic issues.
Human capital is one of the discussions in which Adams Smiths ideas are used. Human capital is one of the four types of capital that were identified by Adam as being important for the success of a company. As argued by Smith previously, human capital and the productive ability of the labor force is both dependant on the division of labor.
It’s worthy noting that human capital includes skills, dexterity, and the ability to make the right decisions and human capital can be acquired through informal schooling and on the so called on-the-job training. These acquisitions of skills aimed at improving the effectiveness of the workforce are still practiced today by many companies. (An Inquiry into the Nature and Causes of the Wealth of Nations (1776) >productivity) Adam Smith vs Karl Marx Both equally Adam Cruz and Karl Marx shared a common idea and this common idea was their reward for capitalism. These two early on pioneers of recent economics agreed that capitalism was the key in unleashing the productive powers.
This argument stated that for employees to be even more productive, they will needed to be susceptible to their companies or seniors. If the employees were remaining to act on their own amusement these two males agreed that their productivity would be nominal and as a result, their very own employers would incur big losses. This kind of created the need for competition among both the organisations and the staff as well since this would retain these two celebrations on their foot through out. Nevertheless despite these kinds of similarities within their in their landscapes, there was differences in their concepts as well. Marx and Cruz both seem to agree that capitalism is the ultimate power in income maximization.
Fresh profits and value added, that they seem to agree came because result of the employers paying of the workers the exact value that is certainly in the market for their labor ability. But the unhappy thing is that in most cases, the market value from the goods that this workers made exceeded that market value. This kind of clearly ensures that the companies were producing maximum profits while paying little for their workers. Both Marx and Smith acknowledge that� there are different types of capital and they play different roles during production. Production Capitals include things like area, natural resources or raw materials and lastly technology.
All the above named different classes of capital were based upon each other in production. Both of these men seemed to agree also that social relationships of creation should not be made up of associations between persons but rather ought to be between huge groups of people or certain classes of folks. These two males had the same idea of a free market. They will described a totally free market as being a market by which all prices of the products that are offered are made the decision by common consent among sellers and buyers and also one� that would not mislead the sellers plus the buyers. That they both argued that these two major persons in the market, the customer and the retailer, should not be compelled into producing decision simply by an external party.
The relationship among these two players should not be manipulated by a single but to the contrary, it must be left to obey the natural law of supply and demand. The difference among free and controlled markets is that controlled markets will be controlled simply by external pushes These makes mostly identifies governments which may directly or indirectly try to have control of prices or the supplies available in the market. One area exactly where these two males seem to vary is their very own idea of work specialization. Smith advocates intended for specialization pertaining to jobs among workers.
This individual argues that laborers who were assigned a lot of different responsibilities were fewer productive than those who were designated a specific activity to perform time in outing. He says that the leads to effective usage of time and it looks for to save time that is generally wasted by simply workers once moving from one task to another. But to the contrary, Karl Marx disapproves this thought arguing that job specialization could cause workers with increased poor general skills. This, as he says would be as a result of tendency of men and women to withstand change. He also says that when persons perform one particular task regularly, it may lead to boredom and make them fewer enthusiastic about their very own work.
This individual describes this kind of whole procedure as a kind of alienation. In respect to him, the more employees become specialised and do exactly the same thing over and over, they later turn into totally alone. Marx will go ahead to dispute that trademark labor delivers with it spiritual depressive disorder to the employees. This means that the workers perform their particular duties feeling as if they are really being forced apart from doing away of their own will certainly.
This greatly lowers the morale in the workers and thus lower their productivity. Physical tiredness or perhaps fatigue can be brought about by work specialization as Marx will go ahead to argue since they no more feel like human beings but they think more of machines. Contrary to the idea of Smith, Marx believes that fullness of production is very essential to man liberation goes on to say that he would accept the thought of a stringent division of labor as a momentary necessary wicked. These opinions can be said to get in total distinction to those indicated by Johnson.
Smith on his part assumed that virtually any business was a collection of inter related jobs that were directed at solving a particular issue. In order to effectively try this, Smith asserted that the work load should be divided into simple models of responsibilities which could be achieved effectively by workers who had been equipped with special skills to get doing that particular job. It’s worthy observing that Cruz, despite his advocating to get division of labor, he would not advocate for achievement of labor division at all costs.
It’s worthy observing that in contrast to Smith’s look at which were just limited to useful domain only and were created up of activities that were immediate in sequence as far as the production process is concerned, modern techniques are very comprehensive. It was as a result of his suggestions that labor division was adopted. Today, we can evidently say that much of today’s procedures in the work markets possess borrowed considerably from the tips of Jones. In all firm, there is work specialization.
This has led to the rise of departments in lots of organizations and each department is usually allocated certain workers who are generally equipped with certain skill to enable them execute specific responsibilities. The impression in this complete exercise since argued by simply Smith is the fact it saves a great deal of period that could be thrown away by staff when going from one process to another. This kind of proves essential since simply no employer may wish to waste his money personnel without increasing their productivity. However , it truly is good to notice that Jones admits that seeking personal interests is not always good. All he tried to carry out was planning to reverse think that self curiosity is generally negative.
He likewise intended to provide for the light the concept wile human being motives happen to be selfish and greedy; the out come of these man behaviors will bring benefits to the complete community at large. This is the direct opposite with the ideas that Marx had. In his disputes; Marx says that the major struggles are always between the producers and those who work in the industries. Another of his greatest contribution to contemporary economics was his sharpened distinction between two types of division specifically social and economic trademark labor.
If perhaps these two labor divisions happen to be conflated, it may look like labor department is inevitable rather than becoming constructed socially and inspired by power. (Adam Cruz, An Query into the Mother nature and Causes in the Wealth of International locations (1776) & Karl Marx, The Lower income of Philosophy). References Edwin G. Western, (1976)The Guy and His Wor