Why is the work of Adam Smith considered so crucial in the development of economic thought?

Adam Smith is widely regarded as the father of economics as a social science, and is perhaps best known for his work The Wealth of Nations. Throughout this work Smith states and informs towards his belief that society is not at its most productive when ruled over by rules and limitations with regards to trade, and that in order for markets to maximise prosperity, a free trade environment should be made accessible. In this essay I intend to asses the way in which many of Smiths theories taken directly form his works can be applied to past and current situations, first from an economic then social, and then a political point of view. I will also …show more content…
Smith transferred his strong beliefs about the negativity of mercantilism as a political tool in his works, which were received with great support. For this reason Smith can be credited with at least some of the responsibility for helping the economy move from a situation in which government were controlling trade from an export import point of view. The policies at the time were geared at creating a positive Balance of Payments, and the tariffs on imports played a big part in maintaining this positivity. Smith argued that without these tariffs, competition would increase, driving market prices down, benefiting consumers. This would also cause firms to find new ways in which to become more efficient, so as to have the ability to keep in line with the new lower market prices of goods.

Throughout his works Smith developed many theories, most of which can be applied to modern day economic environments without any alteration. I believe this is an example of how beneficial Smiths works have been in developing economic thought.
One such theory is the well known theory of supply and demand. This theory suggests how supply and demand cause fluctuations in the market price of a good around the natural price. This theory is taught in modern economics as the fundamental basis of all economics. This is an excellent example of just