An analysis of adam smiths theory of economic growth

It may be noted that unlike Marshall, Young was not simply concerned with the factors that raise productivity or cost-reduction within an individual industry as it expands but explained the increase in productivities in interrelated industries of the economy as a whole.

Google Scholar Rostow, W. That is, he extended his division of labour to the international level.

Father of economics

It is worth noting that Adam Smith expressed the view that industry generally permitted greater scope for division of labour or specialization than agriculture and, therefore, in rich developed countries industrialization had taken place to a greater extent. This theory has only limited relevance to the developing countries because of the following reasons. Skinner, and Thomas Wilson, London, U. Google Scholar Johnston, Bruce F. But when the rate of interest falls considerably, the money lenders are unable to lend more in order to earn more to maintain their standard of living. Google Scholar Copyright information. This is because the interest of land owners is closely related to general interest of the society. Adam Smith opposed any government intervention in industry and commerce. This becomes a drag on technological progress.

Sequence of Development: According to Adam Smith, the natural course of development is first agriculture, then industry and finally commerce. Their greatest obstacle to economic development is the deficiency of capital.

ricardo theory of economic development

Fixed capital consists of all the means of production. He advocated free trade as it would increase the size of market for goods produced by different countries to reap benefits of higher degree of division of labour.

However, he also pointed out that there is limit to the economic development which ultimately lands a free market economy in a stationary state in which further capital accumulation ceases to take place and therefore there is no more growth of the economy.

The development of agriculture leads to increase in construction works and commerce.

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Adam Smith Theory of Development in Economics (Main Features)