BrainPOP
  • 3 months ago
Transcript
00:00Those are gantry cranes. They unload shipping containers from every corner of the earth.
00:12Some say they were George Lucas' inspiration for...
00:15Whoa, better keep your eyes peeled.
00:23Dear Tim and Moby,
00:24Who was Adam Smith from Spike?
00:28Adam Smith was an 18th century Scottish philosopher.
00:32He wrote The Wealth of Nations, which pretty much invented the field of modern economics.
00:39Uh, aren't you going to ask?
00:45Well Moby, economics is the study of how people produce, buy, and sell goods and services.
00:51Goods are things you can buy, like hot dogs and mp3 players, while services are tasks
00:56that you pay people to do, like auto repair and dentistry.
01:00Anyhow, Adam Smith was born in 1723. He was an exceptional student.
01:06At the tender age of 14, he enrolled in college at the University of Glasgow.
01:12After a lengthy education, Smith made a living giving public lectures, and he later became
01:17a professor at Glasgow.
01:19Like many men of his era, Adam Smith believed that scientific inquiry could provide answers
01:24to just about anything, even social problems.
01:27In fact, in his first major work, he proposed that the more freedom individuals had, the
01:32more harmonious society would be.
01:35Smith carried this theme into his next book, An Inquiry into the Nature and Causes of the
01:39Wealth of Nations, or The Wealth of Nations for short.
01:45At the time, European nations believed that amassing lots of gold and silver was the best
01:50way to strengthen their economies.
01:55Since these two metals are limited in supply, it followed that one country's gain was
01:59another's loss.
02:02So each nation tried to make more money on exports than it spent on imports.
02:07Exports are goods sold to other countries, and imports are goods bought from other countries.
02:14To accomplish this, governments actively interfered with the economy.
02:18They supported their own nation's industries, and discouraged the purchase of goods from
02:22other countries.
02:23This system was known as mercantilism.
02:26Well, Smith wrote that wealth isn't a zero-sum game where one country's gain is necessarily
02:32another's loss.
02:33Instead, he suggested that wealth comes from labor, not gold or silver.
02:38If a shoemaker works harder this year than he did last year, and produces more shoes,
02:42his extra labor has generated wealth.
02:46So a country's economy can grow through increased labor or productivity without decreasing the
02:51wealth of its neighbors.
02:53OK, so Smith identified three general strategies for helping economies grow.
02:59First, letting people pursue their own self-interest or individual goals.
03:04It may sound selfish, but according to Smith, when individuals work to enrich themselves,
03:09they benefit society as a whole.
03:13Smith called this the invisible hand of the marketplace, leading individuals to work for
03:17the greater good, even though their main concern is themselves.
03:21The second strategy is division of labor.
03:24You can produce more goods when work is broken up into simple tasks.
03:29And the third is free trade.
03:31When governments stay out of the way of international trade, everyone benefits.
03:35Overall, the Wealth of Nations said that a free market is preferable to an economy directed
03:40by the government.
03:41This idea became known as laissez-faire, French for let it be.
03:46Well, he wasn't arguing for 100% free markets.
03:51Smith believed that governments have a valuable role to play in making sure that everything
03:54stays fair.
03:55Funny you should ask.
03:58The Wealth of Nations came out in 1776, the same year that the American colonies broke
04:03away from England.
04:05Like the American Revolution, Smith's ideas flowed from the principle of individual freedom.
04:11They were quite controversial at the time.
04:14But by the late 1800s, both democracy and Smith's vision of free market capitalism had
04:20become widely accepted.
04:22And more than 200 years later, the Wealth of Nations is essential reading for any student
04:27of economics.
04:29For writing the first systematic scientific study in the field, Smith is now known as
04:34the father of modern economics.
04:37He died in 1790.
04:46So this is your big shipment, huh?
04:57A million pairs?
05:00Um, yeah, you'll make a killing on those.