Chapter 29: Problem 4

When making economic decisions, Adam Smith urged society to a. follow the principle of self interest. b. follow the principle of public interest. c. transfer wealth according to need. d. provide equal income for all citizens.

Short Answer

Expert verified

a. Follow the principle of self-interest.

Step by step solution

Introduction to Adam Smith

Adam Smith was a Scottish economist and philosopher, widely considered the "father of economics." His most famous work, "An Inquiry into the Nature and Causes of the Wealth of Nations," discusses the importance of a free-market economy, which was groundbreaking at the time.

Evaluating Option A

Option A states that Adam Smith urged society to follow the principle of self-interest. This is consistent with his economic theories, as he believed that an individual's self-interest would naturally lead to a better and more prosperous society. According to Smith, individuals pursuing their self-interest in a free-market economy would result in an "invisible hand" guiding the economy to a more efficient outcome.

Evaluating Option B

Option B states that Adam Smith urged society to follow the principle of public interest. While Smith recognized the importance of public goods and the role of government in certain aspects of society, his main focus was on the power of individual self-interest and free markets.

Evaluating Option C

Option C states that Adam Smith urged society to transfer wealth according to need. This idea is not consistent with Smith's economic theories. He did not advocate for wealth redistribution based on need; instead, he believed in a free-market economy where individuals are responsible for their economic outcomes.

Evaluating Option D

Option D states that Adam Smith urged society to provide equal income for all citizens. This is not a principle that Smith advocated, as he promoted the concept of a free-market economy where individuals could pursue their self-interest without interference. Equal income distribution contradicts the idea of a free-market economy since it would involve government intervention in the economy.

Conclusion

Based on our analysis, the correct answer is: a. Follow the principle of self-interest. Adam Smith believed that individuals pursuing their self-interest in a free-market economy would lead to a more efficient and prosperous society.

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