A sample of the essay I wrote for History of Economic Thought, comparing the economic theories of Adam Smith and Friedrich Hayek.
As society has progressed, economic thought has evolved in response to the ideas presented by scholars like Adam Smith and Friedrich Hayek. Because Smith and Hayek resided in two fundamentally different time periods, the body of economic knowledge available to them differed greatly. While Hayek had centuries of analysis at his disposal, Smith had little prior research with which to expand on in his writings. However, despite this information asymmetry, the theories that Adam Smith presents in The Wealth of Nations overlap significantly with those discussed by Friedrich Hayek in The Use of Knowledge in Society. Both are strong critics of central planning and are advocates of the division of labor and pursuing …show more content…
Although these overarching ideas overlap, Smith explores multiple perspectives on price theory while Hayek only emphasizes the use of prices to coordinate market actions.
The idea of limited interference by government or other parties is strongly supported by both Hayek and Smith. They both argue that government interference to create monopolies and restrict trade is less efficient than a perfectly competitive market. When Smith proposed this, it changed the course of economic thought because it was a novel and revolutionary idea. In The Wealth of Nations, he asserts, “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” It is important to understand the context in which these ideas developed. During Smith’s time period, the mercantile system dominated many countries, which Smith strongly opposed due to too much control by national governments. Instead, he favored the
As society has progressed, economic thought has evolved in response to the ideas presented by scholars like Adam Smith and Friedrich Hayek. Because Smith and Hayek resided in two fundamentally different time periods, the body of economic knowledge available to them differed greatly. While Hayek had centuries of analysis at his disposal, Smith had little prior research with which to expand on in his writings. However, despite this information asymmetry, the theories that Adam Smith presents in The Wealth of Nations overlap significantly with those discussed by Friedrich Hayek in The Use of Knowledge in Society. Both are strong critics of central planning and are advocates of the division of labor and pursuing …show more content…
Although these overarching ideas overlap, Smith explores multiple perspectives on price theory while Hayek only emphasizes the use of prices to coordinate market actions.
The idea of limited interference by government or other parties is strongly supported by both Hayek and Smith. They both argue that government interference to create monopolies and restrict trade is less efficient than a perfectly competitive market. When Smith proposed this, it changed the course of economic thought because it was a novel and revolutionary idea. In The Wealth of Nations, he asserts, “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” It is important to understand the context in which these ideas developed. During Smith’s time period, the mercantile system dominated many countries, which Smith strongly opposed due to too much control by national governments. Instead, he favored the