LESSON 7: Adam Smith and John Maynard Keynes

Who is Adam Smith?

Adam Smith is a Scottish philosopher and pioneer of political economy known as the "father of modern economics"; his seminal works include The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776).

What is the Invisible Hand Theory?

The invisible hand within economics is a market force that drives key economic decisions; it is primarily a supply and demand force that optimizes market activity and market output; the market decides the optimal prices and optimal output for goods and services.

What is laissez-faire economics?

Laissez-faire means "leave it alone" or "stay out"; it is the concept of the government not intervening; no laws and let the market decide for itself through self-regulation.

What does the article about Adam Smith's anniversary discuss regarding AI?

The article talks about the "artificial hand" referring to AI as a market force capable of achieving the vision of labor; AI is technology that generates opportunity cost savings; division of labor is easier due to AI; opportunity cost is going to go DOWN.

Who is John Maynard Keynes?

John Maynard Keynes is the founder of modern macroeconomics; his most famous work The General Theory of Employment Interest and Money was published in 1936; his thinking was influenced by the Great Depression in 1929 and World War I.

What is Keynes's view on government intervention?

Government intervention is considered a good thing according to Keynes; some intervention is necessary when things go wrong (e.g. war natural disasters and COVID); the government has a responsibility to intervene and fix things when necessary through physical policies (forms of regulation and intervention).

What was the closest event to the Great Depression in modern times?

The Great Recession in 2007; this lasted around 4 to 5 years.

What are the different kinds of economies?

Command economies are highly controlling and need a lot of intervention; central planning is where the government makes all key decisions; market economy is capitalism; mixed economy combines private enterprise with government intervention balancing market efficiency with social welfare.

What type of economy does the United States have?

The US is currently an economy that uses features of capitalism AND features of a command economy (central planning).