The first free-market capitalist, Adam Smith, was a Scottish economist and philosopher. He was raised by his mother and attended the University of Glasgow at the age of 14 and transferred to Balliol College in Oxford, England. Being known as the “father modern of economics”, Smith reformed economics with his ideas, his most famous one being his “invisible hand” theory, division of labor, and the idea of a free market system. Sadly, Smith died in 1790, but what he left behind became the fundamental economic concept that is accepted and used globally.

One of Adam Smith’s most influential concepts is the natural force of the ‘Invisible hand’, he first introduced this concept in The Theory of Moral Sentiments (1759). It basically explains how consumers and producers will naturally tries to maximize their benefit on self-interest, the invisible hand guides supply and demand to create the best outcome that benefits both sides. For example, you have a rare disease that can be transmitted; you choose to stay home. This decision is for your own good, you avoid catching new bacteria outside and also preventing other people from getting your disease. The choice you made is beneficial for you and other people. That is the power of the invisible hand, to know what’s efficient for you and what’s not.

One of Smith’s most famous books is written during the scottish enlightenment. It was a series of 5 books, published consecutively throughout his lifetime. Published in 1776, shortly after the industrial revolution, An Inquiry into the Nature and Causes of the Wealth of Nations introduced new ideas of economics in modern culture. When machines and tools dominate over agriculture and new technology started to spread across the globe. Perhaps, this is where the term ‘modern’ in Smith’s nickname (the father of modern economics) comes from, representing a new age of economy. Although his ideas were not entirely original, he was the first to compile the basic idea into a format version. In this book, Smith argued with the prevailing concept of how a country should encourages exports and resists imports in order to keep money circulate in the nation. He disagreed and stated that, instead of restricting, it should be set free.

The first part of An Inquiry into the Nature and Causes of the Wealth of Nations (1776) focuses on the division of labor and specialization. It means each worker specializes in doing a particular task. For example, a box company has 100 workers. 25 workers fold the boxes, 25 glue them, 25 stack them, and the last 25 put them in a big box. Each group of workers are specialized in one field, none of them does all the folding, gluing, stacking, and packaging. If all the workers have the to do the same tasks, the production will slow down, since one worker cannot be proficient on all tasks. Division of labor allows more goods and services to be produced, less time is spent, and it takes full use of everyone’s abilities. Furthermore, Smith stated that the key to mass production is an increase in labor, productivity and workforce. The more efficient the workforce, the more products can be produced into the market.

Smith’s believed in the free market system, where producers and consumers decide what, how, and for whom to produce through their exchange or trade in different goods and services. With free market, consumer’s wants are responded quickly and more variety of goods and services are produced. When trade is not limited between borders, the market gets wider, making additional wealth to the economy. The main point of free market is that it has barely no intervention from the government (Laissez-faire), this approach can further create freedom in resource allocation (choosing what to produce and how much land, labor, and capital is needed to produce these things). With more flexibility, firms can move their resource to produce a more demanding product and can maximize their profit. For example, a firm produces strawberry milk and chocolate milk, but the demand of strawberry milk is very low,while the demand for chocolate milk is very high. Therefore, the firm faces a surplus of strawberry milk and shortage of chocolate milk, to solve the problem, the firm may allocate its resources to produce only chocolate milk. With this method, the firm can maximize its profit by producing what the society demands. The firm gains benefit and more chocolate milk are placed in the market. The free market system does not benefit individuals, but the whole community.

Adam Smith, an accomplished philosopher and economist has helped shape today’s economy with his ground-breaking ideas and reforms. The reason His Laissez-faire approach toward the economy in his time had created an opportunity for businesses to thrive and grow. Not only by nation, but for the whole global market.