Adam Smith or Ibn Khaldun - The Father of Modern Economics?

Summary

This video explores the contributions of Adam Smith, known as the father of modern economics, and Ibn Khaldun, a 14th-century scholar whose work predates Smith's. Smith's 'The Wealth of Nations' emphasizes the free market's self-correcting nature, the division of labor, and the 'Invisible Hand' theory. Ibn Khaldun's 'Muqaddimah' similarly discusses labor as the source of wealth and the division of labor. The video ponders whether Khaldun should be recognized as the true father of modern economics, considering his influence on Smith and the broader economic discourse.

Takeaways

• 🎓 Adam Smith, known as the father of modern economics, was a Scottish economist born in 1723.
• 📚 His most famous work, 'The Wealth of Nations,' critiques mechanist economies and advocates for free markets.
• 🌐 Smith introduced the concept of the 'Invisible Hand' to describe how markets self-correct without state intervention.
• 🔍 He emphasized that self-interest and competition drive wealth creation more effectively than government control.
• 🔨 Smith promoted the division of labor, using the example of a pin factory to illustrate its efficiency.
• 📈 He believed in capital saving and investment as key drivers of economic development.
• 📘 'The Wealth of Nations' was influential, selling out its first edition within six months and shaping economic thought.
• 🧔 Ibn Khaldun, born in 1332, was a historian, sociologist, and demographer whose work 'The Muqaddimah' touched on similar economic ideas.
• 🌾 Like Smith, Khaldun pointed to labor as the source of wealth and supported the division of labor.
• 💡 Khaldun discussed supply and demand, noting how scarcity and abundance affect prices.
• 🤝 There are striking similarities between Smith's and Khaldun's economic theories, despite the centuries between them.

Q & A

Who is Adam Smith and why is he significant in the field of economics?

Adam Smith, born in 1723 in Scotland, is known as the father of modern economics. His most famous work, 'The Wealth of Nations,' critiques mechanist economies and advocates for the power of the free market, suggesting that minimal state intervention leads to economic prosperity.

What is a mechanist economy as described by Adam Smith?

A mechanist economy is one where the state heavily intervenes in the business of its citizens, restricting trade with other nations, monopolizing companies, heavily subsidizing businesses, and encouraging colonial expansion.

What is the concept of the 'Invisible Hand' in the context of Adam Smith's economic theories?

The 'Invisible Hand' is a metaphor used by Adam Smith to describe how a market, if left to its own devices, corrects itself and leads to economic growth. It suggests that individual self-interest drives wealth creation more effectively than state intervention.

What role does the division of labor play in Adam Smith's economic philosophy?

Adam Smith advocated for the division of labor, arguing that it increases productivity. He used the example of a pin factory to illustrate how breaking down the production process into specialized tasks could significantly increase output.

How does Leonard Reed's essay 'I Pencil' relate to Adam Smith's economic theories?

Leonard Reed's essay 'I Pencil' similarly argues for the free market, using the example of a pencil to show how the collaboration of various specialized skills and resources from around the world creates a simple product, highlighting the miracle of the free market.

What is the significance of capital saving and investment in Adam Smith's view of economic development?

Adam Smith commended the saving of capital to invest in new ventures, seeing it as a driving force of economic development. He believed that reinvesting profits into the economy leads to growth and innovation.

Who is Ibn Khaldun and how does his work relate to Adam Smith's?

Ibn Khaldun, born in 1332 in Tunis, was a historian, sociologist, and demographer. His work, 'The Muqaddimah,' covers various fields including economics. Like Smith, Khaldun points to labor as the source of wealth and advocates for the division of labor, showing striking similarities between their economic philosophies.

What is the concept of supply and demand as explained by Ibn Khaldun?

Ibn Khaldun discussed supply and demand, stating that when goods are scarce, their prices increase, but when goods are abundant and transportation is easy, their prices decrease due to increased supply.

How might Adam Smith have been exposed to Ibn Khaldun's ideas?

Adam Smith could have been exposed to Ibn Khaldun's ideas indirectly through the rise of the Ottoman Empire and the exchange of ideas that occurred through increased business and merchant travel between Europe, North Africa, and the Middle East.

What is the classical school of economics and how did it evolve?

The classical school of economics was started by Adam Smith and later evolved into the neoclassical school. It emphasizes the importance of supply and demand, labor, and the minimal role of the state in economic affairs.

What is the significance of 'The Wealth of Nations' and how did it impact economic thought?

The first edition of 'The Wealth of Nations' sold out within six months and has significantly shaped the decisions of politicians and economists. It laid the foundation for the classical school of economics and influenced economic thought for centuries.

Outlines

00:00

📚 Adam Smith: The Father of Modern Economics

This paragraph introduces Adam Smith, known as the father of modern economics, and his influential work 'The Wealth of Nations.' Born in 1723 in Scotland, Smith criticized the mechanist economies of his time, which involved heavy state intervention in business, trade restrictions, monopolies, and colonial expansion. Instead, he advocated for the free market and the 'Invisible Hand' metaphor, suggesting that markets self-correct and lead to economic growth driven by scarcity, need, self-interest, and drive. Smith also championed the division of labor, exemplified by a pin factory's ability to produce 48,000 pins per day with specialized tasks, versus only 10-20 if done individually. He further encouraged capital saving for investment in new ventures as a force for economic development. The paragraph also draws a parallel between Smith's ideas and those of Ibn Khaldun, a 14th-century scholar, suggesting a possible influence on Smith's economic philosophy.

05:01

🌐 Ibn Khaldun: A Possible Predecessor in Economic Thought

The second paragraph discusses Ibn Khaldun, a 14th-century historian, sociologist, and demographer, who is considered one of the most influential scholars of the Middle Ages. His work 'The Muqaddimah' is highlighted as an ambitious text that some regard as the first attempt at a philosophy of history, covering Islamic theology, science, history, sociology, and economics. Khaldun's views on labor as the source of wealth and the division of labor mirror Smith's, emphasizing the increased productivity through specialization. He also touched on supply and demand dynamics, noting how scarcity and abundance affect prices. The paragraph raises the question of whether Khaldun should be considered the father of modern economics, given the similarities in their economic theories and the possibility of Smith being exposed to Khaldun's ideas indirectly through the rise of the Ottoman Empire and increased intellectual exchange.

Keywords

💡Adam Smith

Adam Smith, often referred to as the father of modern economics, was an influential figure in the field of economics. Born in 1723 in Scotland, his most famous work, 'The Wealth of Nations,' is a foundational text in economics. In the video, Smith is discussed for his advocacy of free markets over state intervention, arguing that the 'Invisible Hand' of the market would lead to economic growth and prosperity. His ideas have profoundly influenced economic policies and thought, shaping the classical school of economics and later the neoclassical school.

💡The Wealth of Nations

This is the seminal work by Adam Smith, published in 1776, which laid the groundwork for modern economic theory. The video highlights how 'The Wealth of Nations' critiques the mechanist economies of the time, which involved heavy state intervention, and instead promotes the benefits of free markets. Smith uses the metaphor of the 'Invisible Hand' to describe how markets self-regulate for the common good when left to operate freely.

💡Invisible Hand

The 'Invisible Hand' is a metaphor introduced by Adam Smith to describe the unintended social benefits resulting from individuals' self-interested actions in a free market. In the video, this concept is central to Smith's argument against state intervention in the economy. It suggests that when individuals pursue their own interests, they inadvertently contribute to the overall prosperity of society, as if guided by an 'invisible hand.'

💡Division of Labor

The division of labor refers to the process of breaking down work into distinct tasks, each performed by specialized workers. In the video, Adam Smith uses the example of a pin factory to illustrate how dividing the process into 14 steps allows 10 men to produce 48,000 pins per day, a significant increase in efficiency over individual workers attempting to make pins on their own. This concept is central to Smith's argument for the efficiency and productivity gains achieved through specialization.

💡Mechanist Economy

A mechanist economy is one where the state heavily intervenes in economic activities, restricting trade, monopolizing companies, and subsidizing businesses. The video contrasts this with the free market approach advocated by Adam Smith, who believed that such intervention was detrimental to economic growth. Smith's critique of the mechanist economy is a key theme in 'The Wealth of Nations,' where he argues for a more laissez-faire approach.

💡Leonard Reed

Leonard Reed was an economist who, in his essay 'I Pencil,' made a case for the free market similar to Adam Smith's. In the video, Reed's essay is mentioned to highlight the complexity of production processes and how the free market coordinates the efforts of many individuals with different skills to create simple products like pencils. This example underscores the video's theme of the efficiency and wonders of the free market.

💡Ibn Khaldun

Ibn Khaldun was a 14th-century Arab historian, sociologist, and demographer whose work 'The Muqaddimah' is considered a significant early attempt at a philosophy of history. The video draws parallels between Khaldun's and Smith's ideas, particularly their views on labor as the source of wealth and the division of labor. Khaldun's work on supply and demand also mirrors Smith's economic theories, suggesting a historical connection between the two thinkers.

💡Supply and Demand

Supply and demand is a fundamental economic concept that describes how the quantity of a good or service that producers are willing to supply at various prices interacts with the quantity that consumers are willing to purchase. In the video, Ibn Khaldun's observations on how the scarcity or abundance of goods affects their prices are used to illustrate this principle, which is a cornerstone of market economics.

💡Capital

Capital refers to the resources, including money, used to produce goods and services. In the video, Adam Smith's advocacy for the saving of capital to invest in new ventures is highlighted as a driving force of economic development. This concept is integral to understanding how economies grow and innovate, as it involves the reinvestment of profits to fund new business endeavors.

💡Classical School of Economics

The classical school of economics is an economic theory that emerged in the late 18th and early 19th centuries, heavily influenced by Adam Smith's ideas. The video mentions that Smith's work started this school, which emphasized the importance of free markets, the division of labor, and the role of capital in economic growth. This school of thought later evolved into the neoclassical school, which continues to influence economic theory and policy today.

💡Neoclassical School

The neoclassical school is an economic theory that developed in the late 19th and early 20th centuries, building upon the classical school's foundations. The video notes that Adam Smith's work has had a lasting impact, influencing the development of this school, which incorporates elements of supply and demand, marginal utility, and equilibrium analysis into its economic models. This school is significant for its refinement and expansion of classical economic theories.

Highlights

Adam Smith, known as the father of modern economics, was born in 1723 in Scotland.

Smith's most famous work, 'The Wealth of Nations,' critiques mechanist economies and advocates for free markets.

In a mechanist economy, the state heavily intervenes in business, restricting trade and monopolizing companies.

Smith argues that state intervention is unnecessary and detrimental to economic growth.

The 'Invisible Hand' metaphor illustrates how markets self-correct and lead to growth without state interference.

Smith emphasizes that wealth creation is driven by scarcity, need, self-interest, and drive.

He advocates for a laissez-faire approach to business, stating that individuals act in their own interest, not out of benevolence.

Smith uses the example of a pin factory to demonstrate the efficiency of the division of labor.

Leonard Reed's essay 'I Pencil' echoes Smith's argument for the free market, showing the complexity of a simple pencil's production.

Smith commends capital saving and investment as the driving force of economic development.

'The Wealth of Nations' sold out its first edition within six months and has influenced politicians and economists.

Smith's work initiated the classical school of economics, which evolved into the neoclassical school.

Ibn Khaldun, born in 1332, was a historian, sociologist, and demographer, and his work 'Muqaddimah' is considered a philosophy of history.

Khaldun and Smith both point to labor as the source of wealth and advocate for the division of labor.

Khaldun discusses supply and demand, noting how prices change with the scarcity or abundance of goods.

Khaldun's work reached the Western World in 1697, potentially influencing Smith through the exchange of ideas during increased trade.

The debate on whether Smith or Khaldun should be considered the father of modern economics is raised.

The video encourages viewers to support the creator through social media and financial contributions.

Transcripts

[Music]

if you study history economics politics

sociology or philosophy one of the first

names you likely to hear is that of Adam

Smith The Man known as the father of

modern economics born in 1723 in

Scotland Smith's most famous work The

Wealth of Nations reflects on the power

of the free market over the mechanist

economies that many countries opted for

at the time in a mechanist economy a

country takes a strong hand in the

business of their citizens restricting

trading with other nations monopolizing

companies and heavily subsidizing

business and encouraging Colonial

expansion Adam Smith said that such

widespread intervention at the state

level was not only unnecessary but

hurtful to country's economies and in

The Wealth of Nations Smith uses the

metaphor of the Invisible Hand of the

market to show how left to its own

devices a market corrects itself leading

to growth that it was scarcity need

self-interest and drive that were the

forces that drove wealth creation and so

government should have a lay Fair

attitude towards business in one of his

most famous lines he said that it is not

from the benevolence of the butcher the

Brewer or the baker that we expect our

dinner but from their regard to their

own interest he advocated for the

division of labor and used the example

of a pin Factory showing that making a

pin can be divided into 14 steps that

could enable 10 men to make 48,000 pins

per day whereas if they did it all

themselves they could only make 10 or 20

per day 200 years later Leonard Reed

would make a similar argument for the

free market in his essay I pencil Reed

said that the simple pencil was a

miracle of Freedom not a single person

on the face of this Earth knows how to

make me the pencil says in the essay

written in the first person the wood is

from cedar trees in California which

take the knowledge of Souls and axes and

motors to Mill the graphite is min

somewhere else with totally different

skills the brass that holds the rubber

in place somewhere else and the paint

somewhere else and finally the rubber

extracted from rapes seed oil that come

from the other side of the world yet all

of this comes together to build a pencil

for 20 cents on top of this Smith

commended the saving of capital to

invest in new Ventures citing this as

the driving force of Economic

Development the first edition of The

Wealth of Nations was sold out within 6

months and has shaped the decisions of

politicians and economists ever since it

started the classical school of

Economics which today has has evolved

into the neoclassical

school ibin calun was born in Tunis

modern-day Tunisia in

1332 some 400 years before Smith as a

historian sociologist and demographer

calun was one of the most respected and

influential Scholars of the Middle Ages

cun's most well-known work the madema is

an ambitious text that some says the

first attempt at a philosophy of History

it deals with Islamic theology Science

History sociology and like Smith

economics and the similarities between

Smith and cun's work are striking like

Smith cun points to labor not gold or

silver as the source of wealth and

advocates for the division of labor in

the same way Smith did he said that when

six or 10 persons including a Smith and

a carpenter to make the tools and others

who are in charge of the oxen plowing of

the soil the harvesting of the ripe

grain and all the other agricultural

activities undertake to obtain their

food and work toward that purpose either

separately or collectively and thus

obtain through their labor a certain

amount of food that amount will be food

for a number of people many times their

own the combined labor produces more

than the needs and necessities of the

workers talking about supply and demand

calun said that when goods are few and

rare their prices go up on the other

hand when the country is near and the

road safe for traveling there will be

many to transport the goods thus they

will be found in large quantities and

the prices will go down C dun's work

didn't reach the Western World until

1697 and even then it was a simple

biography of him in a French

orientalists work bibliotek Oriental

Smith could have been exposed to cun's

ideas if not directly then through the

rise of the Ottoman Empire and the

travel chatter and exchange of ideas

proliferated by increased business and

Merchant travel between Europe North

Africa and the Middle East so while it's

Smith that has been more widely read and

more widely remembered should it not be

iin calun that should take the title of

the father of modern

economics if you like these videos and

would like to support me making more you

can follow me on Twitter Instagram and

Facebook by clicking the links in the

description below you can like this

video And subscribe to the then and now

channel to see more and if you're

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[Music]

you