Adam Smith Theory Of Development

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2. Adam Smith’s theory of development According to Adam Smith “Political economy is an inquiry into the nature and causes of wealth of nations there is no distinction between growth and development.” • He said that Growth means development and development means growth. Adam Smith focused more on individual rather than state. Smith believed in the natural organization of the economic order under the influence of personnel interest. • Adam smith gives the concept Laissez-faire that meaning non intervention from state in the economy. • Smith in the favors of liberalism, he support to liberalism. • Economical activities should be determined by market. • “Market signals, the prices will depend on demand and supply of goods and services in the…show more content…
It means large number of sellers, homogenous product, and free entry. When there is large number of sellers, they cannot determine price. Buyers also cannot determine price. In a perfect market, market forces determine price. Supernormal price will not prevailing a perfect competitive market. When profit is more production increases then supply increases and prices will come down.” • So Smith’s theory in short “can be stated that in a perfect competitive market condition, when market is allowed to taking decisions according to the self-interest of individual there will be harmony in society. Division of labour and specialization will bring development to the society.” 3. Marxian Theory of Development Introduction: Marxian theories of development provide strong accounts of the start of poverty and inequality. Marx contributed to the theory of development in three respects 1. Giving an explanation of the history of economics, in which he talked about two structure (a) Basic structure (b) Super structure 2. Talking about the forces of capitalist development 3. Suggesting an alternative path of planned economic development. By Marxian economic point of view, he divides human society with respect to development into four major stages: Primitive communism, slave society, feudalism and…show more content…
historical development. From slavery to feudalism and capitalism to socialism and finally reaching its highest form in communism and all these historical events is the result of a continuous economic struggle between different classes. Then, Marx explains ‘Dialectical Materialism’ meaning conflict between the opposites. “A stage comes in the evolution of society when the forces of production come into dialectical conflict with the existing relations of production therefore turning existing property relations into ‘fetters’ on the forces of production. Then comes the period of social revolution. This leads to class struggle of haves and have nots ultimately overthrowing the whole social system. Every successive mode of production is superior to the preceeding mode of
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