Question

Identify Adam Smith’s major contributions to classical liberal economic theory and his view of government’s proper role in the economy.

Answer 1

AnswAnswer:

• Adam Smith’s major contributions to classical liberal economic theory were the concept of "THE INVISIBLE HAND"
• his view of government’s proper role in the economy was "NOT PARTICIPATION"

Explanation:

Adam Smith is considerate as the father of capitalism. His main contribution to the classical liberal economic theory was the concept of "THE INVISIBLE HAND" (introduced in the book The Wealth of the Nation): he developed the idea of the existence of an invisible hand which function is regulating the markets. The markets will regulate by itself, by the power of this "hand" and they will find the balance by the actions of the demand and supply.

Government proper role in the economy is limited: as "THE INVISIBLE HAND" regulates the markets (by the action of the supply and demand), the government action is to  "laissez-faire laissez passer" (let things alone, let thing pass), it should not interfere or regulate business or industries. The G must let the private sector do without public intervention trying to regulate and controlling the private business.

The Government is like a referee, not as a participant in the economy. It must provide their population defense and laws to protect and contribute to a free society.