Question

How did Adam Smith revolutionize economics?

Answer 1

 Adam Smith is the guru behind classical economics and his introduction of the 'invisible hand' concept. Basically, no one person is in control of the market and order is generated in the market without anyone intending this. e.g. Firms are in the market to make a profit, but to do this they need to provide goods and services that the market demands. Self-interest feeds the good of society in this way. 

His thoughts are still valid in terms of the ways we think about economics, but classical economics can be argued to have died out in some respects. For example, one argument is that in this recession there should be no government intervention as the invisible hand will intervene, i.e. prices will fall due to decreased demand and the fall in prices will get consumers spending again. Keynesian economics, on the other hand would argue that there needs to be government intervention in order to stimulate aggregate demand and this is the approach most governments are taking, eg. Barack Obama's stimulus plan is an example of Keynesian economics. 

So to answer your question, Adam Smith is very important to understand how the market functions, but some economists have debated some of his theories, as has always been the case in economics. I hope that answers your question.