Adam Smith's Theory
Adam Smith (1723-1790) view economic development as a process of economic growth and economic development by utilizing market mechanisms. An economy will grow if the market mechanism works well and perfect. Conditions needed to achieve economic growth is investment and specialization is controlled through market mechanisms. The government's role is only to seek that market mechanisms can work well. For that, the government should do is maintenance of security, law enforcement, and the provision of public goods, such as education and health.
Adam Smith put forward three key elements in the growth process of production, which is as follows.
a. Human resources, which increase the number of residents.
b. Increase in the stock of capital goods (capital accumulation) because people's savings invested by the owners of capital with the hope of gain.
c. Specialization and division of labor with market expansion and development of domestic and international trade
Adam Smith (1723-1790) view economic development as a process of economic growth and economic development by utilizing market mechanisms. An economy will grow if the market mechanism works well and perfect. Conditions needed to achieve economic growth is investment and specialization is controlled through market mechanisms. The government's role is only to seek that market mechanisms can work well. For that, the government should do is maintenance of security, law enforcement, and the provision of public goods, such as education and health.
Adam Smith put forward three key elements in the growth process of production, which is as follows.
a. Human resources, which increase the number of residents.
b. Increase in the stock of capital goods (capital accumulation) because people's savings invested by the owners of capital with the hope of gain.
c. Specialization and division of labor with market expansion and development of domestic and international trade
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