Differences between Economics and Adam Smith's system:


Adam Smith

Main Purpose

Private Wealth

separate from government and morality

"To me, these two very distinct inquiries have been..separated, the term political economy being now confined to the science..of wealth, and that of politics, ..the relations..between a government and its people" Jean Baptiste Say

"Progress has.. [questioned] whether it is.. impossible that all should start in the world with a fair chance.. The question cannot be fully answered by economic science. For the answer depends.. on the moral and political capabilities of human nature (which) the economist has no.. special.. information" Alfred Marshall

Wealth of Society

integrated with government and morality

"Political œconomy..proposes to enrich both the people and the sovereign."Book 4, The Wealth of Nations

"In every civilized society..there were always two..systems of morality.."Book 5

Psychological Goal


to maximise pleasure,is the problem of Economics"William Stanley Jevons

Peace of mind

"In what constitutes the real happiness of human life..In ease of body and peace of mind, all the different ranks of life are nearly upon a level"Theory of Moral Sentiments

Main Interest

Business Interests

Society works for Business

Societal Interests

Business works for Society
Motive and Measure

Supply or Production Motive

Measured by Gross Domestic Product

"it is the aim of good government to stimulate production, of bad government to encourage consumption."Jean Baptiste Say

"While the GDP and the..national income accounts may seem to be arcane concepts, they are truly among the great inventionsof the twentieth century."Paul Samuelson

Demand or Consumption Motive

measured by Purchasing Power

"Consumption is the sole end and purpose of all production; the interest of the producer ought to be attended to only..for promoting that of the consumer."Book 4, The Wealth of Nations

"The gross revenue of (society) comprehends (their) whole annual produce.. (their) net revenue (is) what..they can place in their stock reserved for immediate consumption.. Their real wealth.. is in proportion, not to their gross, but to their net revenue."Book 2, The Wealth of Nations

Pricing System

Nominal (Money) Prices only

Nominal (Money or Metals) and Real (Grain) Prices

Main Theory

Equilibrium Theory

Society fights itself

Natural Price Theory

Society works together