ADAM SMITH, RONALD REAGAN, AND JEFFREY SACHS
This research draws comparisons with the economic theories of Adam Smith in the 1770s, the economic policies followed during the presidency of Ronald Reagan in the 1980s, and the economic prescriptions advocated by Jeffrey Sachs in the 1990s. The emphasis in this research is on trade and economic activity.
In the formulation of economic theory, Adam Smith was principally concerned with the factors which led to increased wealth in an economy. Smith (1776, pp. 131-136) contended that the cost of labor provided the basis for the determination of the value of a commodity. Smith further contended that it was the relative expenditure of labor that mattered. Smith also contended, however, that the factors of supply and demand also affected the actual price levels (inflation) of commodities in the market place. While Smith considered that the factors of supply and demand were the major determinants of commodity prices, the value of labor consumed in their production was held by Smith to provide the basis for the determination of value of commodities. Smith also contended, however, that the factors of supply and demand also affected the actual price levels of commodities in the market place.
Within the framework described in the preceding paragraph, Smith thought that the size of an economy's output should be limited only by the size of markets--or demand. The key element in the process, in Smith's perception, was the accumulation of capital. Smith thought that the accumulation of capital permitted (1) the creation of plant and equipment to assist human labor, and (2) the full employment of labor. Smith also thought that free competition was essential for the development of an efficient economy. Adam Smith considered that the factors of supply and demand were the major determinants of commodity prices (although the value of labor consumed in their production provided a basis for ...