Adam Smith believed that individual interest leads to collective interest, and in the book, he confirms this attitude: a) true; b) false; d) none
The correct answer and explanation is:
Correct answer: a) true
Explanation (300 words):
Adam Smith, often regarded as the father of modern economics, articulated the idea that individual self-interest can lead to collective social and economic benefits. This concept is most famously expressed in his 1776 seminal work, The Wealth of Nations. In this book, Smith introduces the idea of the “invisible hand”—a metaphor suggesting that when individuals pursue their own gain, they unintentionally contribute to the economic well-being of society as a whole.
Smith wrote:
“By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”
This quote reflects his belief that self-interest in a competitive market environment encourages individuals to produce goods and services that others value, thereby increasing overall wealth and prosperity.
For example, a baker does not provide bread out of kindness, but to earn a living. Yet, by doing so, the baker feeds the community. This self-motivated action ends up serving a public good. Smith emphasized that this process only works effectively under certain conditions—especially within a system of free markets, private property, and limited government intervention.
However, it is important to note that Smith was not advocating for unchecked greed. He recognized the need for moral sentiments, fairness, and some form of regulation, especially where monopolies or exploitation might occur.
In conclusion, Adam Smith did indeed believe that individual interest, when operating in a free and competitive market, leads to collective interest. His writings affirm this belief, making option (a) true. This principle became a foundational concept in classical economics and continues to influence modern economic thought and policies promoting capitalism and free markets.