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Adam Smith's Theory in the Current World Economy

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The free market economy is still the dominant force in the world market today. It will always be an integral part of every economic activity. Yet, even countries like the USA and in Europe, a perfectly free market economy doesn’ t exist in reality. With the pressing issues of the financial crisis and recessions, the free market is one of the factors that carry the burden to explain what really happened. The evolution of the economy makes Smith’ s economic freedom much less be effective today. The weakness of this concept already exists since the birth of its definition way back to Smith.

Ultimately, there is no way to separate the government from the market. The very least participation of the government is on the provision of currency for the market. Indirect involvement through transportation, infrastructures, defense, and education greatly helps the market economy. Without government interventions, the likelihood that monopolies will take over the “ free market” is highly possible (Bechtold, 2011). Maybe, the seemingly faltering free market can point its fingers to the lack or poor economic planning of most countries. If only Adam Smith is alive today, he would definitely make strategic improvements in his free-market ideology.

Instead of a single “ invisible hand” that will drive the players in a market economy, a second “ visible hand” is necessary as what Scott (2006) suggests. The former will take care of pricing mechanism based on laws of demand and supply, while the latter will explicitly manage the economy through legislature and bureaucracy. The government will always have to intervene in a direct or indirect manner. Most of the times, the government must act as regulators only unless a national monopoly is required as an emergency reason for state.

Direct interventions can lead to corruption and distortion of market frameworks (Scott, 2006). However, the policy must be created as an open book to everyone, especially the economic players in the free market. This includes the identification of various economic actors and recognition of different market frameworks within the free market system.  

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