Writer's option Research Paper Example | Topics and Well Written Essays - 3250 words

Writer's option - Research Paper Example Smith clarified the way competition enhances the productivity and social wellbeing by promising ideal distribution of resources and labour in the overall economy. Yet, as a pragmatist, Smith had also identified that capitalism will corrupt the competitive markets. He had also realised that in capitalist economy, certain individuals would turn out to be much wealthier and rich in comparison with others. On the assumption that there will be economic growth, the wealthy would become wealthier, however, the poor would also be more affluent. Adam Smith put substantial level of effort for establishing the theory of capitalism and how it would determine competitive markets. Even after his death, the ideas provided by Adam Smith remained significant in the fields of economy (Yardeni & Moss, 1990). Focusing on this aspect, the study examines Adam Smith’s explanation of competitive market. The study also delineates the way in which Adam Smith has viewed the present competitive markets and the manner in which these markets work. In relation to this, the study defines how the rule of exchange works in a competitive market for determining the prices. Capitalism is an economic structure which protects private property and allows free trade in the competitive markets. In capitalism system, individuals are allowed to follow self-interests as long as these interests are controlled by competition and society obtains advantages from lower expenses and increased choices. However, the problem related to capitalism is that self-interest has a natural tendency for collusion and corruption. In other words, capitalists tend to pursue power and to exploit it in order to rigout the market in their favour at the cost of economic disadvantage (Yardeni & Moss, 1990). Adam Smith often cited capitalism as a supporter of free market which signifies deregulation. A deregulated market where government has low