The Growth Of A Country s Economy By David Hume And Adam...

Because inflation is one of the most crucial indexes for citizens and government to evaluate the overall performance of a country’s economy, it has been widely examined and analyzed by economists throughout history. Back in the 18th century, though the term â€Å"inflation† was not adopted by writers focusing on the science of economics yet, two influential thinkers in Europe already included their view about the cause and subsequent effect of a general rise in price for goods in their works. During the period when gold and silver were still the major types of money in circulation, David Hume and Adam Smith both described the ensuing effect in the society of an increase in the money supply: prices would be relatively higher and inflation would occur. While Hume writes mostly on the intermediate situation between the increase of money supply and the rise of price level, Smith focuses on the effect that inflation has on creditors and borrowers. The authors explain the pro cess and effect of inflation in two different ways and hold dissimilar attitude toward inflation. Although they both agree on the increase of species as the cause of inflation, Hume concentrates his investigation on the labor market and claims that inflation benefits the whole society in the short run while Smith considers price inflation from the perspective of finance and maintains that it leads to unfair redistribution of wealth. Even though Hume and Smith wrote at a time when fiat money already appeared as aShow MoreRelatedAdam Smith And Karl Marx1674 Words   |  7 PagesI. Adam Smith and Karl Marx Contemporary economics are best explained by comparing two foundational thinkers that have contributed to the better understanding of liberalism, one being its proponent Adam Smith and the other being its most significant critic, Karl Marx. 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