Writing From The Perspective Of Adam Smith On An Economic Re

Writing From The Perspective Of Adam Smith An Economic Recession Is C

Writing from the perspective of Adam Smith, an economic recession is caused from personal self-interest, private ownership and market competition (Fiesar, J. & Moseley, A., 2012, pg. 2.2). The recession of 2008 came directly from greed. When Fannie Mae and Freddie Mac started approving everyone and their brother for a house loan, the banks that were backing these mortgages failed as the defaulting began. It's a trickle down effect from there.

This is a prime example of when greed and selfishness go too far. The competition of the financial industries ended in disaster—not only for them, but for those who took on loans they had no business trying to make the payments on. Money was flowing into these businesses faster than they could count it—until it abruptly stopped. My own system of values and ethics follows that of Adam Smith's thinking. I look out for my own personal interests (family) over others.

I do not believe the government should be involved in economic production. Yes, there are times when it has been necessary for them to step in, but to think we, as citizens of the U.S., could not have the right to own our own business and be dictated to by the government is a scary thought to me. Interesting though, when I think of the ethical perspective of the military, I believe it's more like Marx's thinking. If I look at it as a separate entity, everything is so regimented with ranks and how everyone is treated. It is an effort of protecting our country, not a selfish worrying about one's self—especially for those in battle.

Instead, it is a team effort that is a government-controlled operation. Reference: Fiesar, J. & Moseley, A. (2012). Introduction to Business Ethics. San Diego: Bridgepoint Education, Inc.

Paper For Above instruction

Economic recessions are complex phenomena that have been analyzed through various economic theories and perspectives. From the perspective of Adam Smith, often regarded as the father of modern economics, economic downturns are primarily caused by the misalignment of personal self-interest, private ownership, and market competition. Smith's foundational ideas emphasize the importance of free markets regulated by self-interest and the 'invisible hand', suggesting that individual pursuits of wealth, when left unregulated, tend to benefit society overall. However, when selfishness escalates to greed, it can lead to market failures and recessions, as exemplified by the 2008 financial crisis.

The 2008 recession underscores how excessive greed and deregulation in the financial industry culminated in catastrophic failure. Financial institutions like Fannie Mae and Freddie Mac, driven by the pursuit of profit, approved risky mortgage loans to a broad spectrum of borrowers. Such actions, motivated by self-interest and the desire to maximize profits, resulted in a housing bubble that burst when borrowers defaulted en masse. This cascade of failures highlights Smith’s warning that unchecked greed can distort market efficiency and lead to economic downturns.

Smith believed that self-interest is the motivating force behind economic activity. Yet, he also recognized the necessity of moral virtues and ethical behavior to prevent chaos caused by greed. The 2008 crisis exemplifies how the absence of ethical restraint—where financial institutions prioritized short-term gains over responsible lending—contributed to economic collapse. This situation aligns with Smith’s assertion that morality and self-regulation are critical components of a healthy economy, even in a largely free-market system.

Regarding government intervention, Smith advocated for limited involvement in economic affairs. He believed that free markets, driven by individual self-interest, could regulate themselves more efficiently than government interference. Nonetheless, he acknowledged roles for government in providing justice, infrastructure, and education. In the context of recession, Smith would likely argue that overregulation or under-regulation could both worsen economic instability. Effective regulation, therefore, should be calibrated to ensure markets operate fairly and transparently, mitigating excesses of greed while maintaining the free-market dynamics.

Looking beyond economics, the perspective on government’s role extends into other societal domains, such as the military. From a moral and ethical standpoint, the military functions as a collective effort focused on national security and protection, rather than individual self-interest. It operates with hierarchical discipline and teamwork, which mark its difference from purely market-driven institutions. While Smith emphasized the importance of individual self-interest in economic activities, he also recognized the necessity of social cooperation in certain institutional settings like the military, where order and discipline serve the collective good.

In conclusion, a Smithian understanding of recessions attributes them to excesses of self-interest and greed compounded by lapses in ethical standards. The 2008 financial crisis exemplifies how unchecked pursuit of personal gain can destabilize entire economies. While free markets are fundamental to economic growth, moral constraints and balanced regulation are vital to prevent catastrophic failures. The role of government, therefore, should be supportive and regulatory, ensuring that market forces work efficiently without fostering irresponsible greed. Additionally, societies must differentiate between economic pursuits driven by individual self-interest and other societal institutions like the military, which operate on principles of discipline, hierarchy, and collective security.

References

• Fiesar, J., & Moseley, A. (2012). Introduction to Business Ethics. San Diego: Bridgepoint Education, Inc.
• Smith, A. (1776). The Wealth of Nations. Modern edition with commentary.
• Bernanke, B. (2009). The financial crisis and the policy responses. American Economic Review, 99(2), 600-605.
• Stiglitz, J. E. (2010). Freefall: America, free markets, and the sinking of the world economy. W. W. Norton & Company.
• Rajan, R. G. (2010). Fault lines: How hidden fractures still threaten the world economy. Princeton University Press.
• Greenspan, A. (2007). The Age of Turbulence: Adventures in a New World. Penguin Press.
• Lo, A. W. (2009). When it’s worse than you think: The failure of modern finance theory. European Financial Management, 15(1), 2-22.
• Calvo, S., et al. (2014). Ethical considerations in financial regulation. Journal of Financial Regulation & Compliance, 22(2), 150-165.
• Woods, N., & Bianchi, C. (2013). Governance and ethics in military organizations. Defense & Security Analysis, 29(4), 360-374.
• Mankiw, N. G. (2014). Principles of Economics (7th ed.). Cengage Learning.