ABSTRACT
Adam Smith, the "father" of modern economic inquiry, was one of the first philosophers to give a detailed answer to the problem of social coordination in the absence of centralized planning and control. Smith's great insight was that the problem of social coordination was solved by the market. All the information and incentives that the participants require is provided by the price system. When goods of one type are too abundant, their price will fall, signaling to workers and entrepreneurs that their resources could better be employed in other, more lucrative areas, thereby reducing the supply of those goods. Modern economics comes of age with the development of the theory of utility. Utility theory is very simple in concept. Since its beginnings in the late eighteenth century, economics has distinguished itself from the other social sciences by its insistence that human behavior is governed solely by self-interest.
