Some readers have asked me about what is the neoliberal model. It is not easy to clarify. To get to develop this explanation necessarily requires going to wing genesis of this model. Since it is the neo liberalism, it will not be surprising that I should first explain that the liberal model is its predecessor.
To speak of the liberal model we introduce telling the story of his ideologist, the Scot Adam Smith Douglas. He was born in a small town in Scotland called Kirkaldi. At three months old he misses his father. His mother was the daughter of a landowner in the area. At the age of four years, he was kidnapped by gypsies. After much searching he was found abandoned in the woods. At 14, he left town after finishing elementary school as a good student as the owner of a great memory. He went on to study at the University of Glasgow. Three years later he left Glasgow having won a scholarship to study at the prestigious Oxford University. At age 23 he graduated from Oxford and engaged to speak at conferences for some years. At this time he met the philosopher David Hume, Scottish economist and historian who were his atheist's closest friend.
Smith became a professor of ethics and logic for 12 years. During this time of teaching he published in 1759 "Theory of Moral Sentiments" a book of philosophy that presents for the first time his famous invisible hand theory in which human selfishness that underlies unintentionally determines well-being for the whole society.
In 1974 he left for France where he met Voltaire, ideologue of the liberal bourgeoisie and Francois Quesnay, a surgeon who was one of the founders of physiocracy or rule of nature. This group Physiocratic instituted the phrase "laissez faire, laissez passer" those convinced that there should be nothing that would allow the economy flowing by itself without the influence of state power. This was a great influence on Adam Smith and the Physiocrats reacted to the mercantilist, who argued that the trade volume was unchanged was therefore necessary that the nation seeks to export and import as much as possible the minimum to be strengthened.
In 1776 he published his masterpiece, and that makes him worthy of the title of father of economics: "Essay on the wealth of nations". Although many of the elaborations of this book have already been developed before, the same liberal thinking synthesized from an economic perspective and divorces to the economy as an independent science. It was liberalism as a philosophy. Additionally proposes and provides the so-called law of absolute advantage and the concept of job specialization, of great value to the industrial revolution. In terms of absolute advantage Smith as an ideologue of the liberal view of economics will develop this law, which broadly supports the appropriateness of mathematical form of international exchange, taking as parameter the work as a common measure of value. According to Smith countries should specialize in that product where they are more efficient and purchase that product which is less efficient. Being that as Smith's common measure of product value is the amount of work required to produce it, we figure out what products we use comparatively increased workload to another country and which use comparatively less to produce the same volume of product. Thus we must decide where to concentrate our efforts. Recall again the time of Adam Smith writes. There were no transnational corporations emerging in the late nineteenth century. It then explains that the production efficiencies compare between countries do not take into account the performance of companies that are producing goods and services in both countries at once.
Adam Smith in proposing the liberal model was doing something innovative for its time (1776). It was a historic moment, where pressures were still feudal and semi feudal who insisted on not allowing free enterprise. Adam Smith supports the objective of profit is right for society. When Smith speaks to the goal of the baker to get up early to knead the bread is not altruistic. The baker is not thinking about providing a public service or is interested in that moment for the good of humanity or fewer. The baker gets up early just for personal gain he will get when selling the bread, but with the goal of profit, this selfish desire Baker makes it a good for society because workers can satisfy their appetite before starting his task. Personal gain is thus suitable for the whole society.
According to Adam Smith free market is a must for not limiting the scope for expansion of production that brings the division of labor. International trade is beneficial to his trial for both sides of the equation if the country specializes in those where it is more efficient.
Another interesting element in the perspective of Adam Smith is the total reliance on market forces. Smith was referring to an invisible hand. According to Smith, individual decisions to take each person as an invisible hand leading to better outcome for society as a whole you. A simplistic analysis would lead to the same conclusion. If the products prices are skyrocketing, buyers purchase fewer of them to be expensive. This would inevitably lead producers to reduce prices in order to sell or the price as attractive individuals will increase production of that good. This phenomenon will cause the asset is abundant, which make the prices go down under its own weight.
In a naive society that is likely to occur. Obviously any warning analyst would ponder what if the producers agree on a price and it is sufficiently high to prevent the plaintiffs did not acquire, ensure an additional level of profit to producers above indicating the equilibrium price. Especially inelastic products, these are those in which an increase in the price determines a proportionally smaller reduction in demand. If for example the state does not control the rents of apartments is possible that in a market controlled by a group of owners they determine 10% increase in rents. Even if they wanted the people could not prevent the increase taking the decision to move. First, because all rents rose and second because the rate of increase is not powerful enough to make up your mind to invest in a move that will likely require a larger investment than the rent increase.
Although the model proposed by Adam Smith may have many questions I have to be iterative in that it was the expression of a sector of society that was imposed in a time of great economic and social transformations.