The Wealth of Nations
Adam Smith
1776

The definitive theory of the free market, the basic economic premise of the current order, the very foundation of what we call economics – if all of sociology is a dialogue with Karl Marx, all of economic theory is dialogue with Adam Smith. An economist and philosopher of morality, Smith’s Inquiry into the Nature and Causes of the Wealth of Nations analyzed the emerging industrial revolution and its attendant economic framework to produce the theory of the free market as we know it and to situate that particular economic arrangement in a broader analysis of human nature and human morality.

The few-sentence summary? We have natural instincts of both duty and self-interest that together cause us to behave, overall, in ways that are socially-beneficial; economically-speaking, the ideal arrangement is one free of domination by either monopolies or the state, in which the creativity of and competition among producers allows for a stable and expanding economy. In pursuing our own individual interests and allowing our produce/ skills to be judged and assigned a value by the free operation of the market, we achieve a society that grows stronger as a result of natural competition. The market is, in effect, an ‘invisible hand’ guiding productive development, and by which the pursuit of individual ends brings positive collective results. (Or, as Keynes put it, critically and somewhat unfairly to Adam Smith, at least, though less unfairly to his followers – “the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.”)

Increasing complexity in the division of labour, the centrality of industrial technology for boosting production, the role of exchange and development of currency, the relationship between labour and scarcity in determining prices of commodities in the marketplace, the relationship between capital and labour, the role of the state in economic activity, debt, taxation, the opportunities and inequalities produced by the market – it’s all here in Adam Smith, who with David Ricardo and Thomas Malthus forms the great triumvirate of neoclassical economic theory.

Advertisements