The wealth of nations

In 1776 Smith published one of the most important books in the history of economics. The book’s full title is An Inquiry Into the Nature and Causes of Wealth of Nations. Most people simply call if The Wealth of nations. Smith wrote the book after discussing laissez-faire beliefs with some of the physiocrats. Smith’s book is an argument in favor of allowing people to engage in trade, manufacturing or other economic activity without unnecessary control or interference from government.

The main argument in The Wealth of Nations might be stated rather simply: People are naturally selfish. When they engage in manufacturing or trade, they do so in order to gain wealth and/or power. This process should not be interfered with because, despite the self-interest of these individuals, their activity is good for all of society. The more goods they make or trade, the more goods people will have. The more people who manufacture and trade, the greater the competition. Competition among manufacturers and merchants helps all people by providing even more goods and probably lower prices. This activity creates jobs and spreads wealth.

Smith concluded that individuals should own private property and be allowed to engage in private economic activity. This would result in greater wealth for all.

Smith accepted the idea that there were some things the government should do. A government is best suited to build canals or roads. A government may find it necessary to put some restrictions on international trade. And, he said, the government must not allow individual businesses to act together to control the production or trade of certain goods, thus creating a monopoly. A monopoly, in Smith’s opinion, could be as harmful to the general welfare as governmental control.

Smith’s book sets forth the beliefs on which the capitalist economic system is based, although he did not use the word capitalism. His ideas were warmly received by the rising merchant class throughout Europe. The book gave national governments a clear reason to let people engage freely in economic activity.

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