A Critical Analysis Of Adam Smith's The Wealth Of Nations

3. Explain the view of capitalism that was expressed in Adam Smith’s Wealth of Nations.

The Age of Enlightenment brought forth some of history’s greatest philosophers who introduced and provided the arguments for contemporary thought and social systems in continued use today. Although historians consider the ideas of natural rights and separation of powers in democracies of the highest order of importance, the economic theories developed by the leading thinkers of the era pervade daily life in all societies. The idea of wealth is timeless, but philosopher Voltaire and economist Adam Smith wrote opposing theories on the true value of wealth and how society should allocate its wealth and resources. Voltaire’s satire Candide, or Optimism features El Dorado, a socialist utopia where the inhabitants treat precious metals and stones as dirt and provide for the general welfare of their city, while Smith’s The Wealth of Nations discusses macroscopic economies and how these economies interact to maximize production and encourage human advancement. Both arguments make use of ethical, moral, and social ideas, but only work perfectly in a utopian setting. By comparing and contrasting the arguments presented in each of these texts, one establishes an understanding of how economies and societies operating on either capitalism or socialism alone compare to those that incorporate elements of both ideologies.

It is said Smith’s mother led him to his scholarly efforts. By 1740, Smith had developed a passion for freedom in that personal freedom and liberty will lead to the best possible outcome. Because of this, Smith is often regarded as an essential proponent in laissez-faire. By 1748, Smith was teaching and giving lectures at Edinburgh. It was here that Smith first established his economic thoughts about freedom and liberty. By his late 20’s, Smith had already developed the passion for liberty, reason, and free speech.

The Wealth of Nations often considered to be merely a textbook of economics, is more of prescriptive text that endeavours to advice legislators on the manner in which it should structure those policies and institutions that support the practices of production and exchange. The purpose of doing so, it seems, is to best encourage public opulence and as a result public happiness and well-being.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Edwin Cannan, ed. 1904. Library of Economics and Liberty. Retrieved October 26, 2014 from the World Wide Web: http://www.econlib.org/library/Smith/smWN.html

Adam Smith, an Enlightenment economist, advocated for a laissez-faire approach to the economy, leaving the citizens the right to control their economic system. He recommended that the government deregulate trade and allow people to be “perfectly free to pursue his own interest in his own way.” (Doc C) Since people work for their own benefit, Smith argued that the workers, while striving for their own economic gain, would ultimately benefit the entire society, “led by an invisible hand,” (Doc C) which would equate the supply and demand of the free market. By giving people the right to decide how the

In the eighteenth century, most people thought they knew how countries get rich. The way they thought was that you have to export as much as possible and import as little as possible so that they can have a rich economy. They also thought that we had a fixed wealth but Adam Smith was the first person to oppose this theory. He proposed that

An important aspect of Smith's views, were taxes. In one of Smith's many opinions regarding human nature, he explains that the rich, once placed in a position of power, maintain that power through their dealings within a civil government which employs men of inferior wealth, to protect the wealthy lands of the rich. In layman’s terms a community with the bare minimum has little violence since there is nothing to fight over, but one with plush property and wealth, has a plethora of people fighting over one another. This is where Smith's views of taxes comes into play. In his world, the government would impose taxation, with the intentions of discouraging improper or luxurious behavior which he believed did not benefit society as a whole. (Smith, pp.18-20) When discussing human nature in the sociological spectrum, Smith likens humans to animals, or dogs in particular. The typical reliance of animals, once they're matured,on no one but themselves (becoming independents), is a characteristic that humans do not follow. I believe Smith's

role it has to play in industrialization, and its general impact upon the wealth of the state.

Throughout the book An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith uses the term “commercial society” rather than more accustomed words like “capitalism.” Smith explains what he means by this term,

The works of both Adam Smith and Karl Marx have been highly influential on mainstream economics, and still hold precedence in global economic policy across the world. This essay will explore how natural harmony was a key characteristic of economic growth through capitalism, and how Marx believed this was in fact false as the edicts of capitalism were contradictory to its own goals. In the ‘Wealth of Nations’, Smith believed harmony could be achieved through self-interest and free market economics allowing enterprise to expand the economy and in turn improve society, however it was Marxs view that this was unobtainable due to the Smiths “laissez faire” approach to economics re-inforcing class divisions and therefore preventing the reduction of poverty that Smith ultimately aimed for.

In Wealth of Nations, self-interest seems to be synonymous with selfishness, and be the driving force of capitalism and the necessary ingredient for personal and economic wealth. This is, however, and partial and superficial view. Although in Wealth of Nations Smith does declare that human’s primary motive for most actions is self-love, all of their actions are still made within the moral parameters of society, which were created because of sympathy. A man, for example, will not pursue his self-interest at any cost to the people around him. He has to be ethical and fair in his interactions in order to be seen as morally and socially acceptable. In this way an understanding of, and cooperation with the sympathetic nature of society proves to further one’s self-interests. Therefore, to act morally and sympathetically is in fact an act out of self-interest.

Why is the work of Adam Smith considered so crucial in the development of economic thought?

The advent of the ideal of capitalism is often attributed to Adam Smith. Sometimes called “The Father of Economics,” Smith was an 18th century moral philosopher from Scotland. Smith is perhaps most known for writing the book “An Inquiry Into the Nature and Causes of the Wealth of Nations.” In this book Adam Smith considers and advances the ideas of the division of labor, the invisible hand, the pursuit of self-interest, the proper role of government and the idea of a Laissez-Faire (or noninterventionist) economy. Each of these ideas were considered heavily during the establishment and development of the United States. Because of their adoption into the new American government, the United States became the forerunner to the free-market.

In economics, some classical liberals believe that ‘’an unfettered market’’ is the most efficient mechanism to satisfy human needs and channel resources to their most productive uses. The minimal government advocacy of an ‘’unregulated free market’’ is founded on an ‘’assumption about individuals being rational, self-interested and methodical in the pursuit of their goals. Adam Smith was not an advocate of pure capitalism. Adam Smith allowed for many exceptions to a strictly free-market economy. The classical liberals advocated policies to increase liberty and prosperity. They sought to empower the commercial class politically. They abolish royal charters, monopolies and the protectionist policies of mercantilism to encourage