The Wealth of Nations
Background and Purpose
Adam Smith, a Scottish philosopher and economist, published An Inquiry into the Nature and Causes of the Wealth of Nations in London on March 9, 1776, the same year as the Declaration of Independence. He wrote it against mercantilism, the system most European governments used at the time, where the government tightly controlled trade with tariffs, monopolies, and colonial trade rules to pile up gold and silver. Smith argued that a nation's real wealth is what its people produce, and the best way to grow it is to let people work, trade, and compete freely. The CED doesn't assign a specific excerpt; it asks for the book's core principles, which it uses to define free enterprise.
Core Principles
- Pursuit of self-interest: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." People end up serving others by working for their own benefit.
- The invisible hand: a person seeking his own gain is "led by an invisible hand to promote an end which was no part of his intention," the good of society. Millions of private choices add up to an economy that works without a government planner running it.
- Competition and efficient allocation of resources: competing sellers keep prices down, and prices steer workers and money toward what people want most. Specializing (the division of labor) multiplies what workers produce: in Smith's pin factory, ten workers splitting the job into about eighteen steps made over 48,000 pins a day.
- Limited government regulation: under Smith's "system of natural liberty," government has three main jobs: defending the country, running a fair justice system, and providing public works and institutions that no private business could profit from building. This hands-off approach is often called laissez-faire, a French phrase Smith himself didn't use.
The 4.1 page breaks down each principle in more detail, with Unit 4 examples.
Uses for Argumentative Essays
- Principles: free enterprise, limited government, and individualism.
- Where it shows up: Unit 4, Topic 4.1 (EK 4.1.A.1, which defines free enterprise as the "pursuit of self-interest, competition, efficient allocation of resources, and limited government regulation of the market, as espoused by Adam Smith"). The CED also links it to Topics 4.2, 4.8, and 4.9 (political culture, ideology and policymaking, and economic policy).
- In an argument essay: use Smith as evidence for less government involvement in the economy, which is closest to the libertarian and conservative positions (EK 4.9.A.1). For the other side, note that even Smith gave government real jobs and warned that businesses try to dodge competition, and liberals argue that markets alone don't fix problems like monopolies or pollution.