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Adam Smith

Smith against Mandeville

Smith takes the unintended-benefit mechanism from Bernard Mandeville and rejects his morals, filing the Fable of the Bees under the “licentious systems” in The Theory of Moral Sentiments VII.ii.4 for erasing the distinction between vice and virtue. → Mandeville, Rand, and Hume - Self-Interest, Virtue, and the Sources of Morality · Stoic Compassion and Adam Smith's Sympathy

  • The Wealth of Nations
    • Summary
      ”The Wealth of Nations,” written by Adam Smith and first published in 1776, is a foundational text in classical economics. It delves into the nature and causes of wealth in nations, discussing in detail the concept of the division of labor, which enhances productivity and efficiency through specialization. Smith argues that a free market, where individuals act in their self-interest, leads to economic prosperity and societal benefits, a concept encapsulated in his famous idea of the “invisible hand.”
      Smith criticizes mercantilism, the prevalent economic theory of the time, which emphasized the accumulation of wealth through trade surplus and government regulation. Instead, he advocates for free trade and minimal government interference, asserting that markets work best when left to their natural course.
      The book also discusses the role of capital accumulation, labor, and the interplay between wages, profits, and rent. Smith explores various economic systems, including feudalism and agriculture, and the transition to commercial society. His insights laid the groundwork for classical economics and continue to influence modern economic thought and policies.
  • Most Important Thoughts
    1. Division of Labor: Smith emphasized the efficiency gains from the division of labor, where specialization allows individuals to focus on specific tasks, increasing productivity and skill.
    2. Invisible Hand: This metaphor describes how individuals pursuing their self-interest inadvertently benefit society as a whole through the efficient allocation of resources. According to Smith, the market naturally directs resources to where they are most needed without the need for central planning.
    3. Free Markets: He argued for minimal government intervention in the economy, believing that free markets would lead to more effective and beneficial outcomes than regulated ones.
    4. Critique of Mercantilism: Smith challenged the mercantilist idea that a nation’s wealth was measured by its stock of gold and silver. He argued that true wealth came from a nation’s overall production and commerce.
    5. Laissez-Faire Economics: Stemming from his advocacy of free markets, Smith is often associated with laissez-faire economic policies, advocating for a limited role of government in economic affairs.
    6. Labor Theory of Value: Smith proposed that the value of a good or service is determined by the labor required for its production.
    7. Self-Interest and Social Benefit: He believed that when individuals pursue their own interests, they inadvertently promote the good of society through productive economic activities.
    8. The Role of Capital: Smith discussed the importance of capital accumulation for economic growth and how investment in productive enterprises leads to wealth expansion.
  • View on abolishing slavery
    • Owes something to Hume’s argument against slavery
  • Waged war on mercantilism
    • system of state directed overseas commerce centered economic policy that dominated after Columbus
  • Never used the term capitalism
  • Simply of and obvious system of natural liberty
  • Created the idea of Capitalism
  • More comfortable with “free market economy” vs. “capitalism”
  • The target of his system is targeting the crony corporations with government
  • Global trading system is a zero sum game; fixed pie of values
  • Great breakthrough: When free individuals engage in labor, sacred right, of their own choosing to provide goods and services that someone provided the capital, no matter how modest, that the pie can expand and everyone can be made better off.
    • Changed the world
    • Global population has risen 10-fold from 1770 to 2020
    • Quality of life
    • Opportunity for human dignity