Economic Principles of Adam Smith
W. Lesperance, Ph.D.
On Adam Smith, the Inevitability of the Market Economy, and the Wealth of Nations
Adam Smith, in Wealth of Nations, attempts to model ideal economic development using observations of history and European development. Under the Wealth of Nations model, labor is an exchange for goods or services, which is then converted to currency as a proxy for direct barter. Smith further describes the progression from agricultural beginnings to market economies, and the resultant social organization that is causal to market forces – the differences between pastures and cities, wealth and poverty, and state and empire. The model of societal development that Smith advances is used to explain economic growth and trade relations. Smith, then, applies his findings of trade relations to those between the British Empire and the American colonies, leading him to the conclusion that overseas colonies are expensive, and are better served as independent nations. Smith’s works still have many vital lessons to teach both nations and international organizations, even after nearly two and a half centuries.