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Course Hero. "The Wealth of Nations Study Guide." September 28, 2017. Accessed October 23, 2018. https://www.coursehero.com/lit/The-Wealth-of-Nations/.
Course Hero, "The Wealth of Nations Study Guide," September 28, 2017, accessed October 23, 2018, https://www.coursehero.com/lit/The-Wealth-of-Nations/.
Scottish philosopher and economist Adam Smith's The Wealth of Nations is one of the most influential texts of economic theory ever written. Published during the American Revolution in 1776, The Wealth of Nations sought to tackle the intricate trade and taxation disputes between Britain and the American colonies. But more broadly, Smith's book laid the foundation for the development of free-market capitalism.
The Wealth of Nations also marked Smith's transition from moral philosopher to economic theorist. It was praised by heads of state and policy officials in Britain and the Americas when it was published, and today it is considered a truly groundbreaking text in its field—in the same vein as English naturalist Charles Darwin's biological treatise On the Origin of Species or English scientist Isaac Newton's physics text Philosophiae Naturalis Principia Mathematica ("Mathematical Principles of Natural Philosophy").
Although Adam Smith is often called the father of modern economics, scholars guess that he borrowed and built on some earlier ideas regarding free trade. He may have gotten these ideas from short political pamphlets disseminated in Sweden in the 1760s. In 1765 Finnish politician Anders Chydenius published and distributed "The National Gain," an essay envisioning a free market model of economic policy. The Wealth of Nations is similar. Like Smith, Chydenius argued that interference from the state held back economic growth, so he advocated a trade policy that would later be called liberalism. Since the popularity of Smith's The Wealth of Nations, Chydenius has been referred to as the "Adam Smith of the North."
It didn't take long for governments and officials to try out some of the ideas Adam Smith proposed in The Wealth of Nations. In 1777—just a year after the book's publication—British Prime Minister Lord North imposed two new taxes Smith suggested. Smith's book was mostly about trade between the United States and Britain, but his theories extended to Irish economic policy, too. Ireland petitioned for free trade regulations over the course of decades, but historians trace the roots of the petitions to publication of The Wealth of Nations. Lord North tried to reform trade with Ireland starting in 1778, but the process was frequently derailed by growing unrest in Ireland.
Although the British government enacted many of Adam Smith's policies without delay, the American colonists were slower to act. In the years leading up to the American Revolution (1775–83), Smith had some advice for the colonists: either embrace paying taxes to Britain in exchange for colonial protection, or stop payment in favor of abandonment.
If the colonists had kept paying taxes to the Crown, America's economic power might have outshone Britain's to the point where America would "rule" Britain through trade. But that didn't happen at the time.
While Smith saw the oncoming revolution as an economic problem, the founders saw it as an entirely political one. Many economic scholars believe that if the colonies had viewed their ties to Britain within the framework of The Wealth of Nations, the American Revolution might have been avoided.
Adam Smith's influence on capitalism is unparalleled, with many publications considering him the father of modern capitalism. The Wealth of Nations, with its advocacy of free trade and minimal government regulation, provides the framework under which the U.S. economic system developed.
After the American Revolution (1775–83) was over, the U.S. Founding Fathers looked to The Wealth of Nations as a guide for economic policy in the new country. James Madison, who became the fourth president of the United States, talked about The Wealth of Nations in the proceedings of Congress from February 1791. He thought Smith had some interesting ideas about a switch from precious metals to another standard of currency. Thomas Jefferson, who served as the third president of the United States, also praised The Wealth of Nations, noting:
If your views of political inquiry go further, to the subjects of money & commerce, Smith's Wealth of Nations is the best book to be read, unless Say's Political Economy can be had ... But I believe this work has not been translated into our language.
The Wealth of Nations cemented Adam Smith's reputation as the foremost economic theorist of his era, but it wasn't his only notable publication. His previous book, The Theory of Moral Sentiments, was a work of moral philosophy that contributed to the Scottish Enlightenment—an era of advances in philosophy, literature, and the sciences in Scotland. Published in 1759, The Theory of Moral Sentiments viewed human morality through a scientific lens, proposing morality developed because of the inherently social nature of humans.
The Wealth of Nations acted as a guide for advancing economic policy in Britain. At the same time, however, it was a "very violent attack" against 18th-century fiscal principles during the height of the British Empire. Adam Smith believed Britain's notion of wealth was entirely wrong. He argued for power through trade instead of the traditional British policy of hoarding gold and silver. In Smith's view Britain's tendency to stockpile wealth was a weakness, diverting energy from its profitable colonies and prompting conflicts with its neighbors—including France.
The Wealth of Nations is a product of the 18th-century Scottish Enlightenment. Many notable Scottish philosophers emerged during this era, including David Hume, famous for his 1739 publication A Treatise on Human Nature. Adam Smith was one of the leading figures of this movement, both for his moral philosophy in The Theory of Moral Sentiments and for his economic theory in The Wealth of Nations.
Adam Smith's "invisible hand" isn't actually a hand. It's a metaphor that describes how a free-market model of capitalism can regulate itself. One of the most notable and influential images from The Wealth of Nations, the invisible hand often appears in contemporary economic theory. In 2015 the economic theorist Tadeusz Szuba attempted to create a computational model of the effect of the invisible hand. In his project's abstract, Szuba explains that the experiment is a "self-programming computer able to perform computations not only for market optimization & stabilization, but also acting as 'discoverer' of e.g. new technologies necessary for market."
The world's economic history might have been different if not for Smith's uncle, who was said to have rescued his nephew from a kidnapping. During the 18th century, the Roma people—pejoratively referred to as "gypsies"—were often branded as thieves and outlaws in western Europe. A Roma group reportedly kidnapped baby Adam in Scotland, and his brave uncle rescued him on horseback. This story may have been entirely fabricated, however, since tales of Roma communities stealing children from parents were spread across the United Kingdom at this time due to racial prejudice.