An Inquiry into the Nature and Causes of the WEALTH OF NATIONS
By Adam Smith
1776
Introduction
Introduction
I believe that economic freedom is linked to political freedom, and that in order to have a free society, the citizens must enjoy both. The idea of political freedom, which includes the freedom of thought (which therefore includes the freedoms of speech and press) and the right of consent (the right to vote), is much more familiar to our American public, albeit I would still argue that the foundational principles for the political freedom outlined in the Declaration of Independence and then provided in the Constitution are not well understood by the general public. That being said, it seems to me that economic freedom is nevertheless still the less familiar and the less understood of the two freedoms mentioned among the general American public, on either side of the political aisle.
As you watch or listen to political debate regarding economic policy, you may notice as I have that pretty much every discussion is a variation on a given theme, a restatement of this single core question: should we let "the market" work out the issue or should we have government intervene with the market via some sort of regulation? Notice that the reality of 'the market' is not what's being debated, only whether government regulations on certain components within the market or within a given market should or should not be implemented. In other words, should we alter the market or not? I have never heard anyone suggest that the nature of the discussion is anything otherwise.
It seems to me also that at the core of the argument is the concession by all parties that 'the market' seems to be the natural default economic system, which would by extension make capitalism the natural or default economic system, and any economic question in the political sphere seems therefore to explore to what degree of effective departure from the market should we pursue -- on the one extreme, no degree of departure, meaning pure capitalism and no regulation by government, 'let the market work naturally'; and on the other extreme, complete departure, meaning no capitalism and complete regulation, often referred to as central planning.
When we talk about economic freedom, it is important to understand that 'the market' is not an entity or a tangible object, but it is a word that represents people and their economic interactions (namely, their trading patterns). So, it is important to understand that regulation on 'the market' is actually regulation on the people that 'the market' represents in a given discussion, and freedom in 'the market' means freedom for the people that 'the market' represents. Therefore, for better or worse, more pure capitalism means more economic freedom for the participants, and more regulation means less economic freedom for the participants.
It seems to me therefore that it could then be said that a working knowledge of 'the market,' how it works (including how it responds to regulations), and how such changes affect economic freedom, would be desirable for all parties, from the voter to the politician, regardless of political affiliation. Proponents of capitalism should know what they actually defend, opponents of capitalism should know what they actually oppose, and new-comers to the debate should learn about it so they can come to their own conclusion.
While it seems to me the logic of such working knowledge is difficult to refute, it also seems to me that there is nevertheless a lack of general understanding (not to mention comprehensive understanding) among the American people about what the market actually is and how it works. And it puts them and the discussion (and by extension, I would argue, the country and our notion of freedom) at a devastating disadvantage, especially those who claim to be proponents of capitalism, economic freedom, and freedom in general. If one does not know what the market is or how it typically behaves, not to mention how it fosters freedom (both general and economic), how is one to know, or care for that matter, whether a particular government economic measure is a move toward or further away from a market system? Without that baseline, how can progression or regression of economic freedom be measured? I would propose therefore that the ignorance (not just the lack of effective communication of the proponents of capitalism) of the populous presents the greatest obstacle for the proponents of capitalism, and the greatest advantage to the opponents of capitalism.
For these reasons, I decided to Review Wealth of Nations, by Adam Smith. My goal is to summarize and explain the principles therein contained chapter by chapter, so that we all can be better acquainted with these principles. I do not pretend to be an expert on Adam Smith or capitalism or economics. But I am an avid learner, and I suspect that you and I will be more expert on the subjects by the time we finish the book than many participating in the current economic debate.
You may have noted that the book is more than 200 years old, and may think that it must surely be considered outdated. That it is old I do not dispute, but whether it is outdated remains to be seen. True principles don't become outdated, we just forget then rediscover them. I plan on review other works on economics in the future, but since Adam Smith is considered the "father of economics" (not just 'modern economics,' but 'economics' as a whole), I thought that this would be a good place to start. I hope that you enjoy this Review.
As you watch or listen to political debate regarding economic policy, you may notice as I have that pretty much every discussion is a variation on a given theme, a restatement of this single core question: should we let "the market" work out the issue or should we have government intervene with the market via some sort of regulation? Notice that the reality of 'the market' is not what's being debated, only whether government regulations on certain components within the market or within a given market should or should not be implemented. In other words, should we alter the market or not? I have never heard anyone suggest that the nature of the discussion is anything otherwise.
It seems to me also that at the core of the argument is the concession by all parties that 'the market' seems to be the natural default economic system, which would by extension make capitalism the natural or default economic system, and any economic question in the political sphere seems therefore to explore to what degree of effective departure from the market should we pursue -- on the one extreme, no degree of departure, meaning pure capitalism and no regulation by government, 'let the market work naturally'; and on the other extreme, complete departure, meaning no capitalism and complete regulation, often referred to as central planning.
When we talk about economic freedom, it is important to understand that 'the market' is not an entity or a tangible object, but it is a word that represents people and their economic interactions (namely, their trading patterns). So, it is important to understand that regulation on 'the market' is actually regulation on the people that 'the market' represents in a given discussion, and freedom in 'the market' means freedom for the people that 'the market' represents. Therefore, for better or worse, more pure capitalism means more economic freedom for the participants, and more regulation means less economic freedom for the participants.
While it seems to me the logic of such working knowledge is difficult to refute, it also seems to me that there is nevertheless a lack of general understanding (not to mention comprehensive understanding) among the American people about what the market actually is and how it works. And it puts them and the discussion (and by extension, I would argue, the country and our notion of freedom) at a devastating disadvantage, especially those who claim to be proponents of capitalism, economic freedom, and freedom in general. If one does not know what the market is or how it typically behaves, not to mention how it fosters freedom (both general and economic), how is one to know, or care for that matter, whether a particular government economic measure is a move toward or further away from a market system? Without that baseline, how can progression or regression of economic freedom be measured? I would propose therefore that the ignorance (not just the lack of effective communication of the proponents of capitalism) of the populous presents the greatest obstacle for the proponents of capitalism, and the greatest advantage to the opponents of capitalism.
For these reasons, I decided to Review Wealth of Nations, by Adam Smith. My goal is to summarize and explain the principles therein contained chapter by chapter, so that we all can be better acquainted with these principles. I do not pretend to be an expert on Adam Smith or capitalism or economics. But I am an avid learner, and I suspect that you and I will be more expert on the subjects by the time we finish the book than many participating in the current economic debate.
You may have noted that the book is more than 200 years old, and may think that it must surely be considered outdated. That it is old I do not dispute, but whether it is outdated remains to be seen. True principles don't become outdated, we just forget then rediscover them. I plan on review other works on economics in the future, but since Adam Smith is considered the "father of economics" (not just 'modern economics,' but 'economics' as a whole), I thought that this would be a good place to start. I hope that you enjoy this Review.
