ADAM SMITH Bio Scottish Social philosopher/pioneer of political economy Wrote Theory of Moral Sentiments and An Inquiry into

nto the Nature and Causes of the Wealth of Nations Graduated from University of Oxford and University of Glasgow Abducted by gypsies as a child Theory Adam Smith contributed to economic theory in his book The Wealth of Nations. In this work, he stated 3 principles. First, he attacked mercantilism and said that if one country sells it cheaper than you make it, then you should buy it instead of trying to protect home industries with tariffs. Second, he created the Labor Theory of Value. This theory states that the true wealth of a nation is constituted by the labor of individuals. Thirdly, he believed that the government should not interfere in the economy. He gave the government 3 tasks: protecting society, defending individuals, and keeping up extremely expensive public works. Smith believed in free trade as a fundamental economic standard. If the government didnt interfere, the economy would grow and the distribution of goods would be determined naturally rather than by the government, which would drive prices up. Smiths ideas became the basis of economic liberalism in the 19th century. Quote

Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men. This quote is a perfect statement of Smiths ideal economic system. In Smiths eyes, the government should leave business alone to individuals so that they can pursue their own interests and wealth. These individuals compete with other, which lowers prices, creating a strong, flourishing, competitive economy. The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security. This quote argues Smiths perspective. He says that when people are allowed to pursue their own interests, the economy naturally grows to wealth and prosperity. Evalutaion I agree with Smiths theory. The wealth of a nation is truly the labor of that nation, because more labor leads to an increased ability to create things and services of value, which then increase the money coming into the country. Free economy works better than mercantilism, because when people are pursuing what they really want, they can scale obstacles much more efficiently than when the government is telling them what to do. Also, when the government

protects home industries, there is no pressure for the industries to increase their production or quality of their products. When they face competition, they need to constantly improve in order to stay on top, thus resulting in the cheapest and highest quality goods.