The Wealth of Nations
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Adam Smith
In US history Adam Smith was the turning point for american economics. He was best known for his book The Wealth of Nations that was created in 1776. It was apparent that he favored trying to help and expand the middle class, which sparked the Industrial Revolution. Mercantilism was the biggest form of the economy, it is when a country try to get profits by trading with other countries exporting more than it’s importing. Though this economic system had its benefits, there was a paradigm Adam Smith was trying to change was some of the mercantilist policies that he did not agree with and the involvement of the government. Through this he was able to change the US for the better, becoming the father of economics.
According to Smith a market should be controlled by self-interest, competition, the invisible hand and the free market price system. Self-interest was to be the motivator of the worker, it is what the worker would gain. For example, a baker bakes because he wants to earn money for his family, this is self-interest. Also, Smith thought that competition was a huge part of the economy. Therefore, self interest would lead to competition within the business world. Competition would be the regulator of all businesses, nearly eliminating monopolies. Additionally, Businesses wouldn’t be able to sell anything if their prices are too high, because the people would then buy from their competitors. The force pushes self-interest and competition together is called the invisible hand. The invisible hand serves its purpose to make sure that the producers provide necessities for the customers. Lastly, the free market price system is that last factor that Smith felt would led to a country’s economic success. A free market price system allowed for the market to decide the price of goods, depending on the supply and demand of individuals. Smith felt this benefited the economy a lot because there would be no government or monopoly interference in the price system. Even though Smith wanted little government action, there were some cases where he accepted government intervention. Such as, government intervention is necessary when individuals abuse the power of the government. For instance, the greed that caused the famine in Bengal in 1770, which those individuals can use the mercantilist policies to protect them. In Smith’s book, Smith had wrote that the true wealth of a nation is the stream of goods