Business 1050 Engh Hillary Fair Chapter 11 Excerpt from The Wealth of Nations by Adam Smith The Wealth

h of Nations, written by Adam Smith, is an integral part of the development of the economic system functioning today. Smith was an influential philosopher during the 18th century. He wrote several works commenting on the economic structure of countries and how that tied directly to their prowess. The excerpt includes an examination of how an economy fluctuates and the different inputs that affect this phenomenon. He covers several important topics including the Invisible Hand, monopolies, and the importance of private property. Smith published the text in 1756, but it did not gain notoriety until 1776, when it was mass printed to spur a separation between the British Colonies in North America and Britain itself. It was written in the buildup before the Revolutionary War, facing the possibility of a new nation created before him, and set out a standard to economic structure that led the budding country to success. The text applies to business now just as much or more than it did when it was written because of its content. Smith wrote about the ideals of economy and its effects on business, and we still use that groundwork today. It could be argued that Smith took Capitalism and brought it to the masses, making it reachable to every economic level. From his work, capitalism spread like wildfire. This text gives a clear view of the past and its ideals, the pitfalls of reality, and the potential of the future in regards to our economic system. There are questions posed that still need answering today, like the amount of regulation in economy that is beneficial, and when it becomes a hindrance. Smith gives five key ingredients to Mercantilism, and by extension economic success. They are; to increase exports, limit imports, maintain a division of labor, raise prices and keep a stagnant internal economy. He also discusses the profit-motive, private wealth or capital, free markets, laissez-faire, and the Invisible Hand. Their individual influences on economies are explained in depth. As a brief over view, the profit motive is the overall compulsion to produce more than is taken in, and maintain a monopoly over that production in order to ensure that profits have been maximized. Private wealth is capital that the government has no stake over. It ties directly to the right to own property and the ideal of free enterprise, that an individual does what is best in their own self-interest, acquiring property and capital. In turn this capital is recirculated though the economy thus benefiting the whole. Free markets are those who have no government influence or regulation. Smith talks about the pitfalls that are associated with free markets, and clearly state how and why these will never be successful, long lasting economic systems. Laissez-faire is the idea that economics should be left to its own devices. That any influx in demand or supply with be naturally sorted and corrected by the market. There is a minute level of regulation, however the government would not input capital or deprive it in order to change the economies pattern. The invisible hand is a metaphorical view on the self-interests of the individual aiding the interests of society as a whole. Smith gives this metaphor in conjunction with the idea that because an individual is most concerned with directing industry in such a manner as its produce may be of the greatest value industries will self-regulate and market values balance to demand. This is all

made possible by self-interest, hence an unintended consequence or Invisible Hand. Adam Smith and Capitalism Responses by Hillary Fair The question must be posed as to whether these principles are actually applicable, scientific, and realistic. They are scientifically sound in that they can be proven through repetition. They can also be disproved by the fact that every repetition will produce a different result, whether it be by the smallest difference or an enormous derivation. Economics is a science regulated by principles and systems. But how could one possibly put human nature into an equation? Smith wrote this piece in order to bring to light the possibilities that an economic system holds. He discusses the many inputs that could potentially collapse or expand a system and the benefits of each. Up until this point the long lasting implications of regulation had not been fully explored by those building a new nation and this look into what made a successful economy bolstered the United States initial success.