Hailed as the foundation for modern economic literature, The Wealth of Nations came about in the same time period as the American Revolution and matched the Revolution in novelty and genius (Cropsey). It was printed in the same year as the Declaration of Independence and is a reflection of the times with its call for an extension of liberty. Adam Smith, the Scottish Author, gave voice to many revolutionaries’ desires for freedom in the marketplace as it refuted the practice of mercantilism and paired the abstract of freedom with an new concrete theory of free markets.
The accepted economic theory of the day was mercantilism. Mercantilism was the practice of determining a nation’s wealth by how much treasure the nation had. The main component of this practice was the government’s regulation of trade to assure that as much money as possible stayed within their economy. Adam Smith refuted this system by arguing that a nation’s wealth should be determined by the lifestyle of its people, or, in other words, by the per capita income. He also argued that “the invisible hand of the free market directed economic life more effectively and fairly than governmental intervention” (Foner 224).
The principle of free markets was founded on the principle that if a person is left free to act, their human nature compels them to act rationally in their own self interest. As every person acts in their own interest, each trade will be for the benefit of both parties, though they may not profit equally. Some of the pragmatic elements of a market economy include flexible currency, private corporations, industrialization, and consumerism.
This new theory of free markets fit exactly with the revolutionaries’ ideals of liberty and personal responsibility. As the war ended and an economy was built, the principles found in the Wealth of Nations were incorporated into their system. The writers of the United States Constitution were careful to include no mention of how an economy or a financial sector should be run, to avoid beginning a tradition of government regulation. Free market theory also affected how the banking system and treasury department were organized.
Adam Smith presented many new, exciting economic ideas which quickly spread aross the world. Its influence was especially timely in the forming of the new American nation. Through the rebuttal of mercantilism and an expansion of liberty into concrete theory, The Wealth of Nations became a foundation for modern economics.
Works Cited
Cropsey, Joseph. "Wealth of Nations, The." Encyclopedia Americana. 2009. Grolier Online. 3
Foner, Eric. Give Me Liberty!, Second Edition, Volume 1 (Give Me Liberty). 2nd ed. Vol. 1.
Holzapfel, Richard. "Lecture in BYU American Government and Society Course." Brigham
