Adam Smith's Economy
1776 AD
1776 1776
04.15W55.50N
MISC

EDINBURGH, SCOTLAND
	Though his book changed the world, few people even noticed when Adam Smith's, "An Inquiry into the Nature and Causes of the Wealth of Nations" was first published in 1776.
	Smith was born and raised near Edinburgh, Scotland, and though he initially wanted to become an Episcopal clergyman, he ended up as a university professor.
	Later Smith took a job as tutor to the teenage step-son of a prominent politician, a position that took him to France for three years and gave him time to start his book (usually referred to by its short title, "Wealth of Nations").
	In "Wealth of Nations" Smith argued that a country's wealth comes from the ability of its people to make things, and that the more efficiently they make things, the wealthier the nation will become.
	Building on that thought, he added that people become more efficient as they specialize and get to know one task extremely well, and as they use specialized machinery.
	But for people to specialize, he said, there must be a large demand for the product they are making. For example, it would be impossible to earn a living just making pin heads if there were only a few hundred people to sell pins to. And for the same reason, nobody would invent a pin-head making machine unless there was a large demand for pins.
	To ensure a large market, Smith favored trade between individuals and nations with the least possible government regulation.
	He denied that regulation was necessary to prevent some from becoming wealthy at the expense of others. This doesn't happen, he said, because both parties must benefit from trading. If they don't benefit, he said, they won't make the trade.
	For the same reason, he also opposed the common practice of limiting imports to help home-country manufacturers. By doing this, he said, a government might help its manufacturers, but only at the expense of its consumers, who will have to pay for the higher-priced product.
	Smith also described the law of supply and demand, which simply says that when the supply of a product or service is plentiful, the price drops, and when the supply is scarce, the price goes up.
	Today, Smith is particularly respected by capitalist economists, also called "free-market" economists. These economists say that the best economy is the one with the least government involvement. In whole or partial opposition to Smith are socialist and Marxist economists, who promote an active -- or in extreme cases, complete -- government role in the economy.
	The capitalist system Smith describes has also been accused of turning people (such as his hypothetical pin-head maker) from being craftsmen to mere cogs in giant machines.