The Wealth of Nations
In 1776, Adam Smith wrote "The Wealth of Nations". He wrote that trade, industry, and economic growth were driven by the division of labor, which allowed for increased productivity and efficiency. He believed that the economy was self-regulating, with supply and demand determining prices and wages. Smith criticized the mercantilist economic system for its focus on government intervention in the economy and its protectionist policies. He also criticized the Physiocratsfor their focus on agriculture as the main source of wealth and their belief in government intervention in the economy. He believed that the economic growth in Europe was slower than that in North America due to the mercantilist system and other factors. Adam Smith wrote that the state has a responsibility to protect its citizens from injustice and oppression by other citizens, and to establish a functioning justice system. He believed that the state should create and maintain public institutions and works that are useful for the country but cannot be financed by a single citizen or small group of citizens. These works include things like good roads, bridges, and canals, and ideally, they should generate revenue through tolls and port fees. Smith also believed in the importance of education, but thinks that the quality of education is better guaranteed in private schools, where teachers are rewarded according to their qualifications. He suggested that the state can play a role in creating educational opportunities for the poor, by establishing schools that charge very low fees. He believed that better-educated people are less susceptible to illusions, fanaticism and superstition and that this leads to more order and better behavior. He also believes that in free countries, the state should not interfere in the economy, allowing market forces to determine the prices of goods and services.
"The Wealth of Nations" received positive reviews from most leading Scottish and English magazines. Critics praised the book for its attention to facts, its scientific research on principles, and its comparison to the work of French economic authors. Smith's friends and associates also praised the book highly, with David Hume calling it beautiful and magnificent. Hugh Blair believed it should be the trade code for nations and Adam Ferguson called Smith master and commander of the subject matter. The book was expected to sell well in the long term. It was well received by critics and influential figures in Scotland and England. Also, it was seen as a major work in the field of economic principles and was compared favorably to the works of French economists. Marx also referenced Smith in his own work Capital and was influenced by Smith's social concerns, specifically regarding the treatment of factory workers. In the 20th century, economists also frequently referenced Smith, though during the time of Keynes, Smith's ideas on laissez-faire market seemed to take a back seat. In the end, it can be seen that Smith's ideas on the self-regulating market and the role of government in certain areas continue to be a major influence in economic discourse.