1. What was Adam Smith's purpose in writing The Wealth of Nations?

2. Why does Smith think that pursuing personal interests is a more effective way to benefit society than trying to pursue the interest of society as a whole?

3. Why does Smith think that the government should stay out of economic affairs?

4. Are there any reasons why Smith's model of capitalism might not be a successful argument in favor of the free-market system? Explain

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Isai Barnett

11 January, 22:44

1. What was Adam Smith's purpose in writing The Wealth of Nations?

2. Why does Smith think that pursuing personal interests is a more effective way to benefit society than trying to pursue the interest of society as a whole?

3. Why does Smith think that the government should stay out of economic affairs?

4. Are there any reasons why Smith's model of capitalism might not be a successful argument in favor of the free-market system? Explain

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Carmelo Rose · Answer 1

1. Smith's The Wealth of Nations (also known by full name An Inquiry into the Nature and Causes of the Wealth of Nations) which was published in 1776, could be seen as a direct attack on the predominant economic system of the time which was mercantilism. Mercantilism was based on government control and stockpiling of goods.

2. Self-interest according to Smith represents the personal benefit and the actions that would lead to it. Smith believed that when people are free to trade without any restrictions and in their self interest this would lead to competition and thus would lead to creation of better quality goods and more of those goods which would then cost less. This would benefit the society and it will also allow people to spend more which would bring more money to the economy which would again benefit the people.

3. Smith wrote the Wealth of Nations in the time when the government mainly consisted of wealthy nobles who did not know how the true economy worked. He also believed that government intervention is bad for economy and the nation as it made the nation poorer as the government couldn't do as good as job as the "invisible hand of the market" could. Also he believed that government intervention did not promote competition between the companies and manufacturers which in term led to stagnation of progress.

4. Adam Smith's system rests of some form of moral and religious doctrine and in essence is guided by the idea that people would behave morally and that the invisible hand of the market would steer everything in the right direction. Unfortunately, people are not perfect and they would also pursue their interests by not so moral ways. They did not strive to advance the economy through new and better and cheaper products but sometimes they would do this through shady tactics. Therefore an fully unregulated market can increase the woes of mankind such as poverty.