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First published in 1776, the year in which the American Revolution officially began, Smith's "Wealth of Nations" sparked a revolution of its own. In it Smith analyzes the major elements of political economy, from market pricing and the division of labour to monetary, tax, trade and other government policies that affect economic behaviour. Throughout he offers seminal arguments for free trade, free markets and limited government. Criticizing mercantilists who sought to use the state to increase their nations' supply of precious metals, Smith points out that a nation's wealth should be measured by the well-being of its people. Prosperity in turn requires voluntary exchange of goods in a peaceful, well-ordered market. How to establish and maintain such markets? For Smith the answer lay in man's social instincts, which government may encourage by upholding social standards of decency, honesty and virtue, but which government undermines when it unduly interferes with the intrinsically private functions of production and exchange. Social and economic order arise from the natural desires to better one's (and one's family's) lot and to gain the praise and avoid the censure of one's neighbours and business associates. Individuals behave decently and honestly because it gives them a clear conscience as well as the good reputation necessary for public approbation and sustained, profitable business relations.
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1 Ii I ADAM SMITH II An Inquiry into the Nature and Causes of the Wealth of Nations THE GLASGOW EDITION OF THE CORRESPONDENCE Commissioned WORKS OF ADAM AND SMITH by the University of Glasgow to celebrate the bicentenary of the Wealth of Nations I THE THEORY OF MORAL SENTIMENTS Edited by o. D. RAPHAEL and A. L. MAC_'I£ II AN INQUIRY INTO THE NATURE AND OF THE WEALTH OF NATIONS CAUSES Edited by R. H. CAMVUELLand A. S. SKXr_NER;textual editor w. B. TODD III ESSAYS ON PHILOSOPHICAL SUBJECTS (and Miscellaneous Pieces) Edited by w. v. D. WlGHTMAN IV LECTURES ON RHETORIC AND BELLES LETTRES Edited by j. c. BRYCE This volume includes the Considerations concerning the First Formation of Languages v LECTURES ON JURISPRUDENCE Edited by R. L. MEEK, D. D. RAPHAEL,and v. c. ST_Xr_ This volume includes two reports of Smith's course together with the 'Early Draft' of the Wealth of Nations VI CORRESPONDENCE OF ADAM SMITH Edited by _. c. MOSSr_£Rand L S. ROSS •4ssociated volumes: ESSAYS ON ADAM SMITH Edited by A. S. SKn_rCERand T. WILSON LIFE OF ADAM By SMITH I. S. ROSS The Glasgow Edition of the Works and Correspondence of .4dam Smith and the associated volumes are published in hardcover by Oxford University Press. The six titles of the Glasgow Edition, but not the associated volumes, are being published in softcover by LibertyClassics. ADAM SMITH An Inquiry into the Nature and Causes of the Wealth of Nations GENERAL EDITORS R. H. CAMPBELL AND A. S. SKINNER TEXTUAL EDITOR W. B. TODD VOLUME 2 hl_rtyC/_s_ INDIANAPOLIS LibertyClassics is a publishing imprint of Liberty Fund, Inc., a foundation established to encourage study of the ideal of a society of free and responsible individuals. The cuneiform inscription that serves as the design motif for our endpapers is the earliest known written appearance of the word "freedom" (ama-gi), or liberty. It is taken from a clay document written about 2300 B.c. in the Sumerian city-state of Lagash. This Libert