1: It All Started with Adam

Give people their economic freedom

According to Smith, how can production and exchange be maximized and thereby encourage the "universal opulence" and the "improvement of the productive power of labor?"

a political society, characterized by flattery, fawning, and deceit - fosters quick and easy profits and wasteful consumption

According to Smith, what does monopoly power create?

the fear of losing customers

According to Smith, what restrains people from fraud and negligence?

1. the need for a well-financed militia for national defense 2. a legal system to protect liberty, property rights, and to enforce contracts and payment of debts 3. public works - roads, canals, bridges, harbors, and other infrastructure projects 4. universal public education to counter the alienating and mentally degrading effects of specialization under capitalism

According to Smith, what were the four purposes of government?

Mercantilists

believed that the world's economy was stagnant and its wealth fixed, so that one nation grew only at the expense of another - zero gain trade

Mandeville makes no distinction between vice and virtue - disagreed that the economic progress is achieved through greed, vanity, and unrestrained self-love

How did Smith disagree with Bernard Mandeville's idea that self-interest results in social benefits?

Expanding the market through worldwide trade meant that specialization and division of labor could expand, increasing the world's output

How did the expansion of a market through worldwide trade support the idea that wealth was not a fixed quantity?

Das Adam Smith Problem

A "discrepancy" in Smith's two books, The Theory of Moral Sentiments said that sympathy was the driving force behind a benevolent prosperous society while The Wealth of Nations claims self-interest became the primary motive.

Jacques Turgot

A leadign French physiocrat, wrote Reflections on the Formation and Distribution of Wealth in which he supported free trade and laissez-faire

Francois Quesnay

A prominent physiocrat who created the tableau economique

What would be the origin of wealth for the whole nation and average citizen?

Adam Smith's paramount question in The Wealth of Nations

Mercantilists

Encouraged exportation and discouraged importation

the (Scottish)Enlightenment

Name of the period in which the working class looked forward to obtaining a basic minimum of food, shelter, and clothing

Charles de Secondat Montesquieu's The Spirit of the Laws

Name the author and book that encouraged James Madison and Alexander Hamilton to push for constitutional separation of powers, a concept endorsed by Adam Smith

Bernard Mandeville's The Fable of the Bees

Name the book and author from which many economists contend Smith developed his "invisible hand" concept from

David Hume

Philosopher who claimed that real interest rates are determined by the supply of saving and capital, not the money supply

Richard Cantillon

Regarded by many as the "father of modern economics," wrote the Essay on the Nature of Commerce in General and was associated with the collapse of the John Law scandal

1. Freedom: individuals have the right to produce and exchange products, labor, and capital as they see fit (self-interest) 2. Competition: individuals have the right to compete in the production and exchange of goods and services 3. Justice: the actions of individuals must be just and honest, according to the rules of society

Smith's three ingredients to creating wealth and prosperity through democratic free-market order

system of natural liberty (today called "classical model")

System of economics that Smith thought could create "universal opulence"

production and exchange

What did Smith argue were the keys to the "wealth of nations?"

"To get money"

What did Smith claim was every nation's goal?

Favored numerous small sects which, in turn, would generate more interest among followers

What did natural liberty support relative to religion?

Natural harmony of interests between workers, landlords, and capitalists

What does the Invisible Hand lead to?

Industrial Revolution

What economic movement did Smith help set into motion?

Pin factory example

What famous example did Smith use to demonstrate his division of labor principle?

Glasgow University and Oxford University

What two universities to Smith attend?

1. political liberty 2. free enterprise

What two vital freedoms were proclaimed in Smith's The Wealth of Nations?

1. Thrift, hard work, enlightened self-interest, and benevolence toward fellow citizens are virtues and should be encouraged 2. Government should limit its activities to administer justice, enforcing private property rights, and defending the nation against aggression 3. The state should adopt a general policy of laissez-faire noninterventionism in economic affairs (free trade, low taxes, minimal bureaucracy, etc.) 4. The classical gold/silver standard restrains the state from depreciating the currency and provides a stable monetary environment in which the economy may flourish

What was Adam Smith's classical model summed up in four general principles?

Capitalism is about turning luxuries into necessities

What was Andrew Carnegie's famous quote on Capitalism?

Self-interest results in social beenfit

What was Bernard Mandeville's conclusion in his work The Fable of the Bees?

to smash the conventional view held by the mercantilists

What was one of Smith's main objectives in writing The Wealth of Nations?

1. Right to buy goods from any source, including foreign products, without the restraints of tariffs or import quotas 2. Right to charge whatever wage the market may bear 3. Right to save, invest, and accumulate capital without government restraint - important keys to economic growth

What were Smith's three aspects of natural liberty?

His mother, his friends, his books

What were Smith's three great joys in life?

opposed a large public debt

What were Smith's views on public debt?

Favored a stable monetary system based on gold and silver, and supported the doctrine of free banking

What were Smith's views on the monetary system?

Favored tax cuts as well as rigid usury laws and progressive taxation

What were Smith's views on the tax system?

1776

What year was The Wealth of Nations published?

When businessmen have an enlightened long-term view of competition, and they recognize the value of reputation and repeat business

When is Smith's "invisible hand" effective concerning a businessman's outlook?

Doctrines favoring thrift and hard work while condemning excessive luxury, usury, and "unproductive" labor

Which Calvinist doctrines was Smith greatly influenced by?

producers and monopolists

Who did Smith claim mercantilist policies benefited?

Because of his defense of private property and his critique of Plato's communism

Why did Smith consider Aristotle better than Plato?

Etienne Bonnot do Condillac

Wrote Commerce and Government in which he recognized manufacturing as productive, exchange as representing unequal values, that both sides gain from commerce, and that prices are determined by utility value, not labor value

Enlightenment

movement which embodied unbounded faith in science, reason, and economic individualism in place of religious fanaticism, superstition, and aristocratic power