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Adam Smith's Wealth of Nations

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Adam Smith's Wealth of Nations

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  • April 15, 2002
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The pivotal second chapter of Adam Smith's Wealth of Nations, "Of the Principle which gives occasion to the Division of Labour," opens with the oft-cited claim that the foundation of modern political economy is the human "propensity to truck, barter, and exchange one thing for another."1 This formulation plays both an analytical and normative role. It offers an anthropological microfoundation for Smith's understanding of how modern commercial societies function as social organizations, which, in turn, provide a venue for the expression and operation of these human proclivities. Together with the equally famous concept of the invisible hand, this sentence defines the central axis of a new science of political economy designed to come to terms with the emergence of a novel object of investigation: economic production and exchange as a distinct, separate, independent sphere of human action. Moreover, it is this domain, the source of wealth, which had become the main organizational principle of modern societies, displacing the once-ascendant positions of theology, morality, and political philosophy. Smith's formulation transcends a purely descriptive account of the transformations that shook eighteenth-century Europe. A powerful normative theory about the emancipatory character of market systems lies at the heart of Wealth of Nations. These markets constitute "the system of natural liberty" because they shatter traditional hierarchies, exclusions, and privileges.2 Unlike mercantilism and other alternative mechanisms of economic coordination, markets are based on the spontaneous and free expression of individual preferences. Rather than change, even repress, human nature to accord with an abstract bundle of values, market economies accept the propensities of humankind and are attentive to their character. They recognize and value its inclinations; not only human reason but the full panoply of individual aspirations and needs.3 Thus, for Smith, markets give full...