Lecture about Adam Smith

Adam Smith can be considered as the founder of economics as we know it today and wrote the very first book based solely on economic theory called “The Wealth of Nations”. He wanted to research the reasons why one country was wealthier than other countries. He concluded that the amount of control a government has over its economy determines how much trade takes place both within a country and also internationally such as the slave trade. Smith used England as an example as the English Civil War from 1641-51 had changed the economic growth of the country dramatically. After the King was defeated in 1451, the state control of the economy collapsed and the mercantile traders, who until this time governed the trade industry in England, were forced to lose their power. This fall of power enabled free trade throughout England where everyone was allowed to trade and goods from the Caribbean such as sugar, cotton and tea were important as for the first time the country had a rich and health supply of goods to trade around the world boosting its economy and showing its power.

Smith also believed that if a government left its people to trade by themselves it would create a more stable economy and governments who prevent free trade do more harm than good as the economy becomes stagnant. If a person was a skilled metal worker and another person was skilled at woodwork then naturally they would trade their skills in order to make a high quality product such as an axe.  According to Smith this can help to explain human behaviour as people will not want to buy goods if they are poor quality but if they are good quality then people will want to buy them and they will recommend the product to others.