Adam Smith’s Interpretation of The Free Market as Illustrated in His Book, Wealth of Nations

Adam Smith, whose Wealth of Nations was published in 1776, was the father of modern economics and capitalism. He argued, that the free operation of market forces was the best recipe for a flourishing and growing economy. If everyone is as free as possible to pursue his or her own self-interest, he or she will be led by an invisible hand1 to promote the welfare of society as a whole. Many would agree that societies that consist of people pursuing their own self-interests are the most effective way to increase the wealth.

There are many reasons why self-interest is the most effective technique of increasing wealth in society. Within a community/society/countries, there are two main assemblies, the government and the citizens. Both assemblies play an important role in the market place, the government is there to regulate any conflicts and minimize problems and bring social justice to society, other than that, they have no place in the market place. While on the other hand, the citizens main role in society is to produce as many goods and meet societys needs and wants, in order to increase the wealth. As Smith once stated Government should not repress self-interested people, for self-interest is a rich natural source.2 Individuals in society knows best what is good for them, and that under the influence of the profit, it will motive them to understand what society wants and needs and turn their self interest into products society desired.

Smiths theory has influenced many of todays foundation of the economy in Western Europe and North American countries. The main reason is very much obvious, Smiths main idea, perfect competition and a free market system. An example of a free market country would be Canada. Smith believed an economy where competition is the vehicle that drives competitors to renovate their self-interest in order to stay in the free market, otherwise, the invisible hand will knocked them of the market.

A clear sign of succession of Smiths theory of capitalism can be compared with Karl Marxs theory about communism. A capitalist belief is that each individual is continually exerting himself to find the most advantageous employment for whatever capital he can command. In Adam's opinion each person has the right to the pursuit of happiness, and that each person has to take it in their own hands to advance within society. Marx disagrees by saying that when a person betters himself, he does not improve but instead endangers society. In Adam's idea of society each person can do whatever they want to advance them and each person can pursue happiness in whatever fashion they believe to be the best. Technology creates new and better ways to do things, which allow society to grow and become more advanced.