History General economic view at the time: gold and silver = wealth Nations focused on exports over imports
More History1776- Smith rejected the Townshend act which declared that there would betaxes on tea, paint, glass etc…Refused this act because of his beliefs:• Nations wealth is in goods and services (not silver and gold)• Basically embodied mercantilism: developed industry based on the balance of trade in Europe.• Wrote Wealth of Nations to express views
Division of Labor“In those great manufactures, on thecontrary, which are destined to supply the greatwants of the great body of the people, everydifferent branch of the work employs so great anumber of workmen, that it is impossible to collectall into the same workhouse.”-Claiming that division of the manufacturers helpssupply a greater amount of products-Example: Trade of pin-making
EconomicsLaissez faire economics: No government interference - Tariffs/taxes - Restrictions/limitations - CorruptionAllow free competition, free tradingLet the market expand to its full production capabilitiesAdam Smith disagreed on one thing: government involvement is necessaryto uphold contracts, laws, needed for securityGovernment needed to get involved after stock market crash-1929New deal-1930
Roles of Government - Defense - Justice - Education - Maintenance of commerce -Fair and clear taxation
Accumulation of CapitalNations need to save money for economic progressInvest in labor-saving technologiesMore investing/saving = more efficient production - Everyone will become wealthier
Foreign TradeCountries should do what they are best at -ex: France should produce and trade grapes because they areplentiful; not ScotlandRestrictions of foreign trade should be prohibited
Reference TodayHow would you think that the government is involved with the economytoday?And what are some ways that they restrict the market?