Adam Smith & John Maynard Keynes

 Smith sought to convince people that “the wealth of a nation would be promoted with vastly greater effectiveness by the ‘obvious and simple system of natural liberty’ than by national planning of the mercantilist sort” (Mitchell 48). As for the implementation of Smith’s ideas, his influence on today’s economy is probably greater than it was on his contemporaries or those who lived immediately after his works were published.

“An Inquiry into the Nature and Causes of the Wealth of Nations” (or more commonly “The Wealth of Nations”) by Adam Smith, published in 1776 is widely considered to be the first modern work in the field of economics. Up until “The Wealth of Nations” it was generally accepted that in any economic transaction one side always “won”. In other words, either the buyer or seller got to “put one over” on his “opponent” — one went home happy, the other went home and eventually got angry at himself for being a dupe. Smith rejected this notion, however, and stated that “a voluntary, informed transaction always benefits both parties”: when the buyer gives something of value to the seller in exchange for something else of value, both parties “win”. This is because the buyer values what the seller is selling more than what he is giving to the seller in exchange for it. And, for his part, the seller is all too happy to part with what he is selling for the buyers property because he values that more. In short, each party gets something he wants more in exchange for something he wants less — they both benefit.

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This book is a clearly written account of the political economy at the dawn of the Industrial Revolution. Mercantilism was the ruling economic principle then. “The Wealth of Nations” attacks two fundamental principles of mercantilism: the idea that protectionist tariffs serve the economic interests of a nation. the idea that large reserves of gold bullion or other heavy metals are necessary for a country economic success.

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