Yes, he did that, but way more he created an idea that was simple and that all policy makers could consider. It really was elementary. You understand that man makes bargains and this must be facilitated for an economy to prosper.
This idea has been challenged but has always won the day. Now no one really seriously argues otherwise. There are additional ideas that need also to be propagated in order to eliminate poverty but we have waited this long.
All knowledge is based on foundational conceptualizations. Adam Smith put our modern economy upon a rational basis that ended mercantilism as a dominant idea, although sadly we still see many still struggling for the advantage the same old ways.
Adam Smith Proved Ideas Matter
Smith, more than anyone else, laid the intellectual foundations of free trade and free markets
Lawrence W. Reed
July 20, 2015
Adam Smith was baptized on June 5, 1723, in Kirkcaldy, Scotland. It’s not known for certain, but presumed that he was either born on that very day, or a day or two before. Whichever date it was, he entered a world that his reason and eloquence would later transform.
For 300 years before Smith, Western Europe was dominated by an economic system known as “mercantilism.” Though it provided for modest improvements in life and liberty over the feudalism that came before, it was a system rooted in error that stifled enterprise and treated individuals as pawns of the state.
Mercantilist thinkers believed that the world’s wealth was a fixed pie, giving rise to endless conflict between nations. After all, if you think there’s only so much and you want more of it, you’ve got to take it from someone else.
Mercantilists were economic nationalists. Foreign goods, they thought, were sufficiently harmful to the domestic economy so that government policy should be marshaled to promote exports and restrict imports. Instead of imported goods, they wanted exports to be paid for by foreigners in gold and silver. To the mercantilist, the precious metals were the very definition of wealth, especially to the extent that they piled up in the coffers of the monarch.
Because they had little sympathy for self-interest, the profit motive and the operation of prices, mercantilists wanted governments to bestow monopoly privileges upon a favored few. In Britain, the king even granted a protected monopoly over the production of playing cards to a particular, highly-placed noble.
Economics in the late 18th century was not yet a focused subject of its own, but rather a poorly organized compartment of what was known as “moral philosophy.” Smith’s first of two books, The Theory of Moral Sentiments, was published in 1759 when he held the chair of moral philosophy at Glasgow University. He was the first moral philosopher to recognize that the business of enterprise — and all the motives and actions in the marketplace that give rise to it — was deserving of careful, full-time study as a modern discipline of social science.
The culmination of his thoughts in this regard came in 1776. As American colonists were declaring their independence from Britain, Smith was publishing his own shot heard round the world, An Inquiry into the Nature and Causes of the Wealth of Nations, better known ever since as simply The Wealth of Nations.
Smith’s choice of the longer title is revealing in itself. Note that he didn’t set out to explore the nature and causes of the poverty of nations. Poverty, in his mind, was what happened when nothing happens, when people are idle by choice or force, or when production is prevented or destroyed. He wanted to know what brings the things we call material wealth into being, and why. It was a searching examination that would make him a withering critic of the mercantilist order.
Wealth was not gold and silver in Smith’s view. Precious metals, though reliable as media of exchange and for their own industrial uses, were no more than claims against the real thing. All of the gold and silver in the world would leave one starving and freezing if they couldn’t be exchanged for food and clothing. Wealth to the world’s first economist was plainly this: goods and services.