Paper Summary:

Adam Smith's seminal text "The Wealth of Nations" stands as a tribute to the value of capitalism. Fundamentally, its author espouses an optimistic faith in the essential rationalism of human society and human desires. The paper shows how Smith believes in the ability of human economic impulses to balance one another in a state of equilibrium involving supply, costs, and consumer demand, if there is no interference by outside forces. Smith suggests that there is an 'invisible hand' that guides market forces in a harmonious way and that the state should not interfere with it. The state should only enforce laws so conflict between human beings is kept to a minimum and so the economy can function. The paper explains that the existence of this 'invisible hand' is not generated purely by the economy, but by the nature of modern, human social life that Smith believes is, in its essence, rational and good.

From the Paper:

"Smith allows that there is a different kind of value attached by the market to money, as money has a place setting value rather than a value in its intrinsic utility, as in a barter system of goods. Still, Smith believes that the market will always set a fair natural value for a good, based upon the labor required to make a good and the good's costs of production, and the rent expended by the manufacturer. Natural prices made up of wages, profit and rent may be distinct from the market price as determined by supply and demand but the natural price and the market price usually or eventually meet in a state of equilibrium."

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