1776 marks the beginning of what most consider to be the birth of economics - the legendary Scottish Adam Smith publishes his laissez-faire-supporting¹-invisible-hand-equilibrium work, An Inquiry into The Nature and Causes of the Wealth of Nations - colloquially known simply as, The Wealth of Nations. The work is unquestionably canonical in economics, so much so that one economist we interviewed bravely claimed “it’s more important than the Bible; even to non-economists!”

Smith, in the Wealth of Nations proposed a disproportionate number of ideas about the organization and performance of markets that survive today - nearly 300 years later, and an economic revolution or two after the publication. The concept of an “invisible hand,” which Smith barely even mentioned in his book², is widely associated with the text and Adam Smith himself. The invisible hand referred to the market structure that simply appears to organize itself, and, furthermore the simple organization of a market, even after a catastrophic or unexpected economic crash - generally returning itself to pre-disasterous state with no intervention by a greater body, whatsoever.

The book can be a difficult read for modern economists, as such, much of the knowledge extracted from it is passed along to future economists through other, more modernized theories. At the time, there was no field of economics, there was no conception of “capitalism,” and feudalism was still a rampant force leftover from the middle ages in Europe. Much of what is discussed in the book makes very little sense in a modern context - but still, the concept of an equilibrium market, where various negative forces may be applied, generally from interventionism and negative economic situations, holds strong to this day.

Many economists question whether classical economics is truly the foundation for neoclassical economics based on a number of common rejections - particularly the development of Smithian value theory, where a distinction is made between market price and natural price. If, for example, neoclassical economics is the current development of classical economics - when did each start and end? Economic historians do clearly define these periods, focusing on the response to other rejections, as we do here.

Jeremy Bentham and John Stuart Mill were also publishing in this era; discussing their famous Utilitarianism a number of implications came to modern economics. The most obvious, being the Smithian and more-so neoclassical claim that rational agents maximize their returns in any market for their own utility. This, and this alone becomes the fundamental challenge of many economic philosophers - from both the maximizing perspective, and the rational perspective, a number of instances can be found in which this idea clearly fails.

1. Actually, the term “laissez faire et laissez passe” was originated by the Pre-Classical Physiocrats, a term which means “let do and let pass” and suggests freedom of the market. A number of economists disagree whether Adam Smith did support a non-interventionist policy, though it’s mostly undeniable that his works lay the ground for a lot of non-interventionist thought. [↩]
2. A number of experts say once, a number say twice - I do have a copy of the book here, but I hardly feel like searching it. I believe the number is once. [↩]

1. Pre-Classical Economics (before 1776)
2. The Classical Era (1776 - 1870)
3. Karl Marx and Rejections of Classical Economics (1870s)
4. Neoclassical Economics and Beyond (1871 - today)
5. View all pages.

 Print This   Email This   Share/Save