Teacher Example Blog Post: Week 1 - Capitalism

Week 1 - Theme: Capitalism (Economics)


Teacher Text: 

Adam Smith - The Wealth of Nations (1776)

You can read the full text here
http://www.econlib.org/library/Smith/smWN.html


The Invisible Hand

The core of Smith's thesis was that man's natural tendency toward self-interest - in modern terms, looking out for No.1 - results in prosperity. By giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening all markets to competition (international as well as domestic - Smith lived in the age of government chartered monopolies), people's natural self-interest would bring about universal opulence with very little effort from a nation's government. This free-market force became known as the invisible hand, but it needed support to bring about its magic.
Boiling his principles down to essentials, Smith believed that a nation needed three elements to bring about universal prosperity:

Enlightened Self-Interest

Smith wanted people to practice thrift, hard work and enlightened self-interest. He thought the practice of enlightened self-interest was natural for the majority of people. In his famous example, a butcher does not supply meat based on good-hearted intentions, but because he profits by selling meat.

Limited Government

Smith saw the responsibilities of the government being limited to the defense of the nation, universal education, public works (infrastructure such as roads and bridges), the enforcement of legal rights (property rights and contracts) and the punishment of crime. The government would step in when people acted on their short-term interests, and would make and enforce laws against robbery, fraud and other similar crimes. He cautioned against larger, bureaucratic governments.

Solid Currency and Free-Market Economy

The third element Smith proposed was a solid currency twinned with free-market principles. By backing currency with hard metals, Smith hoped to curtail the government's ability to depreciate currency by circulating more of it to pay for wars or other wasteful expenditures. With hard currency acting as a check to spending, Smith wanted the government to follow free-market principles by keeping taxes low and allowing free trade across borders by eliminating tariffs.

(Source: http://www.investopedia.com/articles/economics/09/adam-smith-wealth-of-nations.asp)






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