Wealth of Nations

• Read Adam Smith's overview of the mercantilist system and write a brief (3-4 page) summary of his argument.
  The full text of the Wealth of Nations is online at the Library of Economics and Liberty. l v
  The link above will take you to the table of contents.
  Note: If printing out, be sure to use the PRINT PAGE button to avoid the single column format which is on the Web page.
  The key chapters are:

  • Of the Principle of the Commercial, or Mercantile System
    Paragraphs 1-11 give Smith's treatment of mercantilism;
    Paragraphs 31-33 are a key statement of his doctrine of gains from trade, often referred to as "vent for surplus"

  • Of Restraints on the Importation of such Goods as can be produced at home
    Read paragraphs 1-3 for a brief orientation.
    Paragraphs 8-17 are perhaps the best brief summary of Smith's basic propositions, including (para. 9) the Invisible Hand passage and an attack on industrial policy.
    Paragraphs 23-44 discuss possible justifications for tariffs; you should note that although Smith allows them some force, he is more concerned to restrict their application. Read especially 40-44 on the market disruption argument for slow tariff removal.

  • Of the extradorinary Restraints upon the Importation of Goods of almost all kinds, from those Countries with which the Balance is supposed to be disadvantageous
    See especially part II (paragraphs 31-46), which gives Smith's argument very sharply.

  • Conclusion of the Mercantile System The final paragraphs, IV.8.48 to IV.8.54, are the final brief and very effective summary of Smith's arguments.

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  The Corn Law Debate: Smith, Malthus and Ricardo

  • Of Bounties
    Adam Smith's attack on subsidies for corn (in England, corn means all grains -- wheat, rye, barley and Indian corn) including a "Digression on the Corn Laws." This was the start of a debate which included:
    • Thomas Malthus's The Corn Laws (1814), and
    • Malthus's Grounds of an Opinion on the Policy of Restricting the Importation of Foreign Corn (1815)

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    • David Ricardo's The Influence of a low price of Corn on the Profits of Stock (1814), and

    • Principles of Political Economy (1817)
      Chapter 7, On Foreign Trade
      first states the principle of comparative advantage.

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  Reciprocal Demand

  John Stuart Mill, in his, Essays on Some Unsettled Questions of Political Economy (1844)
  added the concept of reciprocal demand in the first essay, Of the Laws of Interchange between Nations
  . and returned to the idea in his Principles of Political Economy (1848) in the chapters:
  • Of International Trade , and especially
  • Of International Values

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  Free Trade and Tariffs

• Frederic Bastiat, Economic Sophisms (1850) is an defence of free trade for popular consumption; the Seventh Essay, Petition of The Candlemakers, is often reprinted.