Adam Smith-free Trade
In the earlier days of recorded history, nations traded to obtain more goods, especially those they couldn't produce themselves, which seems like a logical enough motive. But by the 17th century, this motive for trade gradually eroded. The desire for goods was replaced by the desire to accumulate gold instead. This seemingly irrational motive for international trade, which came to be called mercantilism, colors some nations' international economic policy to this day. Mercantilism flourished during the 16th and 17th centuries, especially in England, France, the Netherlands, Spain, and other West European countries. Mercantilist states felt that the primary objective of trading ...
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specialize in what they can do best and trade. Not, however, by trading goods for gold, but goods for other goods. "The revenue," he said, "of the person to whom it is paid, does not so properly consists in the piece of gold, as in what he can get for it or in what he can exchange it for" (Smith 499). This heretical statement set the stage for a controversy that has persisted for more than two hundred years. If Smith was right, as most economists nowadays believe he was, then there is no place in a rational world for measures to restrict trade through artificial barriers such as tariffs and import quotas.
Smith also elaborated how people gain by pursuing their own self-interest. "It's not from the benevolence of the baker, the brewer, or the butcher that we expect our dinner, but from their regard for their own self interest," Smith said in one of his most famous quotes (Pool and Stamos 8). People specialize in doing whatever they can do best and exchange it for something ...
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can benefit from trading internationally even if it is more efficient (that is, it can "type faster") in the production of all products than the nation with which it is trading. As Smith said, "Trade which is naturally and regularly carried on between two places, is always advantageous to both" (Smith 514). So international trade pays off even if one nation has an advantage in cost efficiency over the other.
Also, Smith elucidated the ways in which decisions made by individuals in a market setting can serve the social good "as if by an invisible hand," the case for free trade has been very clear: it makes no sense to produce goods at home if other items can be produced more cheaply ...
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"Adam Smith-free Trade." Essayworld.com. October 18, 2005. Accessed April 20, 2024. http://www.essayworld.com/essays/Adam-Smith-free-Trade/35055.
"Adam Smith-free Trade." Essayworld.com. October 18, 2005. Accessed April 20, 2024. http://www.essayworld.com/essays/Adam-Smith-free-Trade/35055.
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