Enlightenment and Economics

Thomas Mun writes in the context of the seventeenth century and the first wave of imperialism and with it the economic policy of mercantilism. This policy will be Adam Smith's main target in Wealth of Nations. During the Middle Ages, economic activity was organized at the local level by guilds. The guilds decided what would be produced, set the price of goods, and provided a safety net for their workers among other things. Imperial, mercantilist policies shifted the direction of the economy from the local to the national level and economic activity from local to global. Mercantilist policy held that the best way for a nation to become wealthy was to achieve an overbalance of trade by exporting more than it imported. This was accomplished, in part, by colonizing land in the Americas and preventing the colonies from trading with any other nation besides the "mother" country. They colonies served as a source of raw material and a market for finished goods at prices set by the mother country.

Although a kingdom may be enriched by gifts received, or by purchase taken from some other nations, yet these are things uncertain and of small consideration when they happen. The ordinary means therefore to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule; to sell more to strangers yearly than we consume of theirs in value. For suppose that when this kingdom is plentifully served with the cloth, lead, tin, iron, fish and other native commodities, we do yearly export the overplus to foreign countries to the value of twenty two hundred thousand pounds; by which means we are enabled beyond the seas to buy and bring in foreign wares for our use and consumptions, to the value of twenty hundred thousand pounds: By this order duly kept in our trading, we may rest assured that the kingdom shall be enriched yearly two hundred thousands pounds, which must be brought to us in so much treasure...

…Behold then the true form and worth of foreign trade, which is, The great revenue of the King, the honor of the kingdom, the noble profession of the merchant, the School of our Arts, the supply of our wants, the employment of our poor, the improvement of our lands, the nursery of our mariners, the walls of the kingdoms, the means of our treasure, The sinews of our wars, the terror of our enemies. For all which great and weighty reasons, do so many well governed states highly countenance the profession, and carefully cherish the action, not only with policy to increase it, by also with power to protect it from all foreign injuries: because they know it is a principal in reason of state to maintain and defend that which doth support them and their estates.

Adam Smith can rightly be considered one of the most influential thinkers of the Enlightenment. He studied moral philosophy at Oxford and in his mid-twenties conceived of an economy philosophy of "the obvious and simple system of natural liberty," which the world would come to know as capitalism. In response to the restrictive emphasis of mercantilism, Smith conceived of an expansive universe, full of opportunity for the individual or nation to exercise initiative, accumulate wealth, and serve others in the process.

In civilized society, [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whosever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer, and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but form their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities but of their advantages...

As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it...He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which is no part of his intention. Nor is it always the worse of the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.