Classical Economic Principles & the Wealth of Nations

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Michael Ashley. Classical Economic Principles & the Wealth of Nations

Introduction

Origins of Classical Thought

Liberty and freedom form the basis for classical principles

The primary objective is to raise living standards

Basic Prinicples

Who should make key economic decisions?

Free Markets

Markets are extremely complex

Free markets make efficient use of resources

Alternatives to Free Markets

Objections to Free Markets I: Inadequate Wages

Free markets fail to provide for an adequate wage

A digression

Minimum wage laws harm the most vulnerable workers

Objections to Free Markets II: More Objections

Free markets aren’t really free

Free markets provide excessive rewards to the rich

Free markets produce an unfair distribution of income

Free markets are disruptive

Free markets encourage price gouging during emergencies

Free markets lead to recessions and depressions

Low Tax Rates

Low tax rates encourage work

Low tax rates encourage financially responsible behavior

Low tax rates direct resources to more productive uses

Limited Government

Intrusive governments reduce freedom

Powerful governments promote inefficiencies in the private sector

Expansive governments need high tax rates

Governments tend to be inefficient

Government Failure

The fallacy of free market failures

The size and scope of government

Government failures versus free market failures

Regulating greed and speculation

Regulating the environment

Government’s Role in Creating Wealth

Government’s primary responsibilities

Misconstruing harm and injustice

Public goods and available resources

Public goods and helping those in need

Public goods and efficiency

Government efficiency—laws versus regulations

Property Rights

Why property rights are essential to prosperity

Government cannot compensate for a loss of property rights

A Stable Currency

The essence of money

Money: good as gold or a politician’s promise

A brief digression into fiscal policy

Money and spending—a simple explanation

Money and spending—some complexities

Summing Up Book I

Footnotes

Bibliography

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At the turn of the 21st century the application of certain classical principles in China and India has helped to lift hundreds of millions of people from conditions of abject poverty… the greatest antipoverty program in history. At the same time, developed nations have abandoned some of these same principles. This has contributed to pockets of poverty and economic hardship in the midst of plenty.

It has been more than two and a half centuries since Adam Smith wrote The Wealth of Nations. Smith’s objective was straightforward: identify and explain ideas and principles that would produce the highest living standards for the greatest number of people. He and those who followed in his wake provided a prescription for creating widespread prosperity. The prescription involves key classical principles… principles that are as relevant today as ever before.

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Time and again we might observe freer markets, lower tax rates and less government spending being followed by periods of strong growth and widespread prosperity. In contrast, we might witness that increases in government spending, regulations and higher taxes are followed by disappointing economic conditions.

In spite of what may appear to be an obvious conclusion, we can’t have absolute proof that either set of policies caused the subsequent events. Such proof would involve turning back the clock and running the same conditions over with different policies. Since we can’t do this, anyone can claim the conditions that followed certain policy changes were not related to those policies.

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