Pre-Reading Activities

1. Use a dictionary and match the synonyms. Mind the use of the prepositions.

Reading

Read the text and assimilate its information.

Between the 16^th and 18^th centuries the major countries of Europe believed in the economic theory of mercantilism. Mercantilists claimed that nations should behave as if they were merchants competing with one another for profit and like merchants, nations should protect business and industry.

But for a group of 18^th-centuary French philosophers and economists, the suggestion that nations should protect their own business and industry made no sense at all. Those were the physiocrats. They claimed that the products of agriculture and other natural resources were the true source of wealth. In other words, since real wealth came from the land, it followed that the best thing the government could do would be to keep its hands off business and let nature take its course. This idea was expressed in the slogan «laissez faire», (let people do as they choose).

The year of 1776 became very significant for the development of the world economic thought, as one of the most influential scientific works, The Wealth of Nations, written by Adam Smith, the father of economics, was published. The author objected to the principal economic beliefs of his day. He disagreed both with the physiocrats and mercantilists. In Smith’s view, the nation’s wealth depended on production, not agriculture alone.

The heart of Smith’s economic philosophy was his belief that the economy would work best without any government regulation. In this case, self-interest would lead companies to produce only those products that consumers wanted, and to produce them at the lowest possible cost. They would do this to outperform their competitors and gain the greatest profit. He believed that self- interest would benefit the society as a whole by providing it with more and better goods and services at the lowest prices. To explain why the society benefits when the economy is free of regulation, Adam Smith used the term «invisible hand», meaning the economic forces that today are called supply and demand.

In his work «The Wealth of Nations» Adam Smith sounds realistic and practical, respectful of the classical past but at the same time dedicated to the great discovery of his epoch – progress. Although he was writing for his generation, his thoughts and ideas have always attracted the attention of all economists, that is why Adam Smith has remained a significant figure in the history of economic thought for more than 2 centuries.

Date: 2015-12-17; view: 837