The American Founding Fathers were fascinated with the possibility of setting up a political and social structure based on natural law, but what about economics? Were there natural laws for the marketplace?
A tome of five books on the subject was published just in the nick of time which gave them the answer. It came out in 1776 and was called The Wealth of Nations. It was written by a college professor in Scotland named Adam Smith.
Adam Smith’s Free-Enterprise Economics Tried First in America
Other writers in Europe were advocating a free-market economy, but nowhere on earth were these principles being practiced by any nation of size or consequence. Therefore, the United States was the first people to undertake the structuring of a whole national economy on the basis of natural law and the free-market concept described by Adam Smith. Among other things, this formula called for the following:
- Specialized production – let each person or corporation of persons do what they do best.
- Exchange of goods takes place in a free-market environment without governmental interference in production, prices, or wages.
- The free market provides the needs of the people on the basis of supply and demand, with no government-imposed monopolies.
- Prices are regulated by competition on the basis of supply and demand.
- Profits are looked upon as the means by which production of goods and services is made worthwhile.
- Competition is looked upon as the means by which quality is improved, quantity is increased, and prices are reduced.
The Four Laws of Economic Freedom
Prosperity also depends on a climate of wholesome stimulation protected by law. Reduced to its simplest formula, there are four laws of economic freedom which a nation must maintain if its people are to prosper at the maximum level.
- The Freedom to TRY.
- The Freedom to BUY.
- The Freedom to SELL.
- The Freedom to FAIL.
By 1905 the United States had become the richest industrial nation in the world. With only 5% of the earth’s continental land area and merely 6% of the world’s population, the American people were producing over half of almost everything – clothes, food, houses, transportation, communications, even luxuries. It was a great tribute to Adam Smith.
If you look at our nation today, it is completely opposite. Our economy is two-thirds based on consumer consumption of products. Nearly everything is imported from other countries.
The Role of Government in Economics
The Founding Fathers agreed with Adam Smith that the greatest threat to economic prosperity is the arbitrary intervention of the government into the economic affairs of private business and the buying public. Historically, this has usually involved fixing prices, fixing wages, controlling production, controlling distribution, granting monopolies, or subsidizing certain products.
Nevertheless, there are four areas of legitimate responsibilities which properly belong to government. These involve the policing responsibilities of government to prevent:
- ILLEGAL FORCE in the market place to compel purchase or sale of products (i.e. required to buy health insurance).
- FRAUD in misrepresenting the quality, location, or ownership of the item being sold or bought.
- MONOPOLY which eliminates competition and results in restraint of trade.
- DEBAUCHERY of the cultural standards and moral fiber of society by commercial exploitation of vice – pornography, obscenity, drugs, liquor, prostitution, or commercial gambling.
The content of this post was contributed by the 15th Principles on Freedom from the book, “The 5,000 Year Leap” by Cleon Skousen. Only half of the content was presented here today. To pick up your own copy of the book, click below:
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