Economic theories have dominated the last three centuries of world history, and it is imperative that we understand their development and implications for the future. Starting in 1776 with Adam Smith and his seminal work The Wealth of Nations, early economic theory championed the free market and individual liberty. Smith identified the division of labor, money, and the invisible hand as crucial components to a functioning economy, formalizing many basic economic tenets. At the core of Smith’s ideas was a belief in the power of individuals to make correct choices about production and consumption, rather than an ubiquitous central authority. The principles of limited government espoused by Smith were a sharp contrast to the view of monarchy that persisted throughout the 18th century. In the infant United States, Smith’s theory found purchase, driving a century of rapid industrialization and expansion.
To read Public Interest Institute’s INSTITUTE BRIEF, A Short History of Economic Theory, please click HERE.