The first stage, known as commercial capitalism , occurred between 1450 and 1750. It was brought about by the five factors which produced the Economic Revolution and was affected by geographic discoveries, colonization, and increase in overseas trade.
During a three-year tour of Europe as traveling tutor of the stepson of Charles Townshend, Smith met the leading thinkers of the Age of Enlightenment, including Benjamin Franklin and Dr. Samuel Johnson.
Thus, the two laws of the market — self-interest and competition — react upon each other and form a balance, guaranteeing the survival of society. In addition, the laws of the market not only insure that prices are competitive, but they also determine the quantities of goods produced.
While traveling, Smith worked on his Wealth of Nations and completed the book in 1776, ten years after his return to Scotland. The Wealth of Nations, which resembles an encyclopedia, is far more than a mere textbook on economics. One critic calls it "a history and criticism of all European civilization.".
Adam Smith (1723-90), a quiet, nervous, scholarly Scottish bachelor, taught first at Oxford University and then at the University of Glasgow. He gained fame as a moral philosopher, and during his lifetime, his book The Theory of Moral Sentiments earned the critics' appraisal as his best work. Consequently, he was already well known ...
Wealth of Nations appeared in England just as the Industrial Revolution was beginning, a fact unknown to Adam Smith and the capitalistic class of his day. In England, the government controlled practically every sector of the economy, including prices, wages, hours of work, production, and foreign trade.
3. The law of accumulation refers to the accumulation of profits, which are put back into production. By accumulating profits, capitalists can purchase additional machinery, which will stimulate further division and specialization of labor, thereby boosting productivity.