Scottish philosopher Adam Smith publishes The Wealth of Nations, ushering in the classical period of political economy.

Adam Smith’s The Wealth of Nations, published in 1776, is one of the most influential works in the history of economics. In this book, Smith examines how nations create wealth and argues that economic prosperity comes from productivity, trade, and efficient markets rather than from accumulating gold or strict government control. Writing during the decline of mercantilism, Smith challenged the idea that governments should heavily regulate trade to maintain national wealth. Instead, he proposed that economies function best when individuals are free to pursue their own economic interests within competitive markets.

One of the central ideas in The Wealth of Nations is the division of labour, which Smith explains through the famous example of a pin factory. By breaking production into specialized tasks, workers can produce far more goods than if each person worked independently on the entire product. Specialization increases efficiency, skill, and speed, ultimately boosting overall productivity and economic growth. Smith believed that as markets expand, the division of labour becomes more advanced, allowing societies to produce greater quantities of goods and improve living standards.

Smith also introduced the concept of the “invisible hand,” which suggests that individuals pursuing their own self-interest can unintentionally benefit society as a whole. When people compete in open markets—producing goods, trading, and seeking profit—they help allocate resources efficiently without central planning. However, Smith did not argue for the complete absence of government. He believed governments still had important responsibilities, such as protecting national security, enforcing laws and contracts, and providing public goods like infrastructure and education. Together, these ideas laid the foundation for modern capitalist economic theory and continue to influence economic thought today.