Persuasion, Domination and Exchange: Adam Smith on the PoliticalConsequences of Markets

Adam Smith argued that division of labour was the basis of wealth: the greater the division of labour the greater the wealth. He also held that the extent of the division of labour was determined by the opportunity to exchange, or by the size of the market. Although Smith understood market exchange to be constrained by distance and natural impediments, he insisted that public policy should not add additional artificial obstacles to market exchange. Thus, in general, he argued that governments should be committed to “free trade.”