Adam Smith’s legacy of economic freedom

Adam Smith turned 300 this year. Born in Kirkcaldy, Scotland, in 1723, he too lived in a time of great upheaval. The seedlings of the industrial revolution were taking root in the U.K. Scotland had only been part of the U.K. since the Act of Union came into effect in 1707. A stable polity provided the foundation upon which great advancements in learning and industry would take place during the Scottish Enlightenment.

For the first time in the history of the world, humans would experience sustained economic growth. The average person’s standard of living was roughly constant for most of human history until the industrial revolution. It’s an underappreciated fact: The average person’s material conditions did not significantly change from the time of Christ to the 1700s.

That makes it all the more stunning that Smith had the nerve to write a book called The Wealth of Nations in 1776 — what a glorious year. Even living in unimaginable squalor compared with today’s standards, Smith looked at the world and asked why some countries were wealthier than others.

He concluded that the progress of the division of labor, what we would today call “specialization,” was the key to wealth. In poor countries, everyone does everything. People make their own clothes, grow and cook their own food, defend themselves against invaders, and more. In wealthy countries, people have specific jobs and trade for the things they don’t make.