Scottish economist Adam Smiths The Wealth of Nations heraldedor caus

Scottish economist Adam Smith’s The Wealth of Nations heralded—or caused—the market-based economic system that has increasingly become the norm since the book’s publication in 1776. Some say that Smith’s magnum opus was to economics as Newton’s Principia Mathematica was to physics or as Darwin’s On the Origin of Species was for biology. Certainly the book made its impact in the early United States.

1776 predates wide usage of the term capitalism, now commonly associated with Smith, and whichSmith refers to as a “system of natural liberty.” Smith presented what we today consider Economics 101: supply and demand, and the importance of specialization and the division of labor. He also posited that individuals pursuing their own self-interest could unintentionally create a more just society by so doing—an idea sometimes referred to as the “Invisible Hand.”

Even Smith’s critics do not deny the book’s immense influence. Murray Rothbard levels the criticism that The Wealth of Nations, in fact, eclipsed public knowledge of all economists—better ones, he says—before Smith.

1. Which of the following statements is not in contradiction with the opinions of Murray Rothbard as expressed in the passage?

I. Smith was possibly the third best economist of all time.
II. The Wealth of Nations should not have been as influential as it was.
III. Adam Smith was not particularly influential.

A. I only
B. I and II only
C. I and III only
D. II and III only
E. I, II, and III


2. Which of the following would be an example of the “Invisible Hand” as described by Adam Smith?

(A) A group of moviegoers who are able to get cheaper tickets for a film by buying their tickets as a group.
(B) A society in which the division of labor frees certain people to pursue careers that might seem impractical in a non-capitalist society.
(C) A university in which classes are first-come, first-served, thereby equitably distributing courses according to the passion and dedication of students.
(D) A market in which there are more buyers than sellers, thus forcing the price of goods upwards.
(E) A stock exchange in which each trader acts according to a different set of information, such that certain commodities become hyped and their prices overinflated.