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The Core Curriculum

Free Markets and Equilibrium Price

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Although the modern economic concept of equilibrium price did not fully emerge until well after Adam Smith’s time (Smith uses the term equilibrium only once in The Wealth of Nations in the context of criticizing mercantilism’s obsession with achieving a balance of trade between imports and exports), some of the early resources for this notion can be mined from Smith’s own discussions of nominal and natural pricing.  As for the freedom of markets, Smith was a strong defender of the view that market-excluding interventions by institutions, including the government, ought to be rejected.  However, contrary to the view that Smith was a staunch defender of laissez-faire economics, he does not reject (and in some cases, explicitly supports—see Book V of The Wealth of Nations) market-including interventions.  


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