I know the theory of capitalism essentially started with Adam Smith’s Wealth of Nations. Does that mean the idea of a free market started then?
Was there never in the history of civilization a free market economy before Wealth of Nations?
I beleive that the slave trade was an early example of a free market at work. :eek:
If you consider a barter economy with no artifical restrictions on price fluctuation free, then free market economies are probably the historical rule rather than the exception. (That is, most preagricultural/nonagricultural economies would be free markets by this definition.)
Beyond that, I don’t really know. I suspect there was something that we would call a free market in places like the great Mediterranean trade centers in classical times, the trading cities of the Asian empires, and so on. Whether Adam Smith would have called them free under his own terms I don’t know.
What about the ancient Roman empire? Was there some government regulation that I am not aware of? Or in Athens during their brief dance with democracy?
Not as far as the slaves were concerned.
Of course there was. Smith wasn’t trying to invent a new system, he was trying to describe a system that already existed and explain why it conduced to national and personal wealth.
A proper history of capitalism would require a book, not a post on a message board. Elements of “free markets” have been present in all human societies since hunter-gatherer days. But the classic capitalist market economy is usually dated to Europe after the decline of feudalism between roughly 1300 and 1800 (earlier in some places, later in others). During that time, advances in weapons technology (gunpowder) led to larger and stronger nation-states, and improvements in shipbuilding led to more long-distance trade. Both of these developments contributed to the larger, less personal markets associated with capitalism. Smith’s contribution was to explain why governments should embrace these developments instead of resisting them.
The Roman economy, by the way, was heavily regulated and depended on slavery, tribute, forced labor, fixed prices, and government distribution of goods (the “dole”).
I concur with the above posts that said that Smith was describing rather than inventing. It should be noted that, AFAIK, he was the first person to come up with (and publish) a working theory on why competitive markets are good things. His accomplishment was not trivial, but earth-moving, because it pointed out a better way to make societies well off besides enrichment of the monarch and excessive state regulation. He did acknowledge that the state does have significant role in economic affairs—non-competitive markets are sub-optimal and all free-market arguments automatically fail when economic competition does not obtain.
Another way of looking at it is that capitalism – at least the way Smith saw it – is not a “system” at all, but rather a lack of a system.