Adam died more than 200 years ago, yet the brilliant insights he had into the way the world works are unknown to vast numbers of young people and lefties all over the planet.
Smith showed that commerce makes effective use of the great diversity of human wants and human talents.
Smith never assumed that people “should” or “ought” to be cooperative, kind or gentle. He simply observed that religions and ideologies created wars and hatred, while commerce created comity.
Understanding the reason commerce utilized human differences and created positive outcomes was Smith’s great contribution to humanity.
First, Smith observed that simple trade created better human behavior. Shopkeepers could be in a foul mood but they were well behaved in their shop in order to retain and attract customers. The same is true in our day, retailers make an effort to be pleasing … in vivid contrast are unionized government employees, such as bus drivers or toll takers, who push all limits in unloading their misery onto innocent passengers, who have no recourse.
Second, Smith observed that in the course of doing business, commercial people constantly strived to reduce costs. There are a multitude of reasons for striving to reduce costs from greed on the one hand to compassion on the other.
The striving to reduce costs brought two important factors to commerce that were found in a few other domains at the time, such as the army: specialization and non-human power. Specialization took advantage of the great diversity of human talents. In needle making, one person could make the wire, another could tend the furnace for the steel a third person could put the eye in the needle, a fourth could count, box and ship the needles and still another could do the bookkeeping and order taking. More specialists could produce far more needles, than the same number of individuals and reduced the cost of each needle.
Similarly, when production tasks were broken down into specialized modules, it became possible to use water wheels, and animals for power in production.
We all learned this in elementary school but we didn’t learn that this commercial practice was the by-product of diverse human motives, utilized the diversity of human talents and it was voluntary. Commerce thrives on human diversity and human autonomy.
Lastly, Smith observed that the vast market created by commerce made sure that everyone came out better: prices were lower, more goods were produced and everyone had greater income. All because of specialization and voluntary effort by people making use of their diverse striving and talents.
In Smith’s day, the best example of a country that pursued gold and silver, ignored trade and commerce and drove traders (Jews and Moors) out of the country, Spain, was a country with vast resources and two hundred years of declining military and economic importance.
Today we would speak of commerce as a positive sum game, maybe one of the few that exist outside of technology and education. In zero sum games, outcomes are always based on the same total being divided differently (think chess, bridge or Monopoly.) In positive sum games, the division of outcomes results in the total being greater after the game.
Today we have many examples of nations that have repressed commerce and brought misery to their own peoples: Soviets, Soviet satellites, China, Cuba, India, North Vietnam etc; and we have the nations that support commerce and have created a vast prosperous middleclass: U.S.A, England, Japan, Taiwan, South Korea, Singapore, Israel etc.
Few examples can be as powerful examples of Adam Smith's understanding of the positive outcomes from commercial markets as the contrast between East and West Germany from 1945 to 1990 and North and South Korea today.