Question

The following statements are, given certain assumptions, either true, false, or partly true and partly false. State which is the case and give your reasons. It is the accuracy of your reasons that principally determines your grade.

1. (5 points) Under Smith’s natural progress of opulence, the liberty of the towns causes the liberty and development of the country.

Answer 1

False

Smith tells us that a nation's economic progress would be best facilitated if its capital were at first mostly allocated to agriculture and then followed by a gradual development of industry and trade in towns and cities. According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce. Moreover, he argues that just such a sequence of development would emerge if investors were left alone to seek the greatest return on their investment. He observes, however, that in the Europe of his day "this natural order of things" is "entirely inverted." It is the towns that grow first and the countryside that tags along. Explaining inversion Smiths says that it's because of those darn regulators in London whose rules and taxes artificially raise rates of return on non-agricultural investments. Natural Liberty was suppressed by feudalism

His message is that, when unregulated, undistorted rewards are higher in one activity than another, economic progress is usually promoted if resources flow toward the high-return use. And resources would flow that way if we are left alone to pursue our happiness.

Natural: agriculture (country) → manufacturer (towns) → foreign commerce
Order of focus of capital → ideal
Town and cities must be based on agricultural achievement.

Historical: towns (manufacturer) → foreign trade → country (agriculture)
Focus historically is "unnatural" because it originates with manufacturing rather than agriculture
Starts with landlords making decision based on the capitalist's interest.