Smithian Merchant Towns and Good Government in The Wealth of Nations
Abstract
Commentators on Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations often characterize Smith as a proponent of government in multiple areas, including security in person, property, contract, and some public goods. However, Smith understood government more expansively than people today. In volume I, book III, chapters I–IV, Smith describes the evolution of merchant towns in England that led to “good governance” that dismantled the feudal system. This limited government not only included the security provided by the formal laws and institutions. It also aligned the informal elements of individual civic ethics and self-reliance with the formal institutions. This Smithian combination of formal and informal government encouraged liberty and market exchange, which enriched towns and, then, agriculture. It established the foundation for English economic development, which made the nation wealthy.
