The basic framework of the classical story of the market

This chapter explains Adam Smith’s basic framework of the classical story of the market, in which he emphasised the interaction between division of labour, price dynamics and capital accumulation. In the classical story, the price mechanism moved to the centre stage and became the key to unlock the dynamics of a market economy. In this surplus approach, the price dynamics allow the conditions of reproduction to be determined and hence of studying growth. On understanding the dynamics of reproduction and growth as a natural process, institutional hindrances to growth and development may be identified and reformed. Smith envisioned a further development of commercial society from which poverty was banished, virtue rather than wealth inspired admiration and commercial relations were characterised by union and friendship. The chapter proceeds by outlining conflicting views on order, change and reform hotly debated in the turmoil in the wake of the French Revolution. What about the traditional social contract between rulers and the ruled, including the right to subsistence in times of need, when the system of poor relief was increasingly seen as harmful to growth?