The Answer Is Transaction Costs Adam Smith's Wealth of Nations Episode 6--Division of Land
Oct 21, 2025
Discover how Adam Smith unraveled the puzzle of Europe’s economic rise, where commerce outpaced feudal structures. The discussion highlights how institutions shape prosperity and the pivotal role of towns as centers of order. Explore Smith's argument that division of labor, rather than just land, drives growth. Hear about the clash of elite interests and the rise of merchant influence that diminished feudal power. Ultimately, commerce is portrayed as the quiet architect of liberty and societal transformation.
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Prioritize Institutions To Unlock Growth
- Focus long-run growth on improving institutions and incentives, not just resources.
- Prioritize policies that remove restrictions and secure property to enable productive investment.
Agriculture Precedes Urban Specialization
- Adam Smith argues that towns grow only after the countryside produces surplus, enabling division of labor.
- This natural order links agricultural surplus to urban specialization and rising prosperity.
Europe Inverted The Natural Order
- Smith says the natural sequence is agriculture, then local manufactures, then foreign trade.
- He finds this order inverted in modern Europe due to institutional distortions favoring commerce first.
