Compared to the age of the world, the market system, where “the consumer is king” and the economy is self sufficient, is relatively new to the stage (Heilbroner 71). However within the short amount of time that it has been allowed to exist, there has been exponential growth and development in economies in just a few hundred years that might have taken thousands back in the day. The reasons for why self-sufficient economies provide for such steep growth in communities is observed by philosopher (one of many titles) Adam Smith. He created the outline for how the market system works, and then further stipulated that the market system also grows due to two laws: The Law of Accumulation and the Law of Population.
The market system as we know it is only possible because of human self-interest and competition. These are the driving forces of the economy. Smith even says, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, … but from their regard to their self-interest” (As cited by Heilbroner, 55). So how do these two phenomena set the stage for economic growth? Partially, it is the market itself- it “harnesses man’s creative powers …that encourages him …to invent, innovate, expand, take risks” (Heilbroner 63). However, there has to be more that pushes the market system upwards, and this is where the two laws come into play.
First, the Law of Accumulation. For whatever reason, the main goal of capitalists was “first, last, and always, to accumulate their savings” (Heilbroner 64). Adam Smith looked upon this act with approval, but being a philosopher, not for the riches but for the positive effects society reaped: Capital, basically “net worth,”(Merriam-Webster.com) or profits, when put back into machinery, created more areas of labor, which meant more productivity. Thus ironically, through the singular greed of men, comes good for the whole community. However with accumulation alone comes an issue: More divisions of labor mean rising demand for workmen, which results in higher wages, and leads us to the point where “profits-- the source of accumulation--were eaten away” (Heilbroner 64).
“Accumulation leads to its own undoing, and then is rescued in the nick of time” by the Law of Population (Heilbroner 65). The problem from before was the demand of labor being too high, and seemingly