Adam Smith's Theory of Moral Sentiments (1759) lays out his moral philosophy, and provides the philosophical and psychological underpinnings of the better-known Inquiry Into the Nature and Causes of the Wealth of Nations (1776). In this video, prepared for the History of Economic Thought course for economics majors at Northwestern University, I highlight the main ideas in TMS and their relevance to Smith's subsequent works.
The Wealth of Nations is Smith's most famous work, and is one of the foundational texts in economics. In the course of his extensive and thorough critique of mercantilist policies that tie together economic and political processes and power, Smith formulates important theoretical insights about the role of specialization in increasing productivity and income, market prices and their adjustments, labor and capital as complements in production, domestic and foreign trade as mutually beneficial value-creating processes, and the role of government in providing defense, enforcing (negative) justice, and providing infrastructure that increases the extent of the market and enables general basic education.
David Ricardo is best known today for his pioneering articulation of the theory of comparative advantage -- the idea that trade is most mutually beneficial when parties specialize according to there relative opportunity costs and then trade. But comparative advantage is only one part of Ricardo's extensive analyses of the determinants of rents and the distribution of income. He developed his ideas in the context of government restrictions on trade, first from blockades during the Napoleonic Wars and the the Corn Laws that Parliament passed to restrict imports of grains into the UK.
A fundamental question in economics is value theory -- where do prices come from, what determents the value of a commodity, product, or good? The classical economists operated with a labor theory of value, but in the mid-19th century, three different economists from three different countries independently developed their own theories of value based on subjective utility and decision-making at the margin. This paradigm shift in economics opened up a wealth of new thinking about human decision-making, and remains the dominant value theory in economics to this day.