Final answer:
Adam Smith, in his groundbreaking book 'The Wealth of Nations,' argued against mercantilism, advocating for a free market and laissez-faire economy led by 'the invisible hand.' Smith's theories became foundational to modern economics, influencing the rise of capitalism and market-based societies.
Step-by-step explanation:
Adam Smith and the Rejection of Mercantilism
Adam Smith, the renowned Scottish economist and philosopher, fundamentally challenged the mercantilist economic principles that dominated 18th-century Europe with the publication of his influential work, The Wealth of Nations in 1776. Advocating for a free market system and the laissez-faire approach, Smith theorized that individual self-interest in a market-led economy would naturally align with society's economic well-being, which he termed the invisible hand. According to Smith, such an economy would function more effectively without government intervention, allowing for businesses to operate efficiently and thus lowering prices for consumers while fostering overall economic growth.
Smith's ideas became the bedrock of modern economic liberalism and were instrumental in shaping the subsequent economic policies of nations, influencing leaders like British Prime Minister William Pitt. Smith's insights into the division of labor, productivity, and a nation's wealth management delineated a new paradigm of political economy, which set the stage for the Industrial Revolution and the rise of capitalism. The Scottish philosopher's thought-provoking critique of existing economic practices led to a shift toward market economies and had a lasting impact on global economic traditions.