1. The Rise of Capitalism and Industrialization: Smith's ideas on economic growth and prosperity were influenced by the rise of capitalist economies and the Industrial Revolution. He observed the transformation of economies from traditional agricultural societies to more industrialized and commercial economies.
2. Mercantilism and Trade Policies: In the 18th century, mercantilism was the dominant economic policy followed by European nations. Mercantilist policies aimed at maximizing exports and minimizing imports to accumulate wealth. Smith criticized mercantilism and advocated for free trade as a means to enhance economic efficiency.
3. Philosophical and Enlightenment Influences: Smith was influenced by Enlightenment philosophers who emphasized the importance of individual liberty, reason, and scientific inquiry. His work reflected these Enlightenment ideals and sought to apply scientific principles to the study of economics.
4. Physiocrats and Economic Thought: Smith was familiar with the ideas of the French Physiocrats, a group of economists who believed that wealth was primarily derived from agriculture. While he agreed with their emphasis on agriculture as the foundation of wealth, Smith also emphasized the importance of manufacturing, trade, and other economic activities.
5. Wealth and Population Growth: Smith's analysis of economic growth also considered the relationship between wealth accumulation and population growth. He discussed how increasing wealth could lead to population growth, which in turn could influence economic dynamics and resource allocation.
6. Labor and Division of Labor: Smith highlighted the importance of labor in creating economic value. He famously discussed the concept of the division of labor, showing how specialization and increased efficiency could enhance productivity.
7. Free Market and Invisible Hand: Smith's work introduced the idea of an "invisible hand" in the market system, suggesting that individuals pursuing their self-interests could inadvertently promote the overall welfare and prosperity of society.
8. Government's Role: Smith advocated for a limited role of government in the economy. He believed that markets should be allowed to operate freely with minimal interference from government regulations, except in cases of market failures or public goods.
These are some of the key events and developments that preceded Adam Smith's "An Inquiry into the Nature and Causes of the Wealth of Nations" and influenced his economic thinking.