Main ideas:

Of the Natural and Market Price of Commodities:

"When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay... cannot be supplied with the quantity which they want... Some of them will be willing to give more. A competition will begin among them, and the market price will rise...

When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be paid in order to bring it thither... The market price will sink...“

(when demand exceeds supply, the price goes up. When the supply exceeds demand, the price goes down)

“An Inquiry into the Nature and Causes of the Wealth of Nations” (1776) by Adam Smith

Main ideas:

Conclusion of the Mercantile System: Smith's argument about the international political economy opposed the idea of Mercantilism.

While the Mercantile System encouraged each country to accumulate gold, Smith argued that free trade eventually makes all actors better off. This argument is the modern 'Free Trade' argument.

The teachings of the classical economists attracted much attention during the mid-19th century.

The labour theory of value, for example, was adopted by Karl Marx, who worked out all of its logical implications and combined it with the theory of surplus value, which was founded on the assumption that human labour alone creates all value and thus constitutes the sole source of profits.

More significant were the effects of classical economic thought on free-trade doctrine.

The most influential was Ricardo’s principle of comparative advantage, which states that every nation should specialize in the production of those commodities it can produce most efficiently; everything else should be imported.

This idea implies that if all nations were to take full advantage of the territorial division of labour, total world output would invariably be larger than it would be if nations tried to be self-sufficient.

Ricardo’s principle of comparative advantage became the cornerstone of 19th-century international trade theory.