What does this quote from The Wealth of Nations  say about the merits of a free-market system of resource allocation? “People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or contrivance to raise prices” (Adam Smith, 1776, book 10, chapter 8).

Expert Answers

An illustration of the letter 'A' in a speech bubbles

One of the most frequently quoted sentences in Adam Smith's treatise The Wealth of Nations concerns the tendency of businessmen to create price-fixing conspiracies and cartels when left to their own devices. As Smith writes,

People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or contrivance to raise prices.

What this says about a free-market system is that it will inevitably encounter obstacles, not the least of which is human nature, which tends to favor self-interest and even the interests of neighbors and members of the same profession over any principle of public good.

What Smith says here is straightforward and not particularly controversial. However, the quotation is often taken out of context to mean that government intervention is required in order to correct this tendency to conspire. Smith says no such thing and, indeed, goes on to say that such meetings cannot and should not be prevented by...

(The entire section contains 4 answers and 1030 words.)

Unlock This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial
Approved by eNotes Editorial Team