Smith and Markets

In the first three chapters Smith talks about the division of labor, why we trade and the extent of markets. This entire discussion assumes we know what a market is and that one is in place. Smith does not tell us, though, what a market is. This is why we have read Hobbes, Locke, and Hume.

From these readings we can plausibly construe a market as a place where:

1) There are enforced property rights. This enforcement comes from both other individuals and the state.

2) Enforced contracts. This enforcement comes from both other individuals and the state.

3) Trading, where what is traded is not simply a good or service, but the rights to these goods and services. These rights are protected in 1 and 2 above.

4) Some claim to the protection of life and limb. We find this mainly in Locke and Hobbes. It would do us little good to have a market where people could not steal from us, but could kill us then take the "ownerless" goods.

At the very minimum, then, a business must work within the framework of 1-4. This does not tell us everything a business is, but it does establish a fundamental framework. Anything that violates any one or more of 1-4 above is not business.

BK