Written by: Phillip Braunstein

Economic Markets around the world have always been interacting and trading with each other for eons, but Adam Smith’s The Wealth of Nations really propounded the consequence of these market economies in a world becoming industrial, and that means technologically equipped. Smith identified that there are two opposed forces that drive any economy toward growth and prosperity. These two forces both restrict and stimulate the other and continually move in

opposite directions: they are Parsimony and Industry. Parsimony, as Smith explains it, is the drive toward savings, affordable labor, and cost reduction. Industry is the drive toward production, growth, expansion, which requires capital and labor and needs capital in order to grow and generate its products. Too much industry without parsimony results in a high production level but with a high debt that will knock the economy off balance. Too much parsimony without industry results in a stagnant economy that does not allocate enough of its capital toward growing its industry.

Productive industry is grounded on another principle, and that is the division of labor. Industry could not produce enough supply to reach the demand that exists if it were not for the production line and division of labor. These basic principles are still pertinent today, and show that the organization and forces that drive business must be recognized in order to achieve a healthy economy.

In fact, the very word economy derives from the ancient Greek word, meaning “the rule of the home.”  Being able to manage the household wealth and finances is the management of the economy, since being able to manage the household allows one to manage a business economy and state wealth as a whole. We can see how the finance of individuals, businesses, real estate, and countries intersect in the realm of the global economy.