Briefly, these are Adam Smith's economic laws:
1. How can society depend on capitalism, which is an unregulated market system? Smith replies with two laws of the market. The desire for wealth permeates all human activity. Therefore, self-interest, or profit, motivates people to perform necessary tasks for which society is willing to pay. As Smith writes, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from our regard to their self-interest." Thus, the first law of the market is self-interest, or the profit motive.
2. But how can the individual's selfish desires benefit society? What stops greed from overwhelming the public, resulting in ruthless exploitation by profiteers? Smith answers that the individual, in the process of providing for personal interests, unintentionally contributes to the economic wellbeing of society. Therefore, the second law of the market is competition. The individual who overcharges for products soon learns that competitors will take away business by offering more reasonable prices. If wages are too small, workers will hire out to another employer who will pay more for their services. Thus, selfish motives are tempered by interaction, resulting in social harmony.
According to Smith, under the market system each worker freely chooses a trade. Through such a multitude of choices, society reaps the benefit of having all its necessary tasks filled. The individual, motivated by self-interest, selects a particular task. Competition for these tasks prevents the individual from over-charging society. Thus, the two laws of the market — self-interest and competition — react upon each other and form a balance, guaranteeing the survival of society.
