Which of the following statements would a follower of Adam Smith be most likely to make?

• A. Wealth is created primarily through the accumulation of gold and silver.
• B. Markets function best when individuals pursue their own self-interest.
• C. Government should control all aspects of economic production.
• D. Prices are determined solely by the decisions of central planners.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the core ideas of Adam Smith, who is often called the father of modern economics. He emphasized the importance of free markets and the 'invisible hand' guiding individuals pursuing their own self-interest to promote overall economic well-being.
2. Step 2: Analyze each statement in the context of Adam Smith's philosophy. For example, the idea that wealth is created primarily through the accumulation of gold and silver aligns more with mercantilism, which Smith criticized.
3. Step 3: Recognize that Adam Smith argued against heavy government control over economic production, favoring limited government intervention instead.
4. Step 4: Note that Smith believed prices are determined by supply and demand in free markets, not by central planners, which contradicts the statement about prices being set solely by central planners.
5. Step 5: Conclude that the statement most aligned with Adam Smith's views is that markets function best when individuals pursue their own self-interest, reflecting his belief in the efficiency of decentralized decision-making.