According to Adam Smith, what is the role of government in a free market economy?

Disable ads (and more) with a membership for a one time $4.99 payment

Prepare for the TAMU ECON202 Principles of Economics Exam 1 with detailed study guides and multiple choice questions. Boost your understanding and confidence ahead of exam day!

In a free market economy, Adam Smith advocated for minimal government intervention, emphasizing that the market functions best when individuals are allowed to pursue their own economic interests. According to Smith, the role of government should primarily be limited to protecting property rights, enforcing contracts, and ensuring national defense, rather than interfering with market operations. This foundational idea supports the notion of allowing free trade, as it enables competition and innovation, which are vital for economic growth and efficiency. Allowing the market to operate without government control aligns with the principle that individuals, by seeking their own self-interest, contribute to the overall economic well-being, often described as the "invisible hand." Therefore, the correct answer accurately reflects Smith's view that government should step back and let the market dynamics function freely.