p. 10. the writings of jean baptiste say, an early nineteenth - century follower of smith, were significant in this regard. he postulated that supply creates its own demand and concluded that marked contractions in economic activity would, with time, be unwound. 7 the widespread acceptance of say's law and the associated confidence in the self - stabilizing property of a market - based price system were dominant factors inhibiting government intervention in periods of economic distress, especially during the latter part of the nineteenth and early twentieth centuries. but the great depression of the 1930s subjected the optimistic conclusions of classical economics, especially say's law, to a much broader assault. as the economic stagnation of the 1930s dragged on, the critical notion that capitalism was self - correcting fell into disrepute. the marked increase in government intervention into markets, in effect a partial reversion to mercantilism, was perhaps an inevitable response to the distress of the great depression. at the same time, the notions of marx gained influence in the west, perhaps because the repressions of the soviet union, the major avowed practitioner of marx, were not well known before world war ii. but cracks in the facade of economic management by government emerged early in the post - world war ii years, and those cracks were to widen as time passed. britain's heavily controlled economy, a carryover from the war, was under persistent stress as it encountered one crisis after another in the early postwar decades. in the united states, unbalanced macroeconomic policies led to a gradual uptrend in the rate of inflation in the 1960s. the imposition of wage and price controls to deal with rising inflation in the 1970s proved ineffective and unworkable. the notion that the centrally planned soviet economy was catching up with the west was, by the early 1980s, increasingly viewed as dubious, though the view was not fully discredited until the collapse of the berlin wall in 1989 exposed the economic ruin behind the iron curtain. the east - west divisions following world war ii engendered an unintended four - decade - long experiment in comparative economic systems - smith versus marx, so to speak. the results, evident with the dismantling of the iron curtain, were unequivocally in favor of market economies. the consequences were far - reaching. the long - standing debate between the virtues of economies organized around free markets and those governed by central planning came to an end. there

living standards and populations, but growth in both was glacial. in the fifteenth century, the great mass of people were engaged in the same productive practices as those of their forebears many generations earlier. smith lived at a time when market forces were beginning to erode the rigidities of the remaining feudal and medieval practices and the mercantilism that followed them. influenced by the ideas and events of the reformation, which helped undermine the concept of the divine right of kings, a view of individuals acting independently of ecclesiastic and state restraint emerged in the early part of the eighteenth century. for the first time, modern notions of political and economic freedom began to gain traction. those ideas, associated with the age of enlightenment, especially in england, scotland, and france, gave rise to a vision of a society in which individuals guided by reason were free to choose their destinies unshackled from repressive restrictions and custom. what we now know as the rule of law - namely protection of the rights of individuals and their property - widened, encouraging people to increase their efforts to produce, trade, and innovate. a whole new system of enterprise began to develop, which, though it seemed bewildering in its complexity and consequences, appeared nonetheless to possess a degree of stability as if guided by an " invisible hand. " the french physiocrats, among others, struggled in the middle of the eighteenth century to develop rudimentary principles to untangle that conundrum. those principles were an attempt to explain how an economy governed by a calculable regularity - that is, natural law and, as characterized by the physiocrat vincent de tournay, " laissez - faire, laissez - passer " - would function. the physiocrats'influence, however, waned rapidly along with the influence of other political economists as evidence grew that their models were, at best, incomplete. j. m. keynes, the general theory of employment, interest, and money, 1936, p. 383. it was left to adam smith to identify the more - general set of principles that brought conceptual clarity to the seeming chaos of market transactions. in 1776, smith produced one of the great achievements in human intellectual history : an inquiry into the nature and causes of the wealth of nations. most of smith's free - market paradigm remains applicable to this day. smith was doubtless inspired by the physiocrats