8 ideas
The natural price is the cost of producing a good (covering rent, wages, and profit), while the market price is what it actually sells for based on supply and demand. When market price rises above natural price, new producers enter and competition pushes it back down; scarcity raises it temporarily but the two continually converge.
Division of labor can only advance as far as there are buyers to absorb the surplus output, so specialization is constrained by market size. This is why elaborate trades flourish in cities and along navigable waterways, while isolated rural areas force people to be generalists.
The true cost of any item is the toil and trouble required to acquire it — what you give up of your own ease and effort to obtain it. Money prices fluctuate, but the amount of labor a good commands or contains is the underlying yardstick of its worth.
Under a system of natural liberty the state has three duties. It defends society against foreign violence, administers justice so that people are protected from one another, and provides public works and institutions that benefit society but could never repay a private investor. These include roads, canals and basic education.
Mercantilism mistakes money for wealth and so pursues trade surpluses, export bounties and import restrictions to pile up bullion. A nation's real wealth is the yearly produce of its land and labour that people can consume, and money is only a tool for circulating it.
One worker making pins alone might produce at most twenty a day, but when the job is split into about eighteen distinct operations among ten workers, they produce roughly 48,000 pins daily. The gain comes from three sources: each worker grows more dexterous at a single task, no time is lost switching between tasks, and narrow repetitive tasks invite the invention of machines to do them.
We get our dinner because the butcher, brewer and baker are pursuing their own interest, not because they are kind. We deal with them by appealing to their self-love rather than to our needs. Exchange lets strangers cooperate at vast scale because each side gains, so the system does not depend on goodwill that cannot stretch that far.
An investor who prefers domestic industry and directs it toward its most valuable output is thinking only of his own gain. He is nonetheless led, as if by an invisible hand, to raise society's total revenue as far as he can. Such decentralized choices draw on local knowledge that no statesman could hold, so central direction of capital is both presumptuous and harmful.