h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Few people understand the debt Smith owed to Quesnay. His Tableau Economique was a revolutionary breakthrough in moral philosophy. The idea that wealth could be created, and not just inherited and/or shared, was to strike the death note to Mercantilism. Smith was never an economist, he was a moral philosopher. The economics comes from Quesnay and the physiocratic school of economics.
But their was a flaw in their thinking. They were obsessed with how the monarchy dominated markets with royal privilege! Merchants were given monopolies and all competition was savagely suppressed. So the economic school of physiocracy went entirely the other way in reacting to this state oppression. They championed laissez-faire or free markets. This flaw was written into the theory of capitalism by none other than Karl Marx. It suited his antithesis to attack capitalism in its purest form. The orthodox economists, who followed Alfred Marshall, then became rabid supporters of free markets and self-regulation in all circumstances. They staunchly defended SAY's Law! But John Maynard Keynes showed that SAY's Law does not work during periods of severe recession. And yet orthodox economists, even today, insist that the efficient market hypothesis works in all markets including financial markets. John Quiggin showed, in his book Zombie Economics (2010), that the efficient market hypothesis does not work when financial markets go into free fall. That is, financial markets are NOT always self adjusting back to equilibrium. Capitalism does not work, in all markets, during periods of severe recession WITHOUT government action.
Smith was not wrong for his time when royal privilege dominated society. But times have changed over two hundred years
of capitalism as an economic system. What works best today is a partnership between the State, as a regulator, and privately owned businesses. With the market forces doing the wealth creation.