In session two, Winters introduces the development of Nation States and the earliest incarnation of economic theory, Mercantilism. He discusses the problematic outcomes of Mercantilist economics and show how those problems led to the spread of Capitalism. Participants look at the work of Adam Smith and his codification of Capitalism. Winters argues that the principle of competition, which Smith found to be the operative driver of the business cycle, has been misunderstood by modern planners and politicians and traces and explains the Market Cycle and introduces the principle of division of labor. He also describes what a Market is and talks about the dangers Market economies face, as Adam Smith saw them.