Friedrich List
Read this biographical article about Friedrich List. It offers some context for his refinements to Smith's ideas, based on List's wealth of experiences.
List's Main Economic Theories
List's Theory of National Economics
List's theory of "national economics" differed from the views of Smith and Say. He contrasted the economic behavior of an individual with that of a nation: an individual promotes only his own personal interests but a state fosters the welfare of all its citizens. An individual may prosper from activities that harm the interests of a nation, while activities beneficial to society may injure the interests of certain individuals: "Canals and railroads may do great good to a nation, but all waggoners will complain of this improvement. Every new invention has some inconvenience for a number of individuals, and is nevertheless a public blessing".
He did, however, recognize the need for moderation, arguing that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good:
It is bad policy to regulate everything and to promote everything by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power.
List asserted that economists should realize that since the human race is divided into independent states:
…a nation would act unwisely to endeavor to promote the welfare of the whole human race at the expense of its particular strength, welfare, and independence. It is a dictate of the law of self-preservation to make its particular advancement in power and strength the first principles of its policy.
He claimed that a country should not count the cost of defending the overseas trade of its merchants and "the manufacturing and agricultural interest must be promoted and protected even by sacrifices of the majority of the individuals, if it can be proved that the nation would never acquire the necessary perfection ... without such protective measures".
Both Adam Smith and Karl Marx adopted the hopeful view that nations and national rivalry were a relic from the past that could be easily overcome. Smith relied on commercial self-interest. Marx relied on class divisions erasing national differences. Both were quite correct as to the general direction in which the world was moving. However, List was more realistic in thinking that the excellent goal of a cosmopolitical world could not be quickly achieved without allowing for the present existence and power of rival nations and states. Thus, List recognized the power of national forces, while Marx and Friedrich Engels seriously underestimated the strength of nationalism.