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# Colonial Economic Diversification

## Definition

The development of varied economic activities within colonies, including agriculture, manufacturing, commerce, and services. While some diversification is natural as economies develop, artificial diversification forced by monopoly policies often reduces efficiency.

## Source Chapter

Book IV, Chapter 7

## Context

Smith distinguishes between natural economic diversification that occurs as colonies develop and artificial diversification forced by monopoly policies. He argues that the latter often reduces efficiency by preventing colonies from specializing according to their natural advantages.

## Economic Domain

Production

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