Adam Smith is one of the world’s most famous economists. His ideas about money, government, and people in general, have guided the thoughts and actions of many of the economists that have followed him. In his book “The Wealth of Nations,” he discusses many different topics, but there are five main or common themes that will be discussed in this paper. The first theme is that regulating commerce is “ill-founded” and “counterproductive.” Smith rebuked the ideas of the common era that said by boosting exports and resisting imports you could maximize wealth. Instead, Smith believed that the only way to maximize wealth was to create an abundant flow of products and services throughout the county. Instead of restricting the nation’s productive capacity, the strategy should be to set it free. In the chapter on treaties of commerce wrote the following quote:
When a nation binds itself by treaty wither to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favoured, must necessarily derive great advantage from the treaty.
It is my opinion, especially after having read, “The Choice“ by Russell Roberts, that free trade is the only way to grow the economy. When you attempt to control the outcomes of trade by placing restriction, tariffs, or other controlled measures on trade, it can create monopolies that produce wealth for only those manufacturers. The best way to create wealth, is to keep trade open without restriction, and allow any country that has a comparative advantage to bring wealth to your country in a more roundabout, or less obvious way. Therefore, less government, less restriction would create greater wealth by allowing the invisible hand and general economic flow of the world to take its course.
The second theme that will be discussed is that the capacity of production is dependent on the division of labor. Smith believes that great efficiencies can be made when you break down production into many small tasks done by people who specialize in each of those small tasks. When production is accomplished in this way, producers are left with a surplus that they can use to either exchange for other things, or for them to invest. It is on this topic the SMith writes the following quote from his book:
This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.
It is my opinion that Adam Smith’s words in the paragraph above are completely accurate. If we diversify our labour into groups of people whose talents and gifts fit the task that they are to do, then their time will be more productive. We see this in life every single day. The best example that I can think of to describe this is a time when I had to stuff informational packets into an envelope. Initially, I was doing the job myself. I had to go down the line, grab each paper, staple them, put them in a folder, throw in a pen, and then lick and seal the envelope. This whole process took me quite awhile when I was doing it alone. Later, some other people arrived to help. We worked out a process where one person would collect the papers in order, the next person would staple, the next would place all of the papers and the pen into the envelope, and the last person would lick and seal. Once we started doing the work together, we cut down our production time by a couple...