The Wealth of Nations
The Wealth of Nations was published 9 March 1776, during the Scottish Enlightenment and the Scottish Agricultural Revolution. It influenced a number of authors and economists, as well as governments and organizations. Synopsis
I: Of the Causes of Improvement in the productive Powers of Labour Of the Division of Labour: Division of labour has caused a greater increase in production than any other factor. This diversification is greatest for nations with more industry and improvement, and is responsible for "universal opulence" in those countries. Agriculture is less amenable than industry to division of labour; hence, rich nations are not so far ahead of poor nations in agriculture as in industry. Of the Principle which gives Occasion to the Division of Labour: Division of labour arises not from innate wisdom, but from humans' propensity to barter. The apparent difference in natural talents between people is a result of specialization, rather than any innate cause. That the Division of Labour is Limited by the Extent of the Market: Limited opportunity for exchange discourages division of labour. Because "water-carriage" extends the market, division of labour, with its improvements, comes earliest to cities near waterways. Civilization began around the highly navigable Mediterranean Sea... Of the Origin and Use of Money: With division of labour, the producer of one's own labour can fill only a small part of one's needs. Different commodities have served as a common medium of exchange, but all nations have finally settled on metals, which are durable and divisible, for this purpose. Before coinage, people had to weigh and assay with each exchange, or risk "the grossest frauds and impositions." Thus nations began stamping metal, on one side only, to ascertain purity, or on all sides, to stipulate purity and amount. The quantity of real metal in coins has diminished, due to the "avarice and injustice of princes and sovereign states," enabling them to pay their debts in appearance only, and to the defraudment of creditors. Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money: Smith gives two conflicting definitions of the relative value of a commodity. Adam Smith, "What everything really costs to the man, who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy." "The value of any commodity … is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities." Of the Component Parts of the Price of Commodities: Smith argues that the price of any product reflects wages, rent of land and "...profit of stock," which compensates the capitalist for risking his resources. Of the Natural and Market Price of Commodities:
"When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay... cannot be supplied with the quantity which they want... Some of them will be willing to give more. A competition will begin among them, and the market price will rise... When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be paid in order to bring it thither... The market price will sink..." When demand exceeds supply, the price goes up. When the supply exceeds demand, the price goes down. Of the Wages of Labour: Smith describes how the wages of labour are...
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