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The Wealth of Nations

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Just a warning that I purchased this edition and had to return it. Only at the end of the introduction do we learn that it is not nearly complete (e.g. Book V has been omitted). Nowhere on the cover does it indicate that it is abridged. I find this misleading bordering on deceitful. I have since purchased the full version at a used book store. It is available from Amazon in Penguin paperback in 2 volumes. The work itself is great and worth the effort.

The simple points upon which this book is based might be much easier to understand today than when it was written, because a large part of the growth of the world economy has been based on the ideas about the growth of capital which this book assumed as the fundamental surplus value of economic activity. Less than a century later, Karl Marx was able to demonstrate, in his book, THE POVERTY OF PHILOSOPHY, how vacuous the ideas of good and bad, as they are usually applied in political economy, turn out to be in practice. Americans have largely accepted the notion of a consumer society totally dependent on copyright and trade laws to protect the value of the entertainment and related therapeutic products which it produces. What might be most upsetting to readers of this book, that someone like myself could use it to reflect on the events of 9/11/2001 as a challenge to such modern assumptions, as if the policing powers which maintain the world financial situation of today have more to fear from an examination of how this book treats consumption than from the usual lessons based on the growth of wealth, might make this an unacceptable view of what this book actually says.

When this book was written, Adam Smith was able to combine economic ideas about the distribution and production (which he considered the highest good) of articles of commerce, in contrast to "the bad effects of the monopoly," in a way that caused thinking people in Britain to believe that the world would be materially better off if the American colonies were free of rules which required those who produced all the tobacco from Maryland and Virginia to sell it in or through Great Britain. Adam Smith was worried that capital maintained to store this product in London was depriving England of the opportunity to produce goods that would generate more wealth. "At the port of London, indeed, it is commonly sold for ready money. The rule is, Weigh and pay. At the port of London, therefore, the final returns of the whole round-about trade are more distant than the returns from America by the time only that goods may lie unsold in the warehouse; where, however, they may sometimes lie long enough." The American revolution was greeted by economic free traders as an event likely to cause a great increase in the wealth of nations, and the normally victorious political element maintains a strong belief in this fiscal ideology.

The current situation might be closer to "the time only which the goods may lie unsold in the warehouse." Near the end of Book IV, "Of Systems of Political Economy," Chapter VII, "Of Colonies," there was a frightening example of how bad things might get to be. "In Spain and Portugal the bad effects of the monopoly, aggravated by other causes, have perhaps nearly overbalanced the natural good effects of the colony trade." Plenty of things went wrong, causing a large portion of the population to feel that they were victims of circumstances, " . . . but above all, that irregular and partial administration of justice, which often protects the rich and powerful debtor from the pursuit of his injured creditor, and which makes the industrious part of the nation afraid to prepare goods for consumption of those haughty and great men to whom they dare not refuse to sell upon credit, and from whom they are altogether uncertain of repayment." Certainly, a great deal of money is in circulation today, and a tremendous amount is considered working capital, capable of producing many things that people might want, but the routine search for contraband includes cash in an amount exceeding $10,000, the amount which might be capable of buying a large amount of illegal substances. Police are actually so unfamiliar with cash transactions that large amounts might be held as evidence, until the police have been convinced that they have no reason to suspect the person who had the money of being involved in any sort of laundering activity. When Adam Smith was writing, his work was as shocking to those controlling the monopolies of his day as radical protests of today rile the police on the beat today, whose confiscation of vehicles, which are sometimes temporary, to see if they were used to transport illegal substances, is not considered in any way similar to hijacking airplanes in order to crash them into buildings which symbolize a violation of the right of the people to personal pleasure in a manner which averts the collapse of society as we know it. This hardly makes more sense than those who expected seizure of everybody's major assets to solve society's problems.

I appreciate that for most readers, Adam Smith's Wealth of Nations is going to be a deadly dull read, although I think this is a pity. With a little discipline, I think that the erudite reader will take away many enriching (yes, pun intended) lessons from Smith's ground breaking treatise. For me, as a business professional and business student (I have an MBA), the Wealth of Nations was a Damascus Road experience.

I think there are several myths about economics that are exploded by a first hand reading of Wealth of Nations. Many supply side economists eagerly tout Smith's "invisible hand" metaphor in advocating deregulated markets, but in my view, Smith took a balanced and integrated approach in analyzing the supply and demand sides of national economy. In the first chapter Smith notes that national wealth is the production of labor. This has dual implications in that production is the creation of supply, but the labor force consumes that supply by trading the resulting wealth. These are two sides to the same coin, & therefore indivisible. Also in the first chapter, Smith notes that increasingly sophisticated economies will employ a division of labor to increase production efficiency, which is another concept that necessarily integrates supply and demand, production and consumption.

Smith devotes quite a bit of time lamenting governmental intrusion into economics by way of regulation. However, he does not condemn government regulation per se, but make very specific criticisms against those state regulatory polices that tend to create monopolies. None of his comments are strictly political in nature. Smith's analysis is purely based on economics & the efficient allocation of capital. He views the enemy not as the King's ministers, but rather the monopolies that were so prevalent during the 18th century mercantile system.

On a related note, I think it is clear that Smith would be horrified by the military centric nature of many post-industrial economies today. He notes that a standing army is a drain on national wealth. Essentially the state is paying workers not to work, but rather to stand ready to fight. I suspect that Smith would view large state defense budgets as being most closely akin to a transfer payment made by a welfare state. For those who will scream invective at me for saying this, please remember that the largest item on any defense budget by far, is payroll.

Finally, as an amateur historian, I enjoyed the brief glimpse into what life was like in the 18th century Empire from an economist's perspective. Various parts of his book review social welfare systems of his day, as well as international banking, political economy, agrarian systems, and life in general.

I really wonder how many people have ever read this book--especially those who deal with economic issues (say Congress or the President). Of course, some of the ideas have become dated because the world of 2004 isn't the world of 1776. However, what's amazing is what has held. So much of this book is still basic economic theory. Plus, its not as if Smith had predecessors who he could follow. Smith is one of those people who will still be remember in 2500 or 3000 and deservedly so.

Talk about revisionist history! Adam Smith deeply suspicious of capitalism--a closet socialist? I don't think so!

Smith argues that even the darker impulses of the human mind generate benefit in a free society. If you want to get rich in a free society, the only way to do it is to come up with something incredibly useful to humankind.

Smith wasn't distrustful of capitalism--he was distrustful of statism and merchantalism, of government handouts and bureaucrats who know best. That was the order of the day in Smith's time. The government regulations for the French textile industry between 1666 and 1730 took up 2,000 pages.

*That's* what Smith was distrustful of, not capitalism!

For a third world citizen, like me, this book seems to be written a couple years ago. Their topics are present in the political agenda of our governments right today, and after all other reviewers have written, better than I would do so, i should add four key points:
- With no proper political institutions there is no possibility of creating wealth (it reminds me sad examples from today...Argentina?). Smith thinks it is very important having economic liberties, besides independent magistrates, and a national state committed to enforce the contracts privates sign up to make transactions when some party doesn't want to comply them.
- Under the right framework of political institutions is posible to have private interests and public interest converging on the same "bargain zone". Under Smith's point of view is the mercantilism, as a policy of state, policy that picks up the winners since the desk of politicians instead of from the shops of every-day industry and parsimony of workers and entrepreuners what creates the conflict (even though he makes some exceptions, like the Navigation Act, but he regards the need of this monopoly of english navy by national security reasons only).
- After the short-run adjustments, the income distribution matters, that are so important for politicians, should be resolved by the market and the entrepreuners whom, by searching opportunities to make more profits, will make converging the prices of land, labour and goods.
- The accumulation of capital is the process that lowers interest rates, expands the supply of loans and suports higher degrees of division of labour in the economy. This process should let people have cheaper goods along the time and improve the wages of workers. The tax system should not stop this process, by "punishing" profits and the letting the remaining sources of rent free (wages, and rent of land).

Under Smith's point of view scarcity and poverty are historical and social problems, and their solutions are in history and in social interaction too.There are not worlds beyond every-day reality, as socialists made us to believe some time ago...just trade and division of labour and accumulation of capital, and so on. Let history and people surprise us. They will make the wealth, not the governments. The Smith system is open to history and change, and learnship, and only requires good foundations to secure an historical outcome of wealth.

The world of today has institutions that were not in XVIIIth century: global financial institutions and spread trade agreements, that create barriers at some places and open gates at anothers. And now we have new constraints (the environment,..) and new key players (global corporations, ..). But this new scene only makes smaller the room of economic policy choices for latin american governments. At the core of the room which is remaining for them, the Smith's suggestions still have urgent and actual importance.

Sad thing to recognize that in XXIst century latin america, we need to read a great book from XVIIIst century to find out solutions.

I have no criticism with Adam Smith's "Wealth of Nations." My criticism is with the Great Minds Series edition of the book. The Great Minds Series is an abridged version. Huge chunks have been edited out of the book, yet nowhere do they let you know this before making the purchase. I bought this book specifically because I wanted to cite it, and I can't because the parts I wanted to quote have been edited out.

Adam Smith's "Wealth of Nations" is a worthy book for any private library, but purchase an edition other than the one offered by the so-called "Great Minds Series."

I was origionally reading the text version of this book on the internet until the printed version came. I was downtroden, sickened, and even frightened to find that the Great Minds Series version of The Wealth of Nations is incomplete, yet gives no indication whatsoever of being so.

The introduction and chapters 2, 3, and 4 of book 3 are simply not there. They are not even listed in the table of contents. There is no discrepency in the page numbers, or any other teletale indication that it is incomplete. It is not written anywhere that it is an abrigement.

I want to point out how careless it is and how misleading to the reader in comprehending the philosophy of Adam Smith to print an incomplete book without any warning.

To be an economist without having read "The Wealth of Nations" is like being a priest without having read the Bible. As is often the case with second hand accounts, textbooks have distorted and watered down Adam Smith. Going back to the original text is both refreshing and enlightening.

The "Wealth of Nations" remains the most truthful defense of the economic science. But remember that Adam Smith also wrote "The Theory of Moral Sentiments"; for Smith, economics was a search to better people's life rather than simply a quest to optimize mathematical functions or estimate variables using econometric models.

To simply associate Smith with expressions such as the "invisible hand," does not do him justice. Take, for example, the opening chapter on the division of labor: first, Smith defends the division of labor as being efficient; then, he defends it as an essential component of the freedom to allocate one's labor to one's talents; finally, he links the division of labor to trade: without the freedom to exchange the fruits of one's labor, the division of labor is meaningless. The point is that Adam Smith defends the rationale for the market, rather than just explain its mechanics.

Anyone studying economics in school would think that economics is all about efficiency; this preoccupation, inevitably, breeds economists who support the market simply because it works. But to read Adam Smith is to enter the realm of an economic science where the ultimate benchmark is not efficiency but human freedom and welfare. That is, probably, what Smith would remark if he were to sit in an economics class today, and why the "Wealth of Nations" is as revolutionary today as it was two centuries ago.

Some books have entered so deeply into our culture that they affect the way we think whether or not we have read them. The Wealth of Nations is certainly one of these books. And like most such books - the Bible, Shakespeare, the works of Freud or Jung, the Bill of Rights - the Wealth of Nations does not say what you think it does.

The fact is, those who most earnestly revere Adam Smith are not always those who have read his works most carefully. Which is why reading The Wealth of Nations is important for those who think about the role of capitalism and free markets in our nations and in our world.