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The Wealth of Nations (Bantam Classics) (Mass Market Paperback) (Paperback)
by Adam Smith
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Economics, Social science, Politics, Nonfiction |
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Seminal work from the father of economics. |
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Author: Adam Smith
Publisher: Bantam Classics
Pub. in: March, 2003
ISBN: 0553585975
Pages: 1,264
Measurements: 6.9 x 4.2 x 2.2 inches
Origin of product: USA
Order code: BA01047
Other information: ISBN-13: 978-0553585971
Language: American English
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- Awards & Credential -
An all-time classic read and re-read by generations of economics students. |
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- MSL Picks -
Nobody seriously involved in economics can do without this exhaustive work, originally published in five volumes as An Inquiry into the Nature and Causes of the Wealth of Nations. This classic is a pragmatic and accessible milestone in the history of economics. Its author, Adam Smith, is woven into every economics textbook. However, Smith's theories, which today often are recounted mostly in fragments, frequently incorrectly, reveal their entire This book is a modeling exercise about the components of a nation's wealth, whereby: Wealth of Nations = Land + Labour + Stock (ie Capital accumulated). This model serves as the foundation of the arguments in the entire book; and an excellent guide to analyze our modern market economies. Smith touches on various topics, ranging from market economics, history of colony establishments, state of opulence (briefly describing China in the 18th century), and of human nature and behavior in general.
Much of Adam Smith's ideas have been distorted by subsequent scholars, some of whom contorted his ideas to suit their own purposes. For example, in coining the word 'the Invisible Hand', Smith recommended free market competition as the foundation for progressive opulance. However, his implicit assumption was that people seeking their own benefits also embraced compassion and sympathy in their moral values. This 'moral value' part is often missing in contemporary economic analysis. As such, to gain an understanding of his complete doctrine, you should read this economics book together with his other book "The Theory of Moral Sentiments", which explores definitions of moral values and virtues.
Another issue worth mentioning is that lots of people thought that Capitalism was derived from Adam Smith's doctrine, and the current market economies in the USA is a descendent of this ideology. However, if we used his definitions and analysis to compare the current USA market system, you will find that parts of the US system seemed to match closer to the Merchantile System that Smith lambasted as inefficient and short-sighted.
A lot has been said about Smith's keen observations and eloquent quotes, however, most failed to mention his uncanny sense of humor. For example, in discussing about labor compensation, Smith remarked that "The public admiration which attends upon such distinguished abilities, makes always a part of their rewards; a greater or smaller in proportion as it is higher or lower in degree. It makes a considerable part of that reward in the profession of physics; a still greater perhaps in that of law; in poetry and philosophy it makes almost the whole."; when taken into contexts that Smith is a Scholar in Philosophy, and hence should expect `public admiration' as his total compensation package, this sentence is almost hilarious.
This book is an insightful read, albeit one that requires much pondering. It took Adam Smith ten years to complete the first edition of Wealth of Nations, hence I would strongly recommend taking a slow pace in this exploration of his wisdom.
You might ask whether there is an easier way to read this book, perhaps through some summary others wrote.
My opinion is really not to do that, because the gist of this book is on the thinking process and good learning does not come easy. Spend the time to reflect on his reasonings and you will gain significantly from his wisdom. Not to forget that you should get a copy of his other book "The Theory of Moral Sentiments" to fully appreciate the Wealth of Nations.
(Quoted by Lim Kok Ching, USA)
Target readers:
Executives, managers, entrepreneurs and MBAs.
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Adam Smith was born in a small village in Kirkcaldy, Scotland in 1723. He entered the University of Glasgow at age fourteen, and later attended Balliol College at Oxford. After lecturing for a period, he held several teaching positions at Glasgow University. His greatest achievement was writing The Wealth of Nations (1776), a five-book series that sought to expose the true causes of prosperity, and installed him as the father of contemporary economic thought. He died in Edinburgh on July 19, 1790.
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From Publisher
It is symbolic that Adam Smith’s masterpiece of economic analysis, The Wealth of Nations, was first published in 1776, the same year as the Declaration of Independence.
In his book, Smith fervently extolled the simple yet enlightened notion that individuals are fully capable of setting and regulating prices for their own goods and services. He argued passionately in favor of free trade, yet stood up for the little guy. The Wealth of Nations provided the first - and still the most eloquent - integrated description of the workings of a market economy.
The result of Smith’s efforts is a witty, highly readable work of genius filled with prescient theories that form the basis of a thriving capitalist system. This unabridged edition offers the modern reader a fresh look at a timeless and seminal work that revolutionized the way governments and individuals view the creation and dispersion of wealth - and that continues to influence our economy right up to the present day.
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CHAPTER I
OF THE DIVISION OF LABOUR
The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.
The effects of the division of labour, in the general business of society, will be more easily understood, by considering in what manner it operates in some particular manufactures. It is commonly supposed to be carried furthest in some very trifling ones; not perhaps that it really is carried further in them than in others of more importance: but in those trifling manufactures which are destined to supply the small wants of but a small number of people, the whole number of workmen must necessarily be small; and those employed in every different branch of the work can often be collected into the same workhouse, and placed at once under the view of the spectator. In those great manufactures, on the contrary, which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse. We can seldom see more, at one time, than those employed in one single branch. Though in such manufactures, therefore, the work may really be divided into a much greater number of parts, than in those of a more trifling nature, the division is not near so obvious, and has accordingly been much less observed.
To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.
In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one; though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another, seems to have taken place, in consequence of this advantage. This separation too is generally carried furthest in those countries which enjoy the highest degree of industry and improvement; what is the work of one man in a rude state of society, being generally that of several in an improved one. In every improved society, the farmer is generally nothing but a farmer; the manufacturer, nothing but a manufacturer. The labour too which is necessary to produce any one complete manufacture, is almost always divided among a great number of hands. How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth! The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely, the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith. The spinner is almost always a distinct person from the weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complete and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour in this art, does not always keep pace with their improvement in manufactures. The most opulent nations, indeed, generally excel all their neighbours in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former. Their lands are in general better cultivated, and having more labour and expence bestowed upon them, produce more in proportion to the extent and natural fertility of the ground. But this superiority of produce is seldom much more than in proportion to the superiority of labour and expence. In agriculture, the labour of the rich country is not always much more productive than that of the poor; or, at least, it is never so much more productive, as it commonly is in manufactures. The corn of the rich country, therefore, will not always, in the same degree of goodness, come cheaper to market than that of the poor. The corn of Poland, in the same degree of goodness, is as cheap as that of France, notwithstanding the superior opulence and improvement of the latter country. The corn of France is, in the corn provinces, fully as good, and in most years nearly about the same price with the corn of England, though, in opulence and improvement, France is perhaps inferior to England. The corn-lands of England, however, are better cultivated than those of France, and the corn-lands of France are said to be much better cultivated than those of Poland. But though the poor country, notwithstanding the inferiority of its cultivation, can, in some measure, rival the rich in the cheapness and goodness of its corn, it can pretend to no such competition in its manufactures; at least if those manufactures suit the soil, climate, and situation of the country. The silks of France are better and cheaper than those of England, because the silk manufacture, at least under the high duties upon the importation of raw silk, does not so well suit the climate of England as that of France. But the hard-ware and the coarse woollens of England are beyond all comparison superior to those of France, and much cheaper too in the same degree of goodness. In Poland there are said to be scarce any manufactures of any kind, a few of those coarser household manufactures excepted, without which no country can well subsist.
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.
First, the improvement of the dexterity of the workman necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man's business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman.
A common smith, who, though accustomed to handle the hammer, has never been used to make nails, if upon some particular occasion he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those too very bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom with his utmost diligence make more than eight hundred or a thousand nails in a day. I have seen several boys under twenty years of age who had never exercised any other trade but that of making nails, and who, when they exerted themselves, could make, each of them, upwards of two thousand three hundred nails in a day... |
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Robert L. Heilbroner (MSL quote), USA
<2007-11-05 00:00>
Adam Smith's enormous authority resides, in the end, in the same property that we discover in Marx: not in any ideology, but in an effort to see to the bottom of things.
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Rolf Dobelli (MSL quote), Switzerland
<2007-11-05 00:00>
Nobody seriously involved in economics can do without this exhaustive work, originally published in five volumes as An Inquiry into the Nature and Causes of the Wealth of Nations. This classic is a pragmatic and accessible milestone in the history of economics. Its author, Adam Smith, is woven into every economics textbook. However, Smith's theories, which today often are recounted mostly in fragments, frequently incorrectly, reveal their entire social and economic innovative power only in context. Smith burst onto the scene at a time when absolutist national states monopolized the world's precious metal reserves and tried to increase their own wealth through stringent export policies. These states were motivated by an entirely new concept about national wealth: that it stemmed from the work of the country's people, not from gold. Based on that idea, economic markets should balance themselves as if guided by an "invisible hand," impelled by each individual's self-interest. The state has to provide only an orderly framework and specific public goods and services. Even though Smith's image of idealized economic and social harmony may have developed a few cracks over the course of time, his ideas have inspired many well-known economists during the past 250 years, including David Ricardo, Vilfredo Pareto, Friedrich August von Hayek and Milton Friedman. We highly recommend this seminal work. |
C.S.Willis (MSL quote), USA
<2007-11-05 00:00>
If you're wondering which Wealth of Nations to purchase, get the Bantam paperback. This is Smith's complete and unabridged final version of the Wealth of Nations. It provides footnotes on Smith's wording, the historical context, and the differences between Smith's 5th edition and previous editions. In addition, the margin of the pages contain useful notes which summarize Smith's writing. For the price, this is clearly the superior choice.
Now, if you're wondering whether you should undertake such an endeavor, let me just say that Adam Smith was a professor of rhetoric. He explains everything so precisely, yet so comprehensible. Smith's writing is by no means difficult; I actually found it a surprisingly easy read given its antique nature. Once you get through the first chapter, you get quite used to Smith's writing style. If you put adequate time and energy into it, it's not hard at all. |
Joseph S. Maresca (MSL quote), USA
<2007-11-05 00:00>
Adam Smith is considered a founding father of economic theory.
In the Wealth of Nations, he laid a foundation for the free market while at the same time explaining some of the problems encountered by workers. He explained that all work had to be highly organized in order to be productive. In addition, he recognized that machinery facilitated work. This notion serves as an important foundation for more modern patent practice. He praised the ingenuity of inventors and makers of new machinery. The author spoke of increased production as a condition precedent to enhancing the power of labor. From this precept, he explained that the size of a market would dictate the division of its constituent labor. For instance, a small community in the suburbs might be serviced by a local "General Store"; whereas, a county in a large city would be serviced by a retail chain store with hundreds of employees and a highly sophisticated management structure. In Adam Smith's time, metals were popular in the manufacture of commodities.
Problems were encountered in weighing the metals and arriving at a uniform system of metrics. The theory of pricing was a function of the toil needed to purchase a good. For instance, the price of an auto was a function of the many hours of labor necessary to earn the money to buy the car. In addition, the price of an item was related to its constituent parts. For instance, the price of linen was a function of the labor of the flaxdresser, spinner, weaver, bleacher and overall
employer. The natural price varied with the price of component parts. For instance, if the semiconductor was reduced significantly in price- then the overall price of an electronic appliance would go down. Adam Smith saw labour as a function of national wealth. He recognized that laborers had to earn more than a mere subsistence in order to live dignified lives.
He told a story of a mother in the Highlands of Scotland who had to raise 20 children so that 2 would survive. Presumably, 18 children would die from various diseases and poverty. The interest rates at the time were low. In England, rates
hovered at 5%. In France, the rates were 3-5% . The government could borrow at 2% in Holland.
Adam Smith defined a wage as a function of the following:
- the ease or hardship to do work
Consider the case of a diamond cutter. The art of cutting a diamond is a precise process which requires extensive training and expert worksmanship. The demand for precious stones was a function of their inherent beauty, scarcity and workmanship involved in polishing them and preparing them for commercial use.
- the difficulty and expense of learning a trade A skilled surgeon required years of medical training and a long apprenticeship in anatomy and surgery.
- the constancy of employment o the trust reposed in the workpeople Consider the case of a landowner who took a year-long vacation to the Orient. He/she would leave behind a manager to run the entire business on a 24/7 basis. This high degree of trust reposed in the workperson required a commensurate compensation.
- probability of success or failure of the venture Consider the effort required to cross the Atlantic. The trip was lengthy, dangerous and prone to failure due to the vagaries of nature, pirating on the high seas and disease. Naturally, a worker had to receive a greater compensation to take these factors into consideration.
- the danger inherent in doing the work Consider the danger inherent in entering a diamond mine. The possibility of collapse was a constant threat. Accordingly, workers were compensated commensurate with the threat level.
Adam Smith explained that fear of misfortune dampened the taking of risks. He knew (intuitively) that investors were risk averse. In addition, there was a restriction on training new labor. In Sheffield, no master cutter could train more than a single cutter . Apprenticeships were lengthy. i.e. 7 years in length.
Adam Smith explained that food was a source of rent to the landowners. The pricing of metals was a function of the price in the most fertile mine in the world. Whatever increased the fertility of the land increased its value by implication.
Markets in foodstuffs were restricted because refrigeration did not exist until motors and condensers were perfected. Essentially, there were no operable refrigerators until the famous Clausius statement was perfected in the engineering
sciences.
Accordingly, the market for butcher's meat was confined to the country of origin. Wool and raw hide could be transported; however, meat was consumed locally as its shelf-life was limited. The value of money was a function of the value of annual produce. Accordingly, increased quantities of commodities raised the value of money. Low fixed rates of interest promoted business and discouraged usury. Riches were a function of the annual produce which created the wealth and supported the tax base. High duties were enforced to protect the local markets. Treaties between countries helped local merchants to craft meaningful
trade sequences. Exports were encouraged . The expense of erecting public works was a function of the taxes raised on the land and the proportion of yield from the crops. Governments granted bounties to merchants who wanted to sell
overseas in order to assist them in making a profit and defraying costs/risks. This work is a classic in theoretical and practical economics. It is a "must read" for economists, historians, majors in government, financiers, investors, literary buffs and a large constituency of academicians.
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