The Wealth of Nations | Wikipedia audio article

The Wealth of Nations | Wikipedia audio article


An Inquiry into the Nature and Causes of the
Wealth of Nations, generally referred to by its shortened title The Wealth of Nations,
is the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published in 1776, the book offers one
of the world’s first collected descriptions of what builds nations’ wealth, and is today
a fundamental work in classical economics. By reflecting upon the economics at the beginning
of the Industrial Revolution, the book touches upon such broad topics as the division of
labour, productivity, and free markets.==History==
The Wealth of Nations was published March 9, 1776, during the Scottish Enlightenment
and the Scottish Agricultural Revolution. It influenced several authors and economists,
such as Karl Marx, as well as governments and organisations, setting the terms for economic
debate and discussion for the next century and a half. For example, Alexander Hamilton was influenced
in part by The Wealth of Nations to write his Report on Manufactures, in which he argued
against many of Smith’s policies. Hamilton based much of this report on the
ideas of Jean-Baptiste Colbert, and it was, in part, Colbert’s ideas that Smith responded
to, and criticised, with The Wealth of Nations.The Wealth of Nations was the product of seventeen
years of notes and earlier works, as well as an observation of conversation among economists
of the time concerning economic and societal conditions during the beginning of the Industrial
Revolution, and it took Smith some ten years to produce. The result, An Inquiry to the Wealth of Nations,
was a treatise which sought to offer a practical application for reformed economic theory to
replace the mercantilist and physiocratic economic theories that were becoming less
relevant in the time of industrial progress and innovation. It provided the foundation for economists,
politicians, mathematicians, biologists, and thinkers of all fields to build upon. Irrespective of historical influence, The
Wealth of Nations represented a clear paradigm shift in the field of economics, comparable
to Sir Isaac Newton’s Principia Mathematica for physics, Antoine Lavoisier’s Traité Élémentaire
de Chimie for chemistry, or Charles Darwin’s On the Origin of Species for biology. Five editions of The Wealth of Nations were
published during Smith’s lifetime: in 1776, 1778, 1784, 1786 and 1789. Numerous editions appeared after Smith’s death
in 1790. To better understand the evolution of the
work under Smith’s hand, a team led by Edwin Cannan collated the first five editions. The differences were published along with
an edited sixth edition in 1904. They found minor but numerous differences
(including the addition of many footnotes) between the first and the second editions,
both of which were published in two volumes. The differences between the second and third
editions, however, are major. In 1784, Smith annexed these first two editions
with the publication of Additions and Corrections to the First and Second Editions of Dr. Adam
Smith’s Inquiry into the Nature and Causes of the Wealth of Nations, and he also had
published the three-volume third edition of the Wealth of Nations, which incorporated
Additions and Corrections and, for the first time, an index. Among other things, the Additions and Corrections
included entirely new sections, particularly to Bk 4 Chs 4 & 5, and Bk 5 Ch 1, as well
as an additional chapter (8), ‘Conclusion of the Mercantile System’, in Bk 4.The fourth
edition, published in 1786, had only slight differences from the third edition, and Smith
himself says in the Advertisement at the beginning of the book, “I have made no alterations of
any kind.” Finally, Cannan notes only trivial differences
between the fourth and fifth editions—a set of misprints being removed from the fourth
and a different set of misprints being introduced.==Reception and impact=====
Great Britain=======Intellectuals, critics, and reviewers
====The first edition of the book sold out in
six months. The printer William Strahan wrote on 12 April
1776 that David Hume said The Wealth of Nations required too much thought to be as popular
as Edward Gibbon’s The History of the Decline and Fall of the Roman Empire. Strahan also wrote: “What you say of Mr. Gibbon’s
and Dr. Smith’s book is exactly just. The former is the most popular work; but the
sale of the latter, though not near so rapid, has been more than I could have expected from
a work that requires much thought and reflection (qualities that do not abound among modern
readers) to peruse to any purpose.” Gibbon wrote to Adam Ferguson on 1 April:
“What an excellent work is that with which our common friend Mr. Adam Smith has enriched
the public! An extensive science in a single book, and
the most profound ideas expressed in the most perspicuous language”. The review of the book in the Annual Register
was probably written by Whig MP Edmund Burke. In 1791 the English radical Thomas Paine wrote
in his Rights of Man that “Had Mr. Burke possessed talents similar to the author ‘On the Wealth
of Nations,’ he would have comprehended all the parts which enter into, and, by assemblage,
form a constitution.” In 1800, the Anti-Jacobin Review criticized
The Wealth of Nations. In 1803, The Times argued against war with
Spain: She is our best customer; and by the gentle and peaceable stream of commerce, the
treasures of the new world flow with greater certainty into English reservoirs, than it
could do by the most successful warfare. They come in this way to support our manufactures,
to encourage industry, to feed our poor, to pay taxes, to reward ingenuity, to diffuse
riches among all classes of people. But for the full understanding of this beneficial
circulation of wealth, we must refer to Dr. Adam Smith’s incomparable Treatise on the
Wealth of Nations. In 1810, a correspondent writing under the
pseudonym of Publicola included at the head of his letter Smith’s line that “Exclusive
Companies are nuisances in every respect” and called him “that learned writer”. In 1812, Robert Southey of the Quarterly Review
condemned The Wealth of Nations as a “tedious and hard-hearted book”. In 1821, The Times quoted Smith’s opinion
that the interests of corn dealers and the people were the same. In 1826, the English radical William Cobbett
criticised in his Rural Rides the political economists’ hostility to the Poor Law: “Well,
amidst all this suffering, there is one good thing; the Scotch political economy is blown
to the devil, and the Edinburgh Review and Adam Smith along with it”.The Liberal statesman
William Ewart Gladstone chaired the meeting of the Political Economy Club to celebrate
the centenary of the publication of The Wealth of Nations. The Liberal historian Lord Acton believed
that The Wealth of Nations gave a “scientific backbone to liberal sentiment” and that it
was the “classic English philosophy of history”.====Legislators====
Smith’s biographer John Rae contends that The Wealth of Nations shaped government policy
soon after it was published.=====18th century=====
In 1777, in the first budget after the book was published, Prime Minister Lord North got
the idea for two new taxes from the book: one on man-servants and the other on property
sold at auction. The budget of 1778 introduced the inhabited
house duty and the malt tax, both recommended by Smith. In 1779, Smith was consulted by politicians
Henry Dundas and Lord Carlisle on the subject of giving Ireland free trade. The Wealth of Nations was first mentioned
in Parliament by the Whig leader Charles James Fox on 11 November 1783: There was a maxim
laid down in an excellent book upon the Wealth of Nations which had been ridiculed for its
simplicity, but which was indisputable as to its truth. In that book it was stated that the only way
to become rich was to manage matters so as to make one’s income exceed one’s expenses. This maxim applied equally to an individual
and to a nation. The proper line of conduct therefore was by
a well-directed economy to retrench every current expense, and to make as large a saving
during the peace as possible. However Fox once told Charles Butler sometime
after 1785 that he had never read the book and that “There is something in all these
subjects which passes my comprehension; something so wide that I could never embrace them myself
nor find any one who did.” When Fox was dining with Lord Lauderdale in
1796, Lauderdale remarked that they knew nothing of political economy before Adam Smith wrote. “Pooh,” replied Fox, “your Adam Smiths are
nothing, but” (he added, turning to the company) “that is his love; we must spare him there.” Lauderdale replied: “I think he is everything”,
to which Fox rejoined: “That is a great proof of your affection”. Fox also found Adam Smith “tedious” and believed
that one half of The Wealth of Nations could be “omitted with much benefit to the subject”. The Wealth of Nations was next mentioned in
Parliament by Robert Thornton MP in 1787 to support the Commercial Treaty with France. In the same year George Dempster MP referenced
it in the debate on the proposal to farm the post-horse duties and in 1788 by a Mr. Hussy
on the Wool Exportation Bill.The prime minister, William Pitt, praised Smith in the House of
Commons on 17 February 1792: “…an author of our own times now unfortunately no more
(I mean the author of a celebrated treatise on the Wealth of Nations), whose extensive
knowledge of detail, and depth of philosophical research will, I believe, furnish the best
solution to every question connected with the history of commerce, or with the systems
of political economy.” In the same year it was quoted by Samuel Whitbread
MP and Fox (on the division of labour) in the debate on the armament against Russia
and also by William Wilberforce in introducing his Bill against the slave trade. The book was not mentioned in the House of
Lords until a debate in 1793 between Lord Lansdowne and Lord Loughborough about revolutionary
principles in France. On 16 May 1797, Pitt said in the debate on
the suspension of cash payments by the Bank of England that Smith was “that great author”
but his arguments, “though always ingenious”, were “sometimes injudicious”. In 1798, Sir John Mitford, the Solicitor-General,
cited the book in his criticism of bills of exchange given in consideration of other bills. During a debate on the price of corn in 1800
Lord Warwick said: There was hardly any kind of property on which the law did not impose
some restraints and regulations with regard to the sale of them, except that of provisions. This was probably done on the principles laid
down by a celebrated and able writer, Doctor Adam Smith, who had maintained that every
thing ought to be left to its own level. He knew something of that Gentleman, whose
heart he knew was as sound as his head; and he was sure that had he lived to this day
and beheld the novel state of wretchedness to which the country was now reduced …; that
Great Man would have reason to blush for some of the doctrines he had laid down. He would now have abundant opportunities of
observing that all those artificial means of enhancing the price of provisions, which
he had considered as no way mischievous, were practised at this time to a most alarming
extent. He would see the Farmer keeping up his produce
while the poor were labouring under all the miseries of want, and he would see Forestallers,
Regraters, and all kinds of Middle-men making large profits upon it. Lord Grenville replied: [W]hen that great
man lived, … his book was first published at a period, previous to which there had been
two or three seasons of great dearth and distress; and during those seasons there were speculators
without number, who … proposed that a certain price should be fixed on every article: but
all their plans were wisely rejected, and the Treatise on the Wealth of Nations, which
came forward soon after, pointed out in the clearest light how absurd and futile they
must have been.=====19th century=====The Radical MP Richard Cobden studied The
Wealth of Nations as a young man; his copy is still in the library of his home at Dunford
House and there are lively marginal notes on the places where Smith condemns British
colonial policy. There are none on the passage about the invisible
hand. Cobden campaigned for free trade in his agitation
against the Corn Laws. In 1843, Cobden quoted Smith’s protest against
the “plain violation of the most sacred property” of every man derived from his labour. In 1844, he cited Smith’s opposition to slave
labour and claimed that Smith had been misrepresented by protectionists as a monopolist. In 1849 Cobden claimed that he had “gone through
the length and breadth of this country, with Adam Smith in my hand, to advocate the principles
of Free Trade.” He also said he had tried “to popularise to
the people of this country, and of the Continent, those arguments with which Adam Smith … and
every man who has written on this subject, have demonstrated the funding system to be
injurious to mankind.”Cobden believed it to be morally wrong to lend money to be spent
on war. In 1849, when The Times claimed political
economists were against Cobden on this, Cobden wrote: “I can quote Adam Smith whose authority
is without appeal now in intellectual circles, it gives one the basis of science upon which
to raise appeals to the moral feelings.” In 1850, when the Russian government attempted
to raise a loan to cover the deficit brought about by its war against Hungary, Cobden said:
“I take my stand on one of the strongest grounds in stating that Adam Smith and other great
authorities on political economy are opposed to the very principle of such loans.” In 1863, during Cobden’s dispute with The
Times over its claims that his fellow Radical John Bright wanted to divide the land of the
rich amongst the poor, Cobden read to a friend the passage in the Wealth of Nations which
criticized primogeniture and entail. Cobden said that if Bright had been as plain-speaking
as Smith, “how he would have been branded as an incendiary and Socialist”. In 1864, Cobden proclaimed, “If I were five-and-twenty
or thirty, … I would take Adam Smith in hand, and I would have a League for free trade
in Land just as we had a League for free trade in Corn. You will find just the same authority in Adam
Smith for the one as for the other.”===United States===
After the British took control over occupied French North America in the Seven Years’ War,
Charles Townshend suggested that the American colonists provide help to pay for the war
debt by paying an additional tax on tea. During this time, Adam Smith was working for
Townshend and developed a relationship with Benjamin Franklin, who played a vital role
in the United States’ independence three months after Smith’s The Wealth of Nations book was
released.James Madison, in a speech given in Congress on 2 February 1791, cited The
Wealth of Nations in opposing a national bank: “The principal disadvantages consisted in,
1st. banishing the precious metals, by substituting another medium to perform their office: This
effect was inevitable. It was admitted by the most enlightened patrons
of banks, particularly by Smith on the Wealth of Nations.” Thomas Jefferson, writing to John Norvell
on 14 June 1807, claimed that on “the subjects of money & commerce, Smith’s Wealth of Nations
is the best book to be read, unless Say’s Political Economy can be had, which treats
the same subject on the same principles, but in a shorter compass & more lucid manner.”==
Modern evaluation==With 36,331 citations, it is the second most
cited book in the social sciences published before 1950, behind Karl Marx’s Capital. George Stigler attributes to Smith “the most
important substantive proposition in all of economics” and foundation of resource-allocation
theory. It is that, under competition, owners of resources
(labour, land, and capital) will use them most profitably, resulting in an equal rate
of return in equilibrium for all uses (adjusted for apparent differences arising from such
factors as training, trust, hardship, and unemployment). He also describes Smith’s theorem that “the
division of labour is limited by the extent of the market” as the “core of a theory of
the functions of firm and industry” and a “fundamental principle of economic organisation.”Paul
Samuelson finds in Smith’s pluralist use of supply and demand—as applied to wages, rents,
and profit—a valid and valuable anticipation of the general equilibrium modelling of Walras
a century later. Moreover, Smith’s allowance for wage increases
in the short and intermediate term from capital accumulation and invention added a realism
missed later by Malthus, Ricardo, and Marx in their propounding a rigid subsistence-wage
theory of labour supply.In noting the last words of the Wealth of Nations, If any of the provinces of the British empire
cannot be made to contribute towards the support of the whole empire, it is surely time that
Great Britain should free herself from the expence of defending those provinces in time
of war, and of supporting any part of their civil or military establishments in time of
peace, and endeavour to accommodate her future views and designs to the real mediocrity of
her circumstances.Ronald Coase suggests that if Smith’s earlier proposal of granting colonies
representation in the British parliament proportional to their contributions to public revenues
had been followed, “there would have been no 1776, … America would now be ruling England,
and we [in America] would be today celebrating Adam Smith not simply as the author of the
Wealth of Nations, but hailing him as a founding father.”Mark Blaug argues that it was Smith’s
achievement to shift the burden of proof against those maintaining that the pursuit of self-interest
does not achieve social good. But he notes Smith’s relevant attention to
definite institutional arrangements and process as disciplining self-interest to widen the
scope of the market, accumulate capital, and grow income.Economic anthropologist David
Graeber argues that throughout antiquity, one can identify many different systems of
credit and later monetary exchange, drawing evidence for his argument from historical
and also ethnographical records, that the traditional explanation for the origins of
monetary economies from primitive bartering systems, as laid out by Adam Smith, does not
find empirical support. The author argues that credit systems developed
as means of account long before the advent of coinage around 600 BCE, and can still be
seen operating in non-monetary economies. The idea of barter, on the other hand, seems
only to apply to limited exchanges between societies that had infrequent contact and
often in a context of ritualised warfare, rendering its conceptualisation among economists
as a myth. As an alternative explanation for the creation
of economic life, the author suggests that it originally related to social currencies,
closely related to non-market quotidian interactions among a community and based on the “everyday
communism” that is based on mutual expectations and responsibilities among individuals. This type of economy is, then, contrasted
with the moral foundations of exchange based on formal equality and reciprocity (but not
necessarily leading to market relations) and hierarchy, based on clear inequalities that
tend to crystallise in customs and castes.==See also==
The Theory of Moral Sentiments (1759), Adam Smith’s other major work
The National Gain, a pamphlet by Finnish–Swedish economist and politician Anders Chydenius
which preceded The Wealth of Nations and which had similar ideas

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