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Adam Smith’s Wealth of Nations is widely regarded as the first modern work of economics and a bible of free market capitalism, although both claims are vigorously disputed. What cannot be disputed is that it offers a stinging indictment of what we today call “crony capitalism,” along with a masterful explanation of why such a system impoverishes the whole world. Originally published in 1776 as An Inquiry into the Nature and Causes of the Wealth of Nations, it continues to be enormously influential. Currents of Smith’s thought run through the works of writers as diverse as Karl Marx, John Maynard Keynes, Noam Chomsky, and Milton Friedman.
About the Author
Adam Smith (1723–1790) was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith studied social philosophy at the University of Glasgow and the University of Oxford. His first book, The Theory of Moral Sentiments, was written while he was a professor of moral philosophy at Glasgow; Smith’s lecture subjects, in order of preference, were natural theology, ethics, jurisprudence, and economics.
About the Editor
Hunter Lewis, co-founder of global investment firm Cambridge Associates, has written nine books on economics and moral philosophy. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, and cultural organizations, as well as the World Bank.
Why We All Need to Read Adam Smith
Book One: Of the Causes of Improvement in the Productive Power of Labor and of the Order According to Which Its Produce is Naturally Distributed among the Different Ranks of the People
1: Of the Division of Labor
2: Of the Principle Which Gives Occasion to the Division of Labor
3: That the Division of Labor Is Limited by the Extent of the Market
4: Of the Origin and Use of Money
5: Of the Real and Nominal Price of Commodities, or of Their Price in Labor, and Their Price in Money
6: Of the Component Part of the Price of Commodities
7: Of the Natural and Market Price of Commodities
8: Of the Wages of Labor
9: Of the Profits of Stock
10: Of Wages and Profit in the Different Employments of Labor and Stock
11: Of the Rent of Land
Book Two: Of the Nature, Accumulation, and Employment of Stock
1: Of the Division of Stock
2: Of Money Considered as a Particular Branch of the General Stock of the Society
3: Of the Accumulation of Capital, or of Productive and Unproductive Labor
4: Of Stock Lent at Interest
5: Of the Different Employment of Capitals
Book Three: Of the Different Progress of Opulence in Different Nations
1: Of the Natural Progress of Opulence
Book Four: Of Systems of Political Economy
1: Of the Principle of the Commercial or Mercantile System
2: Of Restraints upon Importation from Foreign Countries of Such Goods as Can Be Produced at Home
3: Of the Extraordinary Restraints upon the Importation of Goods of Almost All Kinds, from Those Countries with Which the Balance Is Supposed to Be Disadvantageous
4: Of Drawbacks
5: Of Bounties
6: Of Treaties of Commerce
7: Conclusion of the Mercantile System
8: Of the Agricultural Systems . . . of Political Economy Which Represent the Produce of Land as Either the Sole or the Principal Source of the Revenue and Wealth of Every Country
Book Five: Of the Revenue of the Sovereign or Commonwealth 1: Of the Expenses of the Sovereign or Commonwealth
2: Of the Sources of the General or Public Revenue of the Society
3: Of Public Debts
From: Introduction – Why We All Need to Read Adam Smith
There are many myths about Adam Smith. Best selling economist John Kenneth Galbraith claimed that Smith was “the first economist,” 1 and thus in effect the inventor of economics. This is certainly wrong. Smith was not even the inventor of modern free market economics. That accolade would be shared by Richard Cantillon, Anne-Robert-Jacques Turgot, David Hume, and to a lesser degree Francois Quesnay, among others.
Famed economist Joseph Schumpeter concluded rightly that “The Wealth of Nations does not contain a single analytic idea, principle, or method that was entirely new in 1776.” A journal article has even been devoted to the question of whether Smith was a plagiarist, although the charge remains unproven, and probably applies today’s standard to the past in an inappropriate way.
It is closer to the truth, but still incorrect, to say that The Wealth of Nations is the “bible” of free market capitalism. As we shall see, Smith made too many errors for this to be the case. A very prominent free market economist, Murray Rothbard, regarded Smith, in Rothbard colleague David Gordon’s telling phrase, as almost the “gravedigger,” not the founder of free market
If Rothbard were entirely right, we could stop right here, close this introduction, and not bother to read Smith himself. To reach this conclusion, however, would be an error. There are reasons not only to read Smith, but also to study and value his work highly. In this introduction at least, we have come not to bury Smith for his undeniable faults but to praise him.
No one disputes that Smith is one of the most influential economists, and indeed thinkers, of world history. Economist Mark Skousen wrote a book describing the “big three” of economics as Smith, Marx, and Keynes. These three have clearly been the most influential, and Smith the most lastingly influential of the three. Has any single book had a greater impact on world history than The Wealth of Nations? The only possible competitor is Charles Darwin’s Origin of the Species, which ignited the evolution controversy.
Is then Smith, the uber-famous economist, simply overblown, a case of earning a reputation that he does not deserve? No, not at all. Whatever his failings, he has more than earned his fame as the most profound and persuasive critic of an economic system traditionally referred to as mercantilism, but more recently (and quite appropriately) called “crony capitalism.” Smith’s critique is always relevant, because crony capitalism is the dominant economic system of world history. It is especially relevant today, when this type of capitalism is especially strong, both in the developed and the developing world.
Book One, Chapter Two: Of the Principle Which Gives Occasion to the Division of Labor
This division of labor, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature . . . to truck, barter, and exchange one thing for another.
. . . In civilized society [an individual] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. . . . It is in vain for him to expect . . . [assistance] . . . from [the] benevolence [of others] only. He will be more likely to prevail if he can interest their self-love in his favor, and show them that it is for their own advantage to do for him what he requires of them. . . .
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. . . .
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