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Wealth of Nations

Wealth of Nations

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Wealth of Nations

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May 23, 2013


Adam Smith (1723-1790) was one of the brightest stars of the eighteenth-century Scottish Enlightenment. An Inquiry into the Nature and Causes of the Wealth of Nations was his most important book. First published in London in March 1776, it had been eagerly anticipated by Smith’s contemporaries and became an immediate bestseller. That edition sold out quickly and others followed. Today, Smith’s Wealth of Nations rightfully claims a place in the Western intellectual canon.

It is the first book of modern political economy, and still provides the foundation for the study of that discipline.

But it is much more than that. Along with important discussions of economics and political theory, Smith mixed plain common sense with large measures of history, philosophy, psychology, sociology, and much else. Few texts remind us so clearly that the Enlightenment was very much a lived experience, a concern with improving the human condition in practical ways for real people. A masterpiece by any measure, Wealth of Nations remains a classic of world literature to be usefully enjoyed by readers today.

May 23, 2013

About the author

Adam Smith (1930–2014) is the pseudonym of George Goodman, a writer and editor best known for his Emmy Award–winning PBS program Adam Smith’s Money World. After graduating from Harvard College, he studied political economy as a Rhodes scholar at the University of Oxford. Goodman made his name as a journalist presenting financial and economic concepts to mainstream audiences and was a bestselling author of numerous books, including The Money Game, Supermoney, and Powers of Mind. He was also a screenwriter, as well as a cofounder of New York magazine and Institutional Investor.

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Wealth of Nations - Adam Smith

Adam Smith

An Inquiry into the Nature and Causes of the

Wealth of Nations

with an Introduction by Mark G. Spencer



Wealth of Nations first published

by Wordsworth Editions Limited in 2012

Published as an ePublication 2013

ISBN 978 1 84870 564 7

Introduction © Mark G. Spencer 2012

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Further Reading

Wealth of Nations

Volume One

Introduction and Plan of the Work

Book 1: Of the Causes of Improvement in the Productive Powers of Labour, and of the Order according to which its Produce is Naturally Distributed Among the Different Ranks of the People

Chapter 1: Of the Division of Labour

Chapter 2: Of the Principle which Gives Occasion to the Division of Labour

Chapter 3: That the Division of Labour is Limited by the Extent of the Market

Chapter 4: Of the Origin and Use of Money

Chapter 5: Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money

Chapter 6: Of the Component Parts of the Price of Commodities

Chapter 7: Of the Natural and Market Price of Commodities

Chapter 8: Of the Wages of Labour

Chapter 9: Of the Profits of Stock

Chapter 10: Of Wages and Profit in the Different Employments of Labour and Stock

Part 1: Inequalities arising from the Nature of the Employments themselves

Part 2: Inequalities occasioned by the Policy of Europe

Chapter 11: Of the Rent of Land

Part 1: Of the Produce of Land which always affords Rent

Part 2: Of the Produce of Land which sometimes does, and sometimes does not, afford Rent

Part 3: Of the Variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent

Digression concerning the Variations in the Value of Silver during the Course of the Four last Centuries

Variations in the Proportion between the respective Values of Gold and Silver

Grounds of the Suspicion that the Value of Silver still continues to decrease

Different Effects of the Progress of Improvement upon three different Sorts of rude Produce

Conclusion of the Digression concerning the Variations in the Value of Silver

Effects of the Progress of Improvement upon the real Price of Manufactures

Conclusion of the Chapter

Prices of Wheat

Book 2: Of the Nature, Accumulation, and Employment of Stock


Chapter 1: Of the Division of Stock

Chapter 2: Of Money, Considered as a Particular Branch of the General Stock of the Society, or of the Expence of Maintaining the National Capital

Chapter 3: Of the Accumulation of Capital, or of Productive and Unproductive Labour

Chapter 4: Of Stock Lent at Interest

Chapter 5: Of the Different Employment of Capitals

Book 3: Of the Different Progress of Opulence in Different Nations

Chapter 1: Of the Natural Progress of Opulence

Chapter 2: Of the Discouragement of Agriculture in the Ancient State of Europe after the Fall of the Roman Empire

Chapter 3: Of the Rise and Progress of Cities and Towns after the Fall of the Roman Empire

Chapter 4: How the Commerce of Towns Contributed to the Improvement of the Country

Book 4: Of Systems of Political Economy


Chapter 1: Of the Principle of the Commercial or Mercantile System

Chapter 2: Of Restraints upon Importation from Foreign Countries of such Goods as can be Produced at Home

Chapter 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

Part 1: Of the Unreasonableness of those Restraints, even upon the Principles of the Commercial System

Digression concerning Banks of Deposit, particularly concerning that of Amsterdam

Part 2: Of the Unreasonableness of those extraordinary Restraints, upon other Principles

Volume Two

Chapter 4: Of Drawbacks

Chapter 5: Of Bounties

Digression concerning the Corn Trade and Corn Laws

Chapter 6: Of Treaties of Commerce

Chapter 7: Of Colonies

Part 1: Of the Motives for Establishing New Colonies

Part 2: Causes of the Prosperity of New Colonies

Part 3: Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope

Chapter 8: Conclusion of the Mercantile System

Chapter 9: Of the Agricultural Systems, or of those 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 5: Of the Revenue of the Sovereign or Commonwealth

Chapter 1: Of the Expences of the Sovereign or Commonwealth

Part 1: Of the Expence of Defence

Part 2: Of the Expense of Justice

Part 3: Of the Expense of public Works and public Institutions

Article 1: Of the public Works and Institutions for facilitating the Commerce of the Society

Article 2: Of the Expence of the Institutions for the Education of Youth

Article 3: Of the Expence of the Institutions for the Instruction of People of all Ages

Part 4: Of the Expence of supporting the Dignity of the Sovereign


Chapter 2: Of the Sources of the General or Public Revenue of the Society

Part 1: Of the Funds, or Sources of Revenue, which may peculiarly belong to the Sovereign or Commowealth

Part 2: Of Taxes

Article 1: Taxes upon Rent. Taxes upon the Rent of Land

Taxes which are proportioned, not to the Rent, but to the Produce of Land

Taxes upon the Rent of Houses

Article 2: Taxes upon Profit, or upon the Revenue arising from Stock

Taxes upon the Profit of particular Employments

Appendix to Articles 1 and 2: Taxes upon the Capital Value of Lands, Houses, and Stock

Article 3: Taxes upon the Wages of Labour

Article 4: Taxes which it is intended should fall indifferently upon every different Species of Revenue

Capitation Taxes

Taxes upon Consumable Commodities

Chapter 3: Of Public Debts

Appendix: On the Herring Bounty

Index of Names


Adam Smith and the Wealth of Nations

Adam Smith (1723–1790) was one of the brightest stars of the eighteenth-century Scottish Enlightenment. An Inquiry into the Nature and Causes of the Wealth of Nations was his most important book. First published in London in March 1776, its release was eagerly anticipated by Smith’s contemporaries. Upon publication, the Wealth of Nations became an immediate bestseller. The first edition sold out quickly and others followed. There were five authorized editions in Smith’s life, with a sixth edition being published in 1791, the year after his death. During his lifetime Wealth of Nations was translated into Danish, Dutch, French, German, Italian, and Spanish, with a summary appearing in Swedish. There were also eighteenth-century pirated re-printings, including several in Ireland (the first in Dublin even before the end of 1776), and in America (Philadelphia in 1789, and then again in 1796) where Smith’s book was to have a particularly notable impact, in part because the American colonies figured largely in the Wealth of Nations and also because the book circulated during the years of the American Revolution (1776–1783) and its aftermath. In the nineteenth and twentieth centuries the Wealth of Nations circulated globally, with Chinese, Finnish, Japanese, Russian and Turkish translations, among scores of others.

Today, Smith’s Wealth of Nations easily and rightfully claims a place as one of the classics of world literature. It is commonly celebrated as the first book of modern political economy and still provides the foundation for the study of that discipline. But it is much more than that. Along with important discussions of economics and political theory, Smith’s eighteenth-century approach mixed a substantial amount of plain common sense with large measures of history, philosophy, psychology, sociology, and much else. Few texts remind us so clearly that the Enlightenment was not only about abstract theory and book learning but was very much a lived experience, encompassing the writing and dissemination of books concerned with improving the human condition in practical ways for real people.

It is also important to remember that Wealth of Nations was not a one-off wonder, produced by a great mind working in isolation. Yes, Smith often kept to himself, was even something of a recluse at times, and lived up to the stereotypical character of an absent-minded professor – a favorite anecdote records him being so lost

in thought that he once walked some 15 miles from his home, wearing only his nightgown. But Smith’s ideas took shape within the socially and intellectually rich environment of the Scottish Enlightenment. He was acquainted with almost all of the Scottish Enlightenment’s greatest thinkers and writers, including philosophers, historians, medical men, geographers, artists, general

men of letters, and merchants. A roll call of names would include his teacher, Francis Hutcheson (1694–1746); a one time patron, Henry Home of Kames (1696–1782); his physician, the chemist William Cullen (1710–1790); Joseph Black (1728–1799), also a chemist, and a mining consultant; James Hutton (1726–1797), the founder of modern geology; James Oswald (1715–1769), MP and merchant; Robert Adam (1728–1792), a noted architect and speculative builder; and the distinguished professors Hugh Blair (1718–1800), Adam Ferguson (1723–1816), John Millar (1735–1802), and Principal William Robertson (1721–1793). Of special note here is Smith’s lasting and close friendship with his beloved David Hume (1711–1776) and later with Black and Hutton who became his literary executors. Smith also lived and worked in Glasgow, then the center of Scottish commerce, from 1751 to 1762. There he attended the Political Economy Club founded by a prominent banker and merchant, Provost Andrew Cochrane (1693–1777). Still, while the Wealth of Nations was the product of a particular mind that took shape in a particular time and place, it is a master-piece by any measure, remaining to this day essential reading for anyone who wishes to be better acquainted with the Western intellectual tradition.

Adam Smith’s precise date of birth is not known. He was baptized on 5 June 1723 in the burgh of Kirkcaldy in the east of Scotland on the Fife coast between the centers of Edinburgh to

the south and St Andrews to the north. Smith’s father, also Adam Smith (1679–1723), had been Clerk of the Court Martial in Scotland and, from 1714, was Controller of Customs at Kirkcaldy. He died several months before his son’s birth. Smith was raised by his mother, Margaret Douglas Smith (1694–1784). His first biographer, the philosopher Dugald Stewart (1753–1828) who had also been one of Smith’s students, recorded in his Account of the Life and Writings of Adam Smith, LL.D. (1794) that Smith’s ‘constitution during infancy was infirm and sickly, and required all the tender solicitude of his surviving parent.’

Not many of the events of Smith’s earliest years are known in detail. Perhaps that is why one childhood incident has become especially ingrained in the Smith historiography. From the time of Stewart’s account on most biographers can not resist repeating the story of the three-year-old Smith’s abduction by Gypsies! As Stewart told it:

An accident which happened to him when he was about three years old, is of too interesting a nature to be omitted in the account of so valuable a life. He had been carried by his mother to Strathenry, on a visit to his uncle Mr Douglas, and was one day amusing himself alone at the door of the house, when he was stolen by a party of that set of vagrants who are known in Scotland by the name of tinkers [Gypsies]. Luckily he was soon missed by his uncle, who, hearing that some vagrants had passed, pursued them, with what assistance he could find, till he overtook them in Leslie wood; and was the happy instrument of preserving to the world a genius, which was destined, not only to extend the boundaries of science, but to enlighten and reform the commercial policy of Europe.

Some of Smith’s subsequent biographers have read much into this event. One, W. R. Scott, even postulated that ‘the shock and, more especially, the constraint would remain deeply impressed on [Smith’s] sub-conscious mind, and this would engender an attitude which would be antipathetic to any enforced compliance and receptive to everything which was in the direction of freedom.’ With less sensationalism but more certainty historians can record that Smith attended the local burgh school of Kirkcaldy, under the guidance of schoolmaster David Miller. Smith showed promise in his studies in the rudiments of Latin, history, rhetoric, and mathematics. Several who knew Smith comment on his particular ability to memorize. In November 1737 the fourteen-year-old Smith matriculated at Glasgow University (that was

not an uncommonly young age to attend university in the eighteenth-century, in fact David Hume went to the University of Edinburgh at the age of eleven). What classes he took are

not known for certain, but probably included Latin and Greek, logic and mathematics, natural and moral philosophy. His most influential teachers were Robert Simson (1687–1768) and Francis Hutcheson (1694–1746). The first was a very fine classicist and the first Professor of Mathematics to teach Newtonian physics in the College. Hutcheson, the Professor of Moral Philosophy whom Smith called the ‘never to be forgotten’ was a favorite with the Glasgow students from 1729 to 1746, partly because

of his natural abilities as a lecturer but also for his kindness,

gentle demeanor, and the modernity of his teachings which were delivered in English. Smith did not agree with all aspects of Hutcheson’s theory of the moral sense, as we will see, and in some ways Smith’s view of self-interest was closer to Bernard Mandeville (1670–1733) whose Fable of the Bees: or, Private Vices, Public Benefits (1714) he had probably read by the time he left Glasgow.

In 1740 Smith entered Balliol College, Oxford, as a Snell Exhibitioner – a scholarship designed to educate boys for the Episcopal Church. He was at Oxford for the next six years, departing on 15 August 1746 without taking a degree and before the end of his Snell Exhibition. Not much is known about Smith’s life at Oxford either, but his memories of the university were not fond. He may have experienced anti-Scottish sentiments and taken that badly. More certain is his appraisal of the intellectual climate of the institution. In his first extant letter Smith wrote from Oxford to his cousin, William Smith, that ‘it will be his own fault if anyone should endanger his health at Oxford by excessive Study, our only business here being to go to prayers twice a day, and to lecture twice a week.’ Indeed, in the Wealth of Nations within a section entitled ‘Of the Expence of the Institutions for the Education of Youth’, Smith wrote in words that have been frequently quoted since: ‘In the university of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching.’ Smith made good use of the library at Balliol, but in 1746 he returned to Scotland with no clear idea of what career he would pursue.

By 1748 Smith had moved to Edinburgh, the center of the Scottish Enlightenment. This move may have been owing to

the patronage of Henry Home, Lord Kames, and others who

are known to have sponsored Smith’s giving a series of public lectures on rhetoric and belles-lettres, jurisprudence, and poss-

ibly also the history of philosophy. Those lectures met with success; he was so employed for three consecutive winters.

Later, Kames’s Historical-Law Tracts (1761) demonstrated several similarities to Smith’s jurisprudence, including the ‘four stages’ theory of historical development, although who borrowed from whom is not clear. It was at this time that Smith met David Hume (1711–1776).

Twelve years Smith’s senior, Hume had already published his A Treatise of Human Nature (1739-40) and his moral and political Essays (1741 and 1742). Hume was a notably rising star of the Scottish Enlightenment and with the publication of his Political Discourses (1752) he established himself as the foremost Scottish economic theorist and writer. Hume had already begun to think about his multi-volume History of England (1754–1762), a best-seller which Smith would cite several times in the Wealth of Nations. Hume’s intellectual influence on Smith’s developing thought is unmistakable. Smith’s theory of the imagination, for instance, may be traced to Hume’s writings as is true of many of his economic theories. Smith also built on Hume’s notion of ‘sympathy’. In his Treatise Hume wrote that sympathy ‘makes us partake of the satisfaction of every one, that approaches us.’ He explained that ‘the pleasure of a stranger, for whom we have

no friendship, pleases us only by sympathy . . . Wherever an object has a tendency to produce pleasure in the possessor, or

in other words, is the proper cause of pleasure, it is sure to please the spectator, by a delicate sympathy with the possessor.’ Both learned from their reading of Montesquieu (1689–1755) and found common ground when it came to thinking about politics in relation to commerce and recognizing broad historical trends. Smith’s premise that the development of global commercial relations in the sixteenth, seventeenth, and eighteenth centuries was emerging as the defining feature of the modern world is Humean and shared by other Scots at the time. The environment of Edinburgh was stimulating to Smith and it was from this time that we can date some of his earliest publications, including several anonymous pieces. For instance, in 1748 he contributed a ‘Preface’ to Poems on Several Occasions, a collection by William Hamilton of Bangour (a Jacobite poet who was one of Kames’s friends) that had been printed by Robert and Andrew Foulis in Glasgow.

In 1751 Smith was appointed as professor of logic at Glasgow University. A year later he accepted the chair of moral philosophy when it became open owing to the resignation of its incumbent on account of poor health. Smith held that position until 1763, being replaced by Thomas Reid (1710–1796). From student lecture

notes only recovered in the nineteenth and twentieth centuries

we know that Smith’s lectures were wide-ranging. Smith was also an enthusiastic participant in Glasgow’s broader literary culture. Besides the Political Economy Club he was a member of the Literary Society which was a general purpose group that heard papers on all manner of new developments ranging from Black’s chemical discoveries, to sunspot theories, literary discussions of ancient and modern works, biological theories and at least one of his own papers ‘On the Value of Economic Liberty’. This is the period to which we also date the first of Smith’s significant publications.

In 1755 he published two pieces in the short-lived Edinburgh Review, a periodical that was largely the product of Smith’s friend Alexander Wedderburn (1733–1805). The first of these was a review of Samuel Johnson’s A Dictionary of the English Language. That review was frequently reprinted in the periodical literature

of the day and sections of it even made their way into the Encyclopedia Britannica. In another piece entitled ‘A Letter to the authors of Edinburgh Review’ Smith encouraged the Edinburgh Review’s Scottish editors to expand their coverage so that recent work by French philosophes such as Georges-Louis Leclerc, Comte de Buffon (1707–1788), Jean-Jacques Rousseau (1712–1778) and Voltaire (1694–1778) – all of whom had been discussed in the Literary Club – would have more attention. Smith enjoyed his time at the University of Glasgow, even though he had a very demanding work load. His students appear to have appreciated his efforts; one even commented on Smith’s ‘animated and extemporaneous eloquence’. Looking back at this period from the perspective of his final years Smith recalled: ‘The period of thirteen years which I spent as a member of that society I remember as by far the most useful, and, therefore, as by far the happiest and most honourable period of my life; and now, after three and twenty years absence, to be remembered in so very agreeable manner by my old friends and Protectors gave me a heart-felt joy which I cannot easily express to you.’

One of the lasting products of Smith’s Glasgow years was the composition of his first book. In 1759 Smith published The Theory of Moral Sentiments, a work which largely came out of

his lectures on ethics and which gave considerable attention

to sympathy’s impact on the moral sense. The Theory of Moral Sentiments gained for Smith international renown. It saw six editions by 1790, the year of Smith’s death. It was translated into several languages and distributed far and wide. In some respects Smith’s first book is very different from the Wealth of Nations, so much so that a group of nineteenth-century German scholars and others following them identified what is referred to as ‘Das Adam Smith Problem’. Namely, that in The Theory of Moral Sentiments Smith was concerned to show that human beings are naturally benevolent, have a capacity for ‘sympathy’, and it is this capacity which allows us to ‘enter into’ the mind of another and also aim to please ‘the impartial spectator’. All of that is a very different perspective than the one offered by the individuals motivated by self-interest and material gain who, some argue, inhabit Smith’s Wealth of Nations. Recent scholarship dissipates the problem by showing how sympathy is also needed in the Wealth of Nations. Whatever conclusions one draws with respect to ‘Das Adam Smith Problem’, it is essential to remember that The Theory of Moral Sentiments is in the background of the Wealth of Nations, which ought not to be read in isolation as representing all that Smith thought.

Indeed, it might be advantageous to approach Smith, not from a starting point that seeks tensions between his works but from the over-riding coherence therein. This is possible if we see the Wealth of Nations as only one branch of Smith’s several investigations into human nature. Smith, like others of the Scottish Enlightenment, was interested in the ‘science of man’. In The Theory of Moral Sentiments a principle concern is what ‘sympathy’ is and how it works in the human mind. In Wealth of Nations Smith sets his sights on ‘self interest.’ What is it and how does it work? In his ‘Essay

on Astronomy’ – published posthumously in 1795 – the focus is working out the places of curiosity, wonder and the need to sooth the imagination. Smith there writes that he aims to map out the ‘principles’ which ‘lead and direct philosophical enquiry’. After the publication of the Wealth of Nations, Smith continued to work on a planned book dealing with law and government. That project was never finished and Smith directed his literary executors, Black and Hutton, to burn some 22 volumes of manuscripts after his death, which they did. So some dimensions of Smith’s overall system of human nature will forever remain hidden from our view but parts of them are probably contained in the ‘Lectures on Jurisprudence’.

Following the success of The Theory of Moral Sentiments Smith was asked to resign his teaching position to become a private tutor to the Duke of Buccleuch, the eighteen-year-old step-son to Charles Townshend and one of the greatest of Scottish noblemen. This appointment in 1763 allowed Smith to travel and made him easy for life since it included a generous yearly salary as well as a lifetime pension. The two began a European tour with

a year and a half in Toulouse. They then travelled through the southern regions of France, spent two months in Switzerland, and concluded with a ten-month residence in Paris. Through the good offices of Hume and others, Smith was introduced to many of the leading lights of the French Enlightenment. He met Voltaire in Geneva, the encyclopedist and mathematician Jean le Rond d’Alembert (1717–1783), and many more in Paris. Equally importantly, he mixed with those who belonged to the physiocratic school (or les économistes, as they were also known), including François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781). Both Quesnay and Turgot argued against mercantilism – the prevailing economic policy in Europe of the day – which championed government support for merchants and manufactures. The physiocrats argued, in particular, that national wealth was based on the value of the produce of lands, most of which was derived from agriculture. At the time of Smith’s visit Quesnay’s Tableau économique (or Economic Table) had recently been published (in 1758) and Turgot was in the midst of writing his Réflexions sur la Formation et la Distribution des Richesses (or Reflections on the Formation and Distribution of Wealth). Smith and his student returned to Britain in November 1766 and Smith (along with a trunk full of books and a head full of developing ideas) made his way from London to Kirkcaldy where he settled in with his mother. Smith, it is worth noting here, never married although his correspondence hints that family life was something he aspired to and stories tell of a blighted early romance.

The Wealth of Nations was a long time in the making before it was published in 1776. It is likely that Smith had been formulating ideas about what would become the Wealth of Nations as early as his days lecturing in Edinburgh and certainly by the time he was professor in Glasgow. However, the earliest probable mention of the actual composition of the work appears in a letter that Smith wrote to Hume from Toulouse on 5 July 1764. Smith writes

‘I have begun to write a book in order to pass away the time.’ But, it appears that he only began to work in earnest once he had returned to Kirkcaldy at the end of his European travels. At that early stage, Smith enjoyed the writing process. He commented to Hume on 7 June 1767 that ‘My Business here is Study in which

I have been very deeply engaged for about a month past. My Amusements are long, solitary walks by the Sea side. You may judge how I spend my time. I feel myself, however, extremely happy, comfortable and contented. I never was, perhaps, more so in all my life.’ By the beginning of 1769, the monumental task he had set for himself in Wealth of Nations had begun to weigh on him more heavily. Smith wrote to Lord Hailes in January of that year to say that his ‘schemes of Study’ left him ‘very little leisure’ and that they ‘go forward too like the web of [P]enelope, so that I scarce see any Probability of their ending.’ Looking back at this period of intense writing and re-writing, Smith later recalled to a friend: ‘Upon my return to Britain I retired to a small Town in Scotland the place of my nativity, where I continued to live for

six years in great tranquility, and almost in complete retirement. During this time I amused myself principally with writing my Enquiry concerning the Wealth of Nations . . . ’

By the Fall of 1772 the end was in sight – or so Smith thought. He wrote to William Pulteney on 3 September that ‘My book would have been ready for the Press by the beginning of this winter; but the interruptions occasioned partly by bad health arising from want of amusement and from thinking too much upon one thing’ will ‘oblige me to retard its publication for a

few months longer.’ By 1773 his friends had begun to press him

to bring his labors to a conclusion. Hume wrote on 10 April,

‘I expect to see you soon. Have you been busy, and whether in pulling down or building up?’ On 9 May 1775, Smith could finally write to Hume, ‘I shall send my own book to the Press in the end of this month or the beginning of the next.’

An Inquiry into the Nature and Causes of the Wealth of Nations was first published in London on 9 March 1776. A hefty book, it was two quarto volumes priced at £1.16s in blue-grey boards or £2.2s if bound. The publishers were William Strahan and Thomas Cadell. The second edition followed two years later, on 28 February 1778, also in London and at the same price. A third edition was ready for the press in 1784, this time in three octavo volumes with significant ‘Additions and Corrections’ and also an index (which several of Smith’s friends had found wanting in earlier editions). Smith explained in an ‘Advertisement’ for that book:

The first Edition of the following Work was printed in the end of the year 1775, and in the beginning of the year 1776. Through the greater part of the Book, therefore, whenever the present state of things is mentioned, it is to be understood of the state they were in, either about that time, or at some earlier period, during the time I was employed in writing the Book. To this third Edition, however, I have made several additions, particularly to the chapter upon Drawbacks, and to that upon Bounties; likewise a new chapter entitled, The Conclusion of the Mercantile System; and a new article to the chapter upon the expences of the sovereign. In all these additions, the present state of things means always the state in which they were during the year 1783 and the beginning of the present year 1784.

The revisions to the third edition were such that Smith’s publishers also now offered as a separate publication 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. By 1786 Wealth of Nations had been published in a fourth edition in which Smith says ‘I have made no alterations of any kind.’ A fifth edition was pub-lished in 1789. That edition was the final one Smith saw through the press and it is the edition published below.

The contemporary reception for the Wealth of Nations is a topic of some controversy. The letters of Smith’s friends are congratulatory to a high degree. Hugh Blair wrote to Smith on 23 April 1776:

I Cannot forbear writing to Congratulate you upon your Book. I have just finished it; and though from what you read to me some years ago, and from the great Attention which I knew you had bestowed on the Subject, I expected much, yet I confess you have exceeded my expectations.

What Blair praised most of all was Smith’s ability to synthesize and to make systematic what before was piecemeal. The Wealth of Nations made clear and concise what past works had seen only through a glass darkly. Blair laments how ‘One writer after another on these Subjects did nothing but puzzle me. I despaired of ever arriving at clear Ideas.’ Smith, on the other hand, has provided a straightforward argument. ‘One chapter paves the way for another; and your System gradually erects itself. Nothing was ever better suited than your Style is to the Subject; clear and distinct to the last degree, full without being too much so, and as tercly [sic] as the Subject could admit.’ Blair’s final assessment: in the Wealth of Nations Smith has produced ‘the Commercial Code of Nations’. Smith has ‘done great Service to the World’ and ‘the Age is highly indebted’ to him.

Others praised the same qualities and often in much the same language. Joseph Black wrote of Smith’s ‘comprehensive System composed with such just and liberal Sentiments’. William Robertson: ‘As I knew how much time and attention you had bestowed upon this work, I had raised my expectations of it

very high, but it has gone far beyond what I expected. You

have formed into a regular and consistent system one of the

most intricate and important parts of political science, and . . . I should think your Book will occasion a total change in several important articles’ of civil government and economics. Like Blair, Robertson forecasts the book ‘must necessarily become a Political or Commercial Code to all Europe, which must be often consulted both by men of Practice and Speculation.’ Adam Ferguson wrote of his ‘esteem’ for Smith’s work, remarking that Smith was ‘surely to reign alone’ on the subjects he wrote upon.

But perhaps no other appraisal would have meant as much to Smith as that of Hume, his dearest friend of all whose health was fast deteriorating in April 1776. Hume wrote:

Euge! Belle! Dear Mr. Smith: I am much pleas’d with your Performance, and the Perusal of it has taken me from a State

of great Anxiety. It was a Work of so much Expectation, by yourself, by your Friends, and by the Public, that I trembled for its Appearance; but am now much relieved.

Hume went on to say that the book ‘has Depth and Solidity and Acuteness, and is so much illustrated by curious Facts, that

it must . . . take the public Attention.’ The next month Hume wrote from London, happily reporting, ‘I find the Town very

full of your Book, which meets with general Approbation.’ Hume died only a few months later, on 25 August 1776. A letter that Smith wrote to their mutual friend, the publisher William Strahan, following Hume’s death was published in 1777 when it was attached to The Life of David Hume, Esq. Written by Himself. Smith’s letter concluded with an extended sketch of Hume’s character which is telling not only of his esteem for Hume but of Smith’s views on human nature more generally:

Thus died our most excellent, and never to be forgotten friend; concerning whose philosophical opinions men will, no doubt, judge variously, every one approving or condemning them, according as they happen to coincide or disagree with his own; but concerning whose character and conduct there can scarce be a difference of opinion . . . Upon the whole, I have always considered him, both in his lifetime and since his death, as approaching as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit.

Later, writing to Andreas Holt concerning the reception of the Wealth of Nations, Smith remarked that while there had been ‘various squibs thrown out’ at him in the newspapers, he had ‘upon the whole been much less abused than I had reason to expect; so that in this respect I think myself rather lucky than otherwise.’ Indeed, wrote Smith, ‘A single, and as I thought a very harmless Sheet of paper, which I happened to Write concerning the death of our late friend Mr Hume, brought upon me ten times more abuse than the very violent attack I had made upon the whole commercial system of Great Britain.’

Other public appraisals of Wealth of Nations from outside Scotland were equally glowing. In his review in The Annual Register

for 1776, Edmund Burke (1729–1797) wrote: ‘The growth and decay of nations have frequently afforded topics of admiration, and complaint to the moralist and declaimer: they have sometimes exercised the speculations of the politician; but they have seldom been considered in all their causes and combinations by the philosopher.’ Like others, Burke pointed to the systematic nature of the account Smith had offered. While the physiocrats had opened up the field, ‘no one work has appeared amongst them, nor perhaps could there be collected from the whole together, any thing to be compared to the present performance, for sagacity and penetration of mind, extent of views, accurate distinction, just and natural connection and dependence of parts.’ Burke concluded: ‘It is a compleat analysis of society, beginning with the first rudiments of the simplest manual labour, and rising by an easy and natural gradation to the highest attainments of mental powers. In which course not only arts and commerce, but finance, justice, public police, the oeconomy of armies, and the system of education, are considered, and argued upon; often profoundly, always plausibly and clearly; many of the speculations are new, and time will be required before a certain judgment can be passed on their truth and solidity.’

Having finally published his Wealth of Nations, Smith stayed for a time in London, perhaps in anticipation or hope of securing a government post there. A job came, but not in London. Early

in 1778 Buccleuch secured for him a position as Commissioner

of the Customs and Salt Duties for Scotland, a post which

Smith held in Edinburgh, where he lived for the remainder of

his years. Smith attended Customs Board meetings on a regular basis and took care of the regular business associated with the Custom-house. Smith’s mother, who had moved in with him at Panmure House, his home in the Canongate, died in 1784, not quite reaching her ninetieth birthday. In 1787 Smith was elected

Lord Rector of Glasgow University. These were also years in which Smith continued to fiddle with the texts of The Theory of

Moral Sentiments and Wealth of Nations, making corrections and revisions for each new edition.

The only images of Smith that we have date from his final years as well. The best known images were those produced by James Tassie (1735–1799), the Scottish gem engraver and modeler. In 1787 Tassie produced two splendid medallions of Smith. One depicts Smith in a bag wig, the style of the day, and the other shows Smith ‘in the antique manner’, in the guise of a Roman. The Edinburgh caricaturist John Kay (1743–1826) drew Smith twice, once in 1787 in a scene in which Smith makes his way to the Custom-house and then again in 1790 as ‘The Author of the Wealth of Nations’. Two other early Smith portraits are almost certainly posthumous and are by unknown artists who might have known him. All later depictions derive from these few.

After Smith’s death on 17 July 1790, the Wealth of Nations continued to attract readers with different people in different times and places reading Smith in different ways. Immediately following Smith’s death the Wealth of Nations became a central text of the French Revolution (1789–1799), circulating in a translation of

the fourth edition, produced in Paris by Jean-Antoine Roucher (1745–1794). Smith’s ideas were also popularized in Britain in

the late eighteenth century, attracting readers well beyond the small circles of enlightened. That was helped, in part, through

the publication in 1797 of A Complete Analysis or Abridgement of

Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth

of Nations. Other inexpensive editions aimed at a popular audience followed, especially with the expiration of the ‘honorary copyright’ in 1804 when it became easier for any British publisher to go to market with an edition of Smith’s sure-seller. At the same time, a decidedly scholarly audience for Wealth of Nations was increasing around the world. In 1814 David Buchanan, an English economist, published the first critical edition of Wealth of Nations. Translations and editions continued and by the mid point of the nineteenth century the English historian Henry Thomas Buckle could proclaim in his History of Civilization in England that the Wealth of Nations was ‘probably the most important book that has ever been written.’ By then the ‘dismal science’ which Smith had done so much to found was well established. Smith had become the recognized originator for laissez faire economics. The French but not Smith had created the term he never used.

In more recent years Smith and the Wealth of Nations in particular have also benefitted from burgeoning scholarship. Smiths’s writings can now be conveniently found in the Glasgow Edition of his works. There have been numerous monographs, volumes of interpretative essays, an intellectual life by Nicholas Phillipson and a critical biography by Ian Simpson Ross, recently reprinted in a new edition. Work on the Scottish Enlightenment has given us a more nuanced Adam Smith. Modern scholars have increasingly come to see that it is not accurate to see Smith as the apostle of an amoral free-market capitalist economic system. He was certainly not blind to the potentially negative moral consequences of market forces or the possibly devastating implications of the division of labor for individual laborers. As Smith put it in the Wealth of Nations:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects too are, perhaps, always the same, or very nearly the same, has no occasion to

exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become.

Not surprisingly, passages like this helped to inspire Karl Marx’s (1818–1883) view on the alienation of labor in his critique of the capitalist system. All of this serves to remind us that Adam Smith’s reputation changes with the times. The Adam Smith of popular consciousness and the Adam Smith of the Wealth of Nations are not always one and the same. There are many ways to approach Smith’s Wealth of Nations and readers of the text reprinted below will have to judge Smith’s meaning for themselves, just as readers of past generations have done.

Smith himself offers some guidance to his readers by providing us with an ‘Introduction and Plan of the Work’. There, Smith gives a description of his goals in each of the volume’s five books. In Book 1, ‘Of the Causes of Improvement in the Productive Powers of Labour, and of the Order according to which its Produce is Naturally Distributed Among the Different Ranks of the People’, Smith takes as his point of departure the ‘annual labour

of every nation’. While the ‘proportion between the number of those who are employed in useful labour, and that of those who are not so employed’ is important in determining a nation’s production, even more important, he says, is ‘the skill, dexterity, and judgment with which’ the nation’s labour is employed. Smith reasons that in more advanced nations (i.e. those that are ‘civilized and thriving’), even one of ‘the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniences of life than it is possible for any savage to acquire.’ The text of Wealth of Nations shows that for Smith it was the division of labor that held the key to expanding any nation’s productivity. To this day, Book 1 remains perhaps the best known part of Smith’s book. It is here that Smith argues:

Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that . . . But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this.

Smith summarizes, ‘Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.’ For Smith, civilized society is a trading society.

In Book 2, ‘Of the Nature, Accumulation, and Employment

of Stock’, Smith argues that regardless of the ‘actual state of the skill, dexterity, and judgment’ of a nation’s applied labour, it is

the ‘proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed’ which matters. And those who are usefully employed are ‘in proportion to the quantity of capital stock’. For Smith, wealth is not properly measured in gold or silver, as the mercantilists of his day saw it, but rather in terms of useful commodities and the skills of the producers.

Book 3, ‘Of the Different Progress of Opulence in Different Nations’, offers an historical survey of the plans that various nations have had with respect to the application of labor. While Smith rarely identified his intellectual targets directly, Book 3 is aimed in part at what Smith saw as the physiocrats’s over-emphasis on agricultural wealth. Smith remarks that ‘since the downfall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce’, all of which is centered on towns; rather than ‘to agriculture’, which is associated with the countryside.

Book 4, ‘Of Systems of Political Oeconomy’, is concerned to map out what Smith sees as the ‘different theories of political oeconomy.’ Those theories, he reminds us, ‘have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states.’

We know who some of his targets were in this section too. One was Sir James Steuart’s Inquiry into the Principles of Political Eco-nomy (1767). About that, Smith wrote to William Pulteney on

3 September 1772, while he was composing Wealth of Nations, that ‘without once mentioning’ the man or his book, ‘I flatter myself, that every false principle in it, will meet with a clear and distinct confutation in mine.’ It is also in Book 4 that the most well-known of Smith’s passages on the working of an ‘Invisible hand’ is to be found. Smith wrote:

Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society . . . he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

While Smith is critical of governmental protectionist policies of the mercantile system and advocates free trade in that context, he also sets limits to those freedoms and identifies duties for those who govern.

In the fifth and final book, ‘Of the Revenue of the Sovereign or Commonwealth’, Smith says he will differentiate between ‘those expenses [which] ought to be defrayed by the general contribution of the whole society’ and those ‘which [ought to be defrayed by] that of some particular part only.’ Here Smith enumerates and assesses the ‘different methods’ whereby ‘the whole society may be made to contribute towards the expences incumbent on the whole society.’ Modern tax theory begins here. Finally, Smith aims to examine ‘the reasons and causes which have induced almost all modern governments to mortgage some part of this revenue, or to contract debts, and what have been the effects of those debts upon the real wealth, the annual produce of the land and labour of the society.’

Smith’s contemporaries marveled at the systematic nature of the Wealth of Nations and saw in it the ‘Commercial Code of Nations’. It is not surprising that even today economists continue to see Smith as the starting point for their discipline. But Smith’s systematic plan is not sufficient to account for the longevity and breadth of the work’s appeal. Certainly not every student who comes to the Wealth of Nations will read through the entire volume from cover to cover. Thankfully, Smith’s individual books and even chapters within those books are designed as stand-alone sections. Readers can pick and choose, dipping in and ducking out where

so inclined. What most often remains with readers of Wealth of Nations – his contemporaries and ours; both academics and general readers alike – are Smith’s poignant examples and maxims. Smith’s realistic description of the pin factory, for instance, with which the Wealth of Nations begins; the elegant simplicity of Smith’s phrases, such as the ‘natural system of perfect liberty and justice’; quotable lines that stick in one’s mind, such as ‘man is, of all sorts of luggage, the most difficult to be transported’; the power of his adages, such that 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’; his abundant illustrations drawn from the nooks and crannies of daily life. This is what made Smith a bestseller in the eighteenth century and it is also why Wealth of Nations remains a classic of world literature to be usefully enjoyed by readers today.

Mark G. Spencer

Brock University, Canada

Further Reading

Allan, David. Scotland in the Eighteenth Century: Union and Enlightenment (Harlow: Pearson Education, 2002).

Bonar, James. A Catalogue of the Library of Adam Smith (2nd edition, Basingstoke: Macmillan, 1932; reprinted, 1966).

Brown, Vivienne. Adam Smith’s Discourse: Canonicity, Commerce and Conscience (London: Routledge, 1994).

Brown, Vivienne. ‘ Mere inventions of the imagination: A survey of recent literature on Adam Smith’, Economics and Philosophy 13 (1997): 281–312.

Buchan, James. Adam Smith and the Pursuit of Perfect Liberty (London: Profile, 2006).

Campbell, R. H. and Skinnner, A. S. Adam Smith (London: Croom Helm, 1982).

Campbell, Thomas D. Adam Smith’s Science of Morals (London: Allen and Unwin, 1971).

Cannan, Edwin. ‘Introduction’ to Adam Smith, The Wealth of Nations (Methuen & Co. Ltd: London, 1904; reprinted, Chicago: University of Chicago Press, 1976).

Carpenter, Kenneth E. The Dissemination of the Wealth of Nations in French and in France, 1776–1843 (New York: The Bibliographical Society of America, 2002).

Copley, Stephen and Kathryn Sutherland, eds. Adam Smith’s Wealth of Nations. New Interdisciplinary Essays (Manchester: Manchester University Press, 1995).

Cropsey, Joseph. Polity and Economy: An Interpretation of the Principles of Adam Smith (The Hauge: Martinus Nijhoff, 1957; reprinted South Bend, IN: St. Augustine’s Press, 2001).

Dwyer, John A. The Age of the Passion. An Interpretation of Adam Smith and the Scottish Enlightenment Culture (East Linton, UK: Tuckwell Press, 1998).

Emerson, Roger L. ‘Conjectural History and Scottish Philosophers’ in Canadian Historical Association, Historical Papers/ Communications historiques 19 (1984): 63–90.

Fitzgibbons, Athol. Adam Smith’s System of Liberty, Wealth, and Virtue: The Moral and Political Foundations of The Wealth of Nations (Oxford: Clarendon Press, 1995).

Fleischacker, Samuel. On Adam Smith’s Wealth of Nations: A Philosophical Companion (Princeton, NJ: Princeton University Press, 2004).

Forbes, Duncan. ‘Scientific Whiggism: Adam Smith and John Millar’, Cambridge Journal 7 (1954): 643–670.

Glahe, F.R., ed. Adam Smith and the Wealth of Nations, 1776–1976. Bicentennial Essays (Boulder, CO: Associated University Press, 1978).

Griswold, Charles L. Adam Smith and the Virtues of Enlightenment (Cambridge, UK: Cambridge University Press, 1999).

Haakonseen, Knud. The Science of a Legislator: The Natural Jurisprudence of David Hume and Adam Smith (Cambridge, UK: Cambridge University Press, 1981).

Haakonseen, Knud, ed. The Cambridge Companion to Adam Smith (Cambridge, UK: Cambridge University Press, 2006).

Hollander, Samuel. The Economics of Adam Smith (Toronto: University of Toronto Press, 1973).

Hont, Istvan. Jealousy of Trade: International Competition and the Nation-State in Historical Perspective (Cambridge, MA: Harvard University Press, 2005).

Hont, Istvan and Michael Ignatieff, eds. Wealth and Virtue. The Shaping of Political Economy in the Scottish Enlightenment (Cambridge, UK: Cambridge University Press, 1983).

Hook, Andrew and Richard B. Sher, eds. The Glasgow Enlightenment (East Linton, UK: Tuckwell Press in association with the Eighteenth-Century Scottish Studies Society, 1995).

Jones, Peter and Andrew S. Skinner, eds. Adam Smith Reviewed (Edinburgh: Edinburgh University Press, 1992).

Kennedy, Gavin. Adam Smith: A Moral Philosopher and his Political Economy (London: Palgrave Macmillan, 2008).

Lightwood, Martha Bolar. A Selected Bibliography of Significant Works about Adam Smith (Philadelphia, PA: University of Pennsylvania Press, 1984).

Macfie, Alec L. The Individual in Society: Papers on Adam Smith (London: Allen and Unwin, 1967).

Mizuta, Hiroshi, ed. Adam Smith’s Library: A Catalogue (Oxford: Clarendon Press, 2000).

Mitzuta, Hiroshi and Chuhei Sugiyama, eds. Adam Smith: International Perspectives (New York, St. Martin’s Press, 1993).

Montes, Leondias and Eric Schliesser. New Voices on Adam Smith (London: Routledge, 2006).

Muller, Jerry Z. Adam Smith in His Time and Ours (New York: Free Press, 1993).

Phillipson, Nicholas. Adam Smith: An Enlightened Life (New Haven: Yale University Press / London: Allen Lane, 2010).

Rae, John. Life of Adam Smith (London: Macmillan & Co., 1895; reprinted, Bristol, UK: Thoemmes Press, 1990).

Raphael, D. D. Adam Smith (Oxford: Oxford University Press, 1985).

Raphael, D. D. ‘Adam Smith,’ in David Daiches, Peter Jones, and Jean Jones, eds. A Hotbed of Genius: The Scottish Enlightenment, 1730–1790 (Edinburgh: University of Edinburgh, 1986;

reprinted, Edinburgh: The Saltire Society, 1996), 69–91.

Ross, Ian Simpson. On the Wealth of Nations: Contemporary Responses to Adam Smith (Bristol, UK: Thoemmes Press, 1998).

Ross, Ian Simpson. The Life of Adam Smith (Oxford: Clarendon Press, 1995; 2nd edition Oxford: University of Oxford Press, 2010).

Rothschild, Emma. Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment (Cambridge, MA: Harvard University Press, 2001).

Scott, W. R. Adam Smith as Student and Professor (Glasgow: Jackson, Son, and Company, 1937).

Sher, Richard B. The Enlightenment and the Book: Scottish Authors and their Publishers in Eighteenth Century Britain, Ireland and America (Chicago: University of Chicago Press, 2006).

Sher, Richard B. ‘New Light on the Publication and Reception of the Wealth of Nations,’ Adam Smith Review 1 (2004): 3–29.

Skinner, Andrew S. A System of Social Science: Papers Relating to Adam Smith (Oxford: Clarendon Press, 1979).

Skinner, Andrew S. and Thomas Wilson, eds. Essays on Adam Smith (Oxford: Clarendon Press, 1975).

Smith, Adam. The Glasgow Edition of the Works and Correspondence of Adam Smith, 7 vols. (Oxford: Oxford University Press, 1976; reprinted Indianapolis, IN: Liberty Fund, 2001).

Taylor, W. L. Francis Hutcheson and David Hume as Predecessors of Adam Smith (Durham, NC: Duke University Press, 1965).

Teichgraeber, III, Richard F. ‘Free Trade’ and Moral Philosophy: Rethinking the Sources of Adam Smith’s Wealth of Nations (Durham, NC: University of North Carolina Press, 1986).

Teichgraeber III, Richard F., ‘ Less Abused than I had Reason to Expect: The Reception of The Wealth of Nations in Britain, 1776–1790’, Historical Journal 30 (1987): 337–366.

Towsey, Mark R. M. Reading the Scottish Enlightenment: Books and their Readers in Provincial Scotland, 1750–1820 (Leiden and Boston: Brill, 2010).

Tribe, Keith, ed. A Critical Bibliography of the writing of Adam Smith (Swindon: Economic and Social Research Council, 2002).

West, Edwin George. Adam Smith: The Man and His Work (New Rochelle: Arlington House, 1969; reprinted Indianapolis, IN: Liberty Press, 1976).

Wilson, Thomas and Andrew S. Skinner, eds. The Market and the State: Essays in honour of Adam Smith (Oxford: Clarendon Press, 1976).

Winch, Donald. Adam Smith’s Politics: An Essay in Historiographic Revision (Cambridge; New York: Cambridge University Press, 1978).

Wood, John Cunningham, ed. Adam Smith. Critical Assessments, 7 vols. (London: Routledge, 1983–94).

Volume One

Introduction: and plan of the work

The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.

According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion.

But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances.

The abundance or scantiness of this supply, too, seems to depend more upon the former of those two circumstances than upon the latter. Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go a-hunting and fishing. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire.

The causes of this improvement in the productive powers of labour, and the order according to which its produce is naturally distributed among the different ranks and conditions of men in the society, make the subject of the first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and judgment, with which labour is applied in any nation, the abundance or scantiness of its annual supply must depend, during the continuance of that state, upon the proportion between the number of those who are annually employed in useful labour, and that of those who are not so employed. The number of useful and productive labourers, it will hereafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed. The second book, therefore, treats of the nature of capital stock, of the manner in which it is gradually accumulated, and of the different quantities of labour which it puts into motion, according to the different ways in which it is employed.

Nations tolerably well advanced as to skill, dexterity, and judgment, in the application of labour, have followed very different plans in the general conduct or direction of it; and those plans have not all been equally favourable to the greatness of its produce. The policy

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  • (5/5)
    Published originally in 1776, this is the first book length study of political economy. But in addition to laying the theoretical groundwork for the field, it contains a lively account of economic history, and Smith’s opinions on monopolies, government economic policy, taxes, trade associations, and what he felt were the justices and injustices of the existing European polices and systems.“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” Adam Smith. The Wealth of Nations Bk 5 Ch 2 Pt 2.
  • (3/5)
    A complicated, multi-layered, cognitive, and deep piece of work surrounding economics. Adam Smith denotes many different facets of the overall broad scope that he sweeps across. Hard to understand, and dense, but worth the read for anyone interested in the subject. The last sections were especially poignant to me.
  • (5/5)
    Actually, the full title is An Inquiry into the Nature and Causes of the Wealth of Nations -- perhaps the longest reading everyone should finish. Every basic economic concept is directly addressed or at least touched upon by this work. However, most of the text involves an endless series of examples using commodities, prices, and laws from the 18th century. Adam Smith covers division of labor early on (it's worth noting that his famous pin factory is brought up within the first 20 pages) and moves through international trade, taxation, public goods, and politics of that time. As this was published in 1776, it is most interesting to note his discussion of the recent "disturbances" in the colonies. Towards the end of the 900 pages he further encourages that the Irish and American people should be willing to pay more in taxes. In discussing wage prices, his discourse about the payment of soldiers and sailors was quite interesting. Both take the position for the non-pecuniary benefit of a slight chance for a large payback in glory, with the soldier getting a greater chance but not facing the competition a sailor's place has in light of the large merchant trade. Smith's discussion of laws and business special interest groups shows that not that much has changed. For example, the wool lobby had such laws prohibiting export of unprocessed wool, prohibiting transport within certain miles of certain coasts, prohibiting transport in darkness, and requiring containment only in leather or cloth bags with "WOOL" written on the outside in letters at least 3 inches wide. Other concepts covered: money, rent, profits, economic efficiency (the invisible hand), education, roads, efficient taxation, examples involving trade restrictions, special interest groups, and factors affecting price supply, and demand.
  • (4/5)
    I just wanted to know what neoliberalism was, and ended up picking up this audiobook. In 1776, the economy was already quite complex, it turns out. I also enjoyed the description of the first types of money in the times of the Roman Empire. For example, copper rods. They had certain properties: were standard, durable, and could be cut in smaller pieces.

    The book is long, but most of its bulk is filled with examples that Adam Smith gave to illustrate his examples. I suppose it's because the book was revolutionary for his times, and he needed all the supporting evidence he could get.
  • (5/5)
    Adam Smith revolutionized the study of economics with the publication in 1776 of his epic tome, An Inquiry into the Nature and Causes of the Wealth of Nations. His analysis of how capital and labor move in an economy completely changed how people thought about money and how governments regulated the markets.The first book of The Wealth of Nations reads much like any basic economics textbook would today. Smith opens with a discussion of specialization its importance to economic growth. He does not extend his argument, as modern economists would, beyond the subject of individual specialization to a broader discussion of comparative advantage and national specialization, but he does anticipate where future economists would take his argument when he discusses tariffs. Smith argues that is unwise to tax cheaper goods being imported to Britain and that the British should instead concentrate on exporting goods it can make more cheaply than its trade partners. This initial introduction to the concept of comparative advantage flew in the face of centuries of mercantilist thinking, in which trade was a matter of winners and losers and it was impossible for a country to enrich itself through trade without impoverishing other nations.Beyond essentially inventing modern economic thought, Adam Smith’s greatest contribution was the concept of the Invisible Hand, a force that moves people, through their own self-interest, to engage in commerce that will benefit society as a whole. In fact, it is often possible for people to contribute more to society through greed and an attempt to profit, than through pure altruism. Profit opportunities are created by market inefficiencies and, by seeking to maximize their profits, entrepreneurs will attempt to capitalize on these profit opportunities and will fix these inefficiencies, often without understanding what they are doing. While Smith is certainly a fan of letting markets and entrepreneurs work freely he is not a proponent of laissez-faire economics. He is very distrustful of corporations and argues that the biggest potential downfall of any economic system is collusion between businesses to drive prices up. He believes that a watchful eye needs to be kept on all businesses and that the government needs to be careful in making policies that might favor one firm over another. There is so much more that could be said about The Wealth of Nations, but it should be sufficient to say that any person interested in economics owes it to themselves to read at least the first book of Smith’s work. They may have been revolutionary at the time, but his ideas laid the foundation for the entire field of economics and it remains relevant today.
  • (3/5)
    Overall, this was an informative read; not for its economic insightfulness but for how its supporters use Smith's theories. There are some basic economic truths and a lot of tedious detail but what is really telling are the outdated ideas and the sweeping generalizations which have carried over to our contemporary economic discussions.
  • (4/5)
    The book that launched a thousand theories. Mr.Smith over explains some of them like the price theory. Interesting view of the world of those times.
  • (4/5)
    History and Economy This is a review of the audiobook. Adam Smith’s work is a reflection about the history and the economy of the europeans states in the XVIII century. The author laid his principles on economic analysis throughout an exposition of historical facts carefully chosen in order to demonstrate his main thesis: public and private wealth flourish in an environment of liberty. One must not be a specialist in economy to understand the book, though some knowledge of history helps to follow the author’s line of thought. The section of the book in which Adam Smith examines the role played by the americans colonies in the economic development of the europeans states is quite interesting and reminds me of Eduardo Galeano’s book, The Open Veins of Latin American. Despite the poor quality of the recording, the audiobook is worth listening.
  • (5/5)
    Vast, rambling, dated, and yet compelling. As a founding tome of the study of economics, many of the ideas in this book have become familiar through diffusion into the discourse of everyday life. However, to see them set out in their historical context (admittedly, occasionally too much historical context) gives them a freshness and a real insight into how great the advances made by Smith really were. As elaborated here, his ideas have a richness and humanity which is often missing from the concepts when reduced to their most compact form. It is illuminating to reflect on both how much of this work is still relevant, and how much has been overturned by modern societies. The admonitions against government indebtedness have a certain resonance with current events, even as the detailed analysis of the price of corn in the various cities of Europe has become antiquated due to the passage of time - and, vitally, the increased ease of movement in the modern world. This upsets some of the assumptions of the work, and it will also be interesting to see to what extent mass customisation overturns certain other assumptions about the efficacy of capital-intensive mass production. That these questions can be asked within the framework of a book dating back so far is testament to the soundness of its basic ideas.Worth reading if you've ever partaken in a capitalist society, or are thinking of doing so.
  • (5/5)
    According to the introduction Adam Smith was the “first modern economist” and “widely credited with laying the theoretical and philosophical foundation for the modern free market system” and “commercial society." He famously wrote that "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." And that by pursuing their own interest in competition with others, entrepreneurs are “led by an invisible hand” by economic forces to create a variety of goods and services that benefit the public. But even Karl Marx used ideas of Smith in arguing for communism--particularly his key idea of the labor theory of value can be traced to Smith--as was Marx's idea of the “alienation” of the worker. As the introduction put it, Smith was concerned about the “deformation of humans due to tedious and repetitive work.” He was also concerned about how business interests would use their potential monopoly power--particularly in how they might use politics against the consumer: The proposal of any new law or regulation of commerce which comes from this [business] order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.What struck me from the first about the book was how flowing and lucid it was to read. I’m not saying there aren’t difficult, dry passages--there are. But if you take the time, it is understandable without reading some Adam Smith for Dummies, and believe me, having read several books of philosophy and economics I appreciated that. And actually I found a lot of the reading quite lively. Like Darwin (and unlike Marx), Smith isn’t just erudite and well-read, but speaks of his personal observations, and in that regard his portrait of a pin-making factory and how it illustrates the efficiencies of the division of labor was very memorable. For Smith such specialization and the gains in productivity are key to the wealth of nations. And I found it interesting Smith stresses geography, not race, as the ultimate reason for differences of wealth between nations--particularly its role in access to markets as there ports and navigable rivers are crucial. An explanation not just enlightened for his time, but anticipating much-lauded recent arguments by Landes in The Wealth and Poverty of Nations and Diamond in Guns, Germs and Steel. Smith’s explanation of the formation and role of money still is among the most lucid and still rings true. All this is to say that Smith is quite readable and enormously influential, and thus well-worth the read. If anything might put a reader off, it’s the sheer length, since complete unabridged editions run to around 600 pages. And as I admit above, I’m not saying some of it isn’t a slog--just that it’s worth it if you want to educate yourself about the basis of modern economics; this is definitely where to start. At the very least, see if you can read an excerpt containing his description of a Pin Factory. It's clear, interesting, short, and influenced both free market and socialist thinkers.
  • (4/5)
    As I think I noted elsewhere, i was struck by the fact that Smith seemed more physiocratic rather than free-enterprise; his real opponent was what we would now call "crony capitalism" --businessmen manipulating government for their own profit.
  • (5/5)
    What more is there to say about a book that's been around 233 years? That's considered to be the founding text of modern economics? Written by a man who has organizations and lectures named after him, whose name is synonymous with free markets?Well, the following is a list of things not generally talked about - in my casual exposure to economics - in regards to this work.Smith, not surprisingly for a man of the Enlightenment, was a blank slate guy. The philosopher, we're told, differs from the porter "not so much from nature, as from habit, custom, and education". Smith's professional progeny, with less justification and an autistic-like inability to model human nature, has largely kept the notion of people as malleable economic units whose value can simply be altered by some inputs of education.This is a book on the wealth of nations, not an argument for how trade is going to pacify the world and render borders obsolete as is the gospel sometimes preached - for at least a hundred years - by advocates of globalization. While Smith acknowledges that wealthy countries make great trading partners, he also notes their wealth makes them "dangerous in war and politics". (He also makes a not entirely unconvincing argument for standing armies being necessary. Part of it rests on the general efficacy of the specialization of labor.)He also makes some, on the face of it, surprising digressions into what sort of established church should be supported and if public education is worthwhile - all under the section on how the government should be spending its money. He's not big on established churches but thinks they are inevitable unless a country has no tradition of them - like the American colonies who were just rebelling in the "recent disturbances" at the time of the book's publication. (Though, of course, individual colonies did have established churches.) He's a supporter of everyone being educated to a certain minimum degree. Indeed, he seems to argue for a sort of licensure system in which people, before entering economic life, have to prove a minimum standard of education. But he is skeptical of public financing and administration being able to do this. And, given the state of American public education in all its aspects, his skepticism sometimes seems still relevant and appropriate.While Smith is rightly considered a strong advocate of free trade - a large section of the book is a demolition of the then fashionable mercantile system with its attendant emphasis on gold and silver as something more than just merely convenient mediums of exchange, he does note some objections. In an age where the US Pentagon admits some of its supply chains disappear somewhere overseas, Smith's admonition that free trade should not hamper national defense seems forgotten. "Defence" notes Smith, "... is of much more importance than opulence." Smith also is not in favor of free trade for items that are taxed by the importing country. Tariffs, he argues, should equal the tax load on the native manufacturer. He also supports retaliatory tariffs, a gradual elimination of tariffs, and notes that free trade should not proceed if those it unemploys can not easily find other employment. Historically, using the argument of the re-employment of thousands of soldiers and seamen after demobilization, he doesn't see this as usually being a problem though.Smith states four maxims of good tax policy: each citizen paying in proportion to the property the state protects and enables the accumulation of , convenience of payments, certainty of amount and time of payment, convenience of payment, and economy of collection. He seems, at one point, to argue for hidden taxes on luxury consumer goods - the goods that social custom does not dictate are essential to the lives of even the lowest class.What isn't in the book is any sort of mention of monetary policy - governments attempting to manipulate economies by manipulating money supplies. And one also wonders what Smith would have thought of the notion of a service economy. To Smith, productive labor was only that which increased the tangible, material property of a society. No significant mention is made of the idea of intellectual property yet he notes that "philosophers or men of speculation" have invented machines that have increased production of goods.Is Smith readable? Largely, yes. The marginal annotations of the Cannan edition are very good and help easily follow Smith's arguments and find relevant sections. There is a reason there are many famous quotes from this book. Smith is usually a lucid - and occasionally wry - author. Even though he digresses into some less - at least to me - interesting topics like the history of the Bank of Amsterdam or the specifics of Britain's deficit financing in the early 18th century, his economic history is often interesting. I don't know how kind modern scholarship has been to his economic theories on European social development post-Roman Empire and the reasons for the Reformation, but they were interesting and not implausible. He also has an section on the pragmatic reasons why slavery was not conducive to the economic development of societies.Smith's work is largely known for being an extended apologia for the benefits of enlightened self-interest. George Stigler, in a preface that ably sums up Smith's main points, convincingly argues - though the debt is not explicit in the text - that it isn't exactly self-interest, and not socialism's and communism's essential and necessary altruism, that motivates economic efficiency. It's the private vices that become public benefits. It's a notion developed in Smith's The Theory Of Moral Sentiments and may stem from Mandeville's The Fable of the Bees: Or Private Vices, Publick Benefits.
  • (4/5)
    One of the most influential books ever. I wish more neo-cons and ultra capitalist would read it. Smith espouses some government involvement in regulating business enterprises. No! Really! Why, that sounds like Marxism! Bull. He surveyed the economies of the world, surveyed assembly of products, reviewed the balance of trade, the influence gold has on national debt, the problem of inflation and other standard economic issues. He was very insightful and should be taught in every high school economic class. The foundation for studying any economic activity should begin with Smith.
  • (4/5)
    It is a classic. a must in every management library.