Smith, Part II: Accumulation,

Laissez-faire and Money

I. Accumulation: Productive and
Unproductive Labor
 Measuring stock: the private and national
balance sheets
• Smith divides the assets of private households into
three categories:
1. Consumption fund – stocks of goods held for
consumption (inventories of foodstuffs, furniture,
houses, private transportation vehicles, …)
2. Circulating capital fund – the firm uses to buy inputs to
production (raw cotton for a spinning factory, or nails
and lumber for a builder)
3. Fixed capital fund – long-lived assets (improvements to
land, productive buildings and equipment which lasts
through many cycles of production)
• Smith uses the same division to conceptualize the assets of
society as a whole.
1. Social consumption fund – the consumption needs of the
population (all the houses, private vehicles, furniture,
appliances and inventories of food and other peirshables held
by all the households in the country)
2. Social circulating capital – the aggregated stocks of
inventories of raw materials, partly finished goods and
finished goods awaiting sale
3. Social fixed capital (human capital) – the aggregated stock of
machines, buildings, improvements to land (dams, roads, …)

Money – circulating or fixed capital at the level of the society???

The stock of money stays put within the nation as a whole, and
depreciates relatively slowly. It should be fixed capital.
Accumulation