Kim Gentes

Of all the documents of economics found in modern (nay, any) times there is no more seminal text than Adam Smith's "The Wealth of Nations".1 In this particular treatise, Smith embarks not on the high-minded work of philosophical argument but in the arduous (sometimes monotonous) task of common sense exploration of the simple, daily, often obvious facts of commerce, production, wages, exchange, labor, value, government (and government corporations such as postal, banking, political and trade organizations), trade, currency, commodities, taxes, militaries, industries, nations, religion, education, inheritance (and inheritance tax), feudal laws, road maintenance (and other public works) and literally almost every conceivable article of economic interest. Because Smith deals with the details is such careful articulation, his larger premise(s) are rarely forcefully declared. Yet, they are become so obvious, they can scarcely be ignored by the observant reader.

With what now seems to be childlike attention to minutia, he articulates a basic course of Euclidian logic in the realm of economics (the axiom from Euclid's Elements that says "Things which are equal to the same thing are equal to one another"). Smith spins dozens of examples against each other to extrapolate nearly every one of his points to show how wages, land/rents and profits/stock have values that combine and compare to various expressions across the economic systems. And he does this kind of thing with nearly every one of his salient points.

Beyond this comparative rendering (that speaks often to Smith's assumptions about value - labor, prices, exchange, land and other items) the book effectively uses categorizing and linear explanation to break down every major principle of economy into its actually understandable (and usable) parts.

For example, on the topic of how a division of labor positively effects the production efficiency of any industry, Smith writes:

This great increase in the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.2

He is stating what we now all take for granted- efficiency in division of labor production can be derived from 1) Accentuated individual expertise in a specific skill, 2) no time lost in context switching between different tasks, and 3) automation. And while these things seem obvious, it wasn't to the world in which Smith lived. It was he who introduced these ideas to the broader intellectual and business leaders of his world.

The clear benefits of division of labor related to production here seem obvious to us, yet it is only so because Adam Smith pointed them out and that his work has become such a universally understood and accepted set of axioms of industry. And this is precisely what the entire volume of Smith's work does- point out easily deduced truths that have gone on to become universal business axioms. The power of this work is not in its elegance as much as its utility- for this book has so much detail that one could assume it was powerless, and nothing could be further from the truth.

Again, this can seem arduous at times, but the beauty of it is in its almost mesmerizing simplicity and reality. Taking into account that Smith wrote about 250 years ago, we must set aside his obvious assumptions based in a time period and culture which demanded such clarity be brought to what is now a much different world. The fact that so much of "The Wealth of Nations" seems so obvious to us is, in fact, a tribute to its practically universal impact on virtually every country, society and economy within 50 years of its writing right up until present times. Literally within a half century of its writing, almost the entire political and economic structures of European countries were revolutionized- and much of that revolution was guided in no small part by the contents of Smith's iconic tome.

Even though "The Wealth of Nations" would be the foundational document for later modern economics, Smith shouldn't be looked at as a revolutionary thinker of new ideas. In fact, it is doubtful Smith would have even considered his ideas new at all. The tone and contents of the book are all delivered as observations, summaries and assumptions based on what Smith was observing in business and trade. For example:

"the wealth of a country consists, not of its gold and silver only, but in its lands, houses, and consumable goods of all different kinds" 3

Here again, Smith is articulating what others would later call "essential", but he saw it as just one of many things that he was correcting that the merchantilists of his time had gotten wrong. Much as Aristotle didn't create biology, metaphysics, politics or zoology- though he did define them for all ages that followed- Smith is an observer and thinker that simply categorized what he saw. He, like his contemporaries, referred to this area of study as political economy but for all practical purposes Smith becomes, with this volume, the father of modern economics. He stands, therefore, as the first major figure to coalesce and categorize the realm of economics and all of its essential parts. It is from this foundational document that later thinkers would attribute everything from free markets, division of labor, money supply (though he never used that term) and laissez-faire to the Smithian vision of economics. For sure, corrections and adjustments to the model outlined by Smith were later made and built on by others. But reading this document will help you understand the scope and architecture of modern free market economics.

While my praise is genuine and in chorus with vast others, it must be, nonetheless, restrained by the ability we hold over Smith- our hindsight and look on history since him. Looking back on "The Wealth of Nations", one could easily become cynical and even critical of Smith's peculiarities on local and current issues. His great ability to critique (the strength that shines so brightly in his book) allows him to make excellent observations into his own nation (United Kingdom) and not withhold appropriate criticism to its corrupt or broken systems. Everything from the merchantilist system (which is, indeed, his chief target of angst for nearly 80% of the book) and it's benefactors, to the government trade monopolies, tariffs, taxation, regulation, and various inefficiencies- Smith takes them all to task as he sees any malignancy in any part. He tackles systems of education and religion as well. At times he is ruthless, but he leaves no aspect of society untouched, including speaking on slavery, educating all ranks of people, need for taxes for public works, standing armies (the need for national security) and dozens of topics. Each of them he relates to their particular connection in economic life.

Because he lives in a time period with obvious prejudices towards classes of people, and nationalities as well, he allows some of that culture to speak out in his writing. This must all be heard and mitigate any grand estimations we might have of Smith as a social reformer in our scope of understanding. He WAS INDEED a huge reformer, and his economic understanding of how free markets can allow nations to raise the standard of living for ALL it's citizens is remarkably prophetic and proven right -- indeed western civilization and its undeniable ability to feed its populations and take care of necessities (and that has been so for almost 150 years since Smith's principles have been assimilated in taken up by every major western society since it's writing) shows the vitality to Smith's claims. However, the depth of social understanding in areas of racial, gender, nationalistic and social standing are not the concerns that Smith could comprehend, and as such we can't become revisionists and acclaim him for anticipating that his economic equality formulae would be one of the most powerful forces that would eventually help give equality to these broken divisions. Smith did not anticipate it, but his truths were still nonetheless effective in assisting and encouraging changes and economic freedom for these divisions just as well as every person was encouraged in the same way through the same terms.

This book is huge- literally. Depending on the version you read, the original volume was published as five  separate books in a collection.  Unabridged versions include all five sections adding up to a massive 640 (plus) pages. Many modern collections of this book feature just the first three sections (books), since the minutia of the last two can be so arduous. No doubt economics students will want to consume the entire tome, but be ready for a few hours of "easy-to-drift-off" details if you venture to tackle this entire collection.

Overall the book was absolutely astounding in keeping the account of such huge proportions still a vital and engaging narrative. I can't recommend it enough- if you have a spare 30 hours, this is your best bet for a truly great read!

Amazon Book Link: http://amzn.to/10DTrTg

Review by Kim Gentes

1. The formal full name of the book as Adam Smith published it first was "An Inquiry into the Nature and Causes of the Wealth of Nations". It commonly became known simply as "The Wealth of Nations".
2. Smith, Adam (2011-04-29). The Wealth of Nations (Illustrated) (p. 3).  Kindle Edition.
3. Ibid. pp. 308-309