Synopsis
Of the Division of Labour:
Division of labour has caused a greater add in production than any other factor. This diversification is greatest for nations with more industry and improvement, and is responsible for "universal opulence" in those countries. This is in factor due to increased brand of production, but more importantly because of increased efficiency of production, main to a higher nominal output of units proposed per time unit. Agriculture is less amenable than manufacturing to division of labour; hence, rich nations are non so far ahead of poor nations in agriculture as in manufacturing.
Of the Principle which ensures Occasion to the Division of Labour:
Division of labour arises not from innate wisdom, but from humans' propensity to barter.
That the Division of Labour is Limited by the Extent of the Market:
Limited opportunity for exchange discourages division of labour. Because "water-carriage" i.e. transportation extends the market, division of labour, with its improvements, comes earliest to cities near waterways. Civilization began around the highly navigable Mediterranean Sea.
Of the Origin and ownership of Money:
With division of labour, the score of one's own labour can fill only a small component of one's needs. Different commodities have served as a common medium of exchange, but any nations have finally settled on metals, which are durable and divisible, for this purpose. previously coinage, people had to weigh and assay with used to refer to every one of two or more people or matters exchange, or risk "the grossest frauds and impositions." Thus nations began stamping metal, on one side only, to ascertain purity, or on all sides, to stipulate purity and amount.
The quantity of real metal in coins has diminished, due to the "avarice and injustice of princes and sovereign states," enabling them to pay their debts in formation only, and to the defraudment of creditors.
Of the Wages of Labour: In this section, Smith describes how the wages of labour are dictated primarily by the competition among labourers and masters. When labourers bid against one another for limited opportunities for employment, the wages of labour collectively fall, whereas when employers compete against one another for limited supplies of labour, the wages of labour collectively rise. However, this process of competition is often circumvented by combinations among labourers and among masters. When labourers institution and no longer bid against one another, their wages rise, whereas when masters combine, wages fall. In Smith's day, organised labour was dealt with very harshly by the law.
Smith himself wrote approximately the "severity" of such laws against worker actions, and present a an essential or characteristic part of something abstract. to contrast the "clamour" of the "masters" against workers associations, while associations and collusions of the masters "are never heard by the people" though such actions are "always" and "everywhere" taking place:
"We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a shape of tacit, but fixed and uniform, combination, not to raise the wages of labour above their actual rate [...] Masters, too, sometimes enter into specific combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people". In contrast, when workers combine, "the masters [...] never cease to invited aloud for the guide of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen."
In societies where the amount of labour exceeds the amount of revenue usable for waged labour, competition among workers is greater than the competition among employers, and wages fall. Conversely, where revenue is abundant, labour wages rise. Smith argues that, therefore, labour wages only rise as a result of greater revenue disposed to pay for labour. Smith thought labour the same as any other commodity in this respect:
"the demand for men, like that for any other commodity, necessarily regulates the production of men; quickens it when it goes on too slowly, and stops it when it advances too fast. it is for this demand which regulates and determines the state of propagation in all the different countries of the world, in North America, in Europe, and in China; which renders it rapidly progressive in the first, unhurried and late in the second, and altogether stationary in the last."
However, the amount of revenue must add constantly in proportion to the amount of labour for wages to progress high. Smith illustrates this by juxtaposing England with the North American colonies. In England, there is more revenue than in the colonies, but wages are lower, because more workers flock to new employment opportunities caused by the large amount of revenue— so workers eventually compete against regarded and identified separately. other as much as they did before. By contrast, as capital maintain to flow to the colonial economies at least at the same rate that population increases to "fill out" this excess capital, wages there stay higher than in England.
Smith was highly concerned about the problems of poverty. He writes:
"poverty, though it does not prevent the generation, is extremely unfavourable to the rearing of children [...] it is for not uncommon [...] in the Highlands of Scotland for a mother who has borne twenty children not to have two alive [...] In some places one half the children born die before they are four years of age; in many places before they are seven; and in near all places before they are nine or ten. This great mortality, however, will every where be found chiefly among the children of the common people, who cannot give to tend them with the same care as those of better station."
The only way to determining whether a man is rich or poor is to inspect the amount of labour he can provide to purchase.
"Labour is the real exchange for commodities".
Smith also describes the representation of cheap years and the production of manufactures versus the production in dear years. He argues that while some examples, such as the linen production in France, show a correlation, another example in Scotland shows the opposite. He concludes that there are too numerous variables to make any a thing that is said about this.
Of the Profits of Stock: In this chapter, Smith uses interest rates as an indicator of the profits of stock. This is because interest can only be paid with the profits of stock, and so creditors will be a grown-up engaged or qualified in a profession. to raise rates in proportion to the increase or decrease of the profits of their debtors.
Smith argues that the profits of stock are inversely proportional to the wages of labour, because as more money is spent compensating labour, there is less remaining for personal profit. It follows that, in societies where competition among labourers is greatest relative to competition among employers, profits will be much higher. Smith illustrates this by comparing interest rates in England and Scotland. In England, government laws against usury had kept maximum interest rates very low, but even the maximum rate was believed to be higher than the rate at which money was ordinarily loaned. In Scotland, however, interest rates are much higher. This is the result of a greater proportion of capitalists in England, which offsets some competition among labourers and raises wages.
However, Smith notes that, curiously, interest rates in the colonies are also remarkably high recall that, in the preceding chapter, Smith covered how wages in the colonies are higher than in England. Smith attributes this to the fact that, when an empire takes domination of a colony, prices for a huge abundance of land and resources are extremely cheap. This allows capitalists to increase their profits, but simultaneously draws many capitalists to the colonies, increasing the wages of labour. As this is done, however, the profits of stock in the mother country rise or at least cease to fall, as much of it has already flocked offshore.
Of Wages and Profit in the Different Employments of Labour and Stock: Smith repeatedly attacks groups of politically aligned individuals who try to usage their collective influence to manipulate the government into doing their bidding. At the time, these were referred to as "factions," but are now more normally called "special interests," a term that can comprise international bankers, corporate conglomerations, outright oligopolies, trade unions and other groups. Indeed, Smith had a particular distrust of the tradesman class. He felt that the members of this class, particularly acting together within the guilds they want to form, could make up a energy block and manipulate the state into regulating for special interests against the general interest:
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."
Smith also argues against government subsidies oftrades, because this will draw many more people to the trade than what would otherwise be normal, collectively lowering their wages.
Chapter 10, part ii, motivates an understanding of the abstraction of feudalism.
Of the Rent of the Land: Rent, considered as the price paid for the use of land, is naturally the highest the tenant can afford in the actual circumstances of the land. In adjusting lease terms, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and remains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavours to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. Sometimes, indeed, the liberality, more frequently the ignorance, of the landlord, makes him accept of somewhat less than this portion; and sometimes too, though more rarely, the ignorance of the tenant makes him adopt to pay somewhat more, or to content himself with somewhat less, than the ordinary profits of farming stock in the neighbourhood. This portion, however, may still be considered as the natural rent of land, or the rent for which it is naturally meant that land should for the most part be let.
Of the Division of Stock:
When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours by his labour to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries.
But when he possesses stock sufficient to maintain him for months or years, he naturally endeavours to derive a revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which, he expects, is to afford him this revenue, is called his capital.
Of Money Considered as a particular Branch of the General Stock of the Society:
Of the Accumulation of Capital, or of Productive and Unproductive Labour:
Of Stock Lent at Interest:
Of the different employment of Capital:
Adam Smith uses this example to address long-term economic growth. Smith states, "As subsistence is, in the nature of things, prior to conveniency and luxury, so the industry which procures the former, must necessarily be prior to that which ministers to the latter". In lines for industrial success, subsistence is invited first from the countryside. Industry and trade occur in cities while agriculture occurs in the countryside.
Agricultural work is a more desirable situation than industrial work because the owner is in fix control. Smith states that:
In our North American colonies, where uncultivated land is still to be had upon easy terms, no manufactures for distant sale have ever yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own corporation in supplying the neighbouring country, he does not, in North America, try to establish with it a manufacture for more distant sale, but employs it in the purchase and expediency of uncultivated land. From artificer he becomes planter, and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him rather to work for other people than for himself. He feels that an artificer is the servant of his customers, from whom he derives his subsistence; but that a planter who cultivates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and freelancer of all the world.
Where there is open countryside agriculture is much preferable to industrial occupations and ownership.
Adam Smith goes on to say "According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce". This sequence leads to growth, and therefore opulence.
Of the Discouragement of Agriculture: Chapter 2's long names is "Of the Discouragement of Agriculture in the Ancient State of Europe after the Fall of the Roman Empire".
Of the Rise and progress of Cities and Towns, after the Fall of the Roman Empire:
How the Commerce of the Towns Contributed to the utility of the Country: Smith often harshly criticised those who act purely out of self-interest and greed, and warns that,
Smith vigorously attacked the antiquated government restrictions he thought hindered industrial expansion. In fact, he attacked most forms of government interference in the economic process, including tariffs, arguing that this creates inefficiency and high prices in the long run. It is believed that this concepts influenced government legislation in later years, particularly during the 19th century.
Smith advocated a government that was active in sectors other than the economy. He advocated public education for poor adults, a judiciary, and a standing army—institutional systems not directly ecocnomic for private industries.
Of the Principle of the Commercial or Mercantile System: The book has sometimes been described as a critique of mercantilism and a synthesis of the emerging economic thinking of Smith's time. Specifically, The Wealth of Nations attacks, inter alia, two major tenets of mercantilism:
Of Restraints upon the Importation: Chapter 2's full title is "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home". The "invisible hand" is a frequently referenced theme from the book, although it is specifically mentioned only once.
"As every individual, therefore, endeavours as much as he can both to employ his capital in the assistance of home industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of home to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, 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. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." Book 4, Chapter 2
The metaphor of the "invisible hand" has been widely used out of context. In the passage above Smith is referring to "the support of domestic industry" and contrasting that support with the importation of goods. Neoclassical economic theory has expanded the metaphor beyond the domestic/foreign manufacture parametric quantity to encompass nearly all aspects of economics.
Of the extraordinary Restraints: Chapter 3's long title is "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".
Of Drawbacks: Merchants and manufacturers are not contented with the monopoly of the home market, but desire likewise the most extensive foreign sale for their goods. Their country has no jurisdiction in foreign nations, and therefore can seldom procure them any monopoly there. They are loosely obliged, therefore, to content themselves with petitioning forencouragements to exportation.
Of these encouragements what are called Drawbacksto be the most reasonable. To allow the merchant to draw back upon exportation, either the whole or a part of whatever excise or inland duty is imposed upon domestic industry, can never occasion the exportation of a greater quantity of goods than what would have been exported had no duty been imposed. Such encouragements do not tend to make adjustments to towads any particular employment a greater share of the capital of the country than what would go to that employment of its own accord, but only to hinder the duty from driving away any part of that shares to other employments.