The Wealth of Nations

An Inquiry into the Nature and Causes of the Wealth of Nations was written by Adam Smith and published in 1776, the same year as Common Sense was produced by Tom Paine, a Norfolk man. Tom gave the intellectual justification for colonialists in America to rebel. It was a time of ferment The Wealth of Nations was about economics rather than politics. It was also highly influential; so much so that it was explained by P. J. O'Rourke who is best known as a humourist. That is why his offering, On The Wealth of Nations - Books That Changed The World is so much easier to read.

It is a follow up to The Theory of Moral Sentiments which also sounds like heavy going. It was, but matters none the less.  P. J. tells us that we cannot really understand Wealth without reading its forerunner. As he said, Cambridge University did the world a disservice in 1903 [ on page xii ] by separating the two subjects. Reading this now, in 2012 with the Financial Crisis of 2008 looking set to run and run one sees the point.

Free Trade which Mr. Smith advocated is subjected to industrial sabotage. It has been made largely criminal. It is also called the Informal Economy. Long may it live.

The Wealth of Nations ex Wiki
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An Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published in 1776, it is a reflection on economics at the beginning of the Industrial Revolution and argues that free market economies are more productive and beneficial to their societies. The book is a fundamental work in classical economics.

The Wealth of Nations was first published on 9 March 1776, during the Scottish Enlightenment and the Scottish Agricultural Revolution. It influenced a number of authors and economists, as well as governments and organizations. For example, Alexander Hamilton was influenced in part by The Wealth of Nations to write his Report on Manufactures, in which he argued against many of Smith's policies. Interestingly, Hamilton based much of this report on the ideas of Jean-Baptiste Colbert, and it was, in part, Colbert's ideas that Smith responded to with The Wealth of Nations.

Many other authors were influenced by the book and used it as a starting point in their own work, including Jean-Baptiste Say, David Ricardo, Thomas Malthus and, later, Ludwig von Mises. The Russian national poet Aleksandr Pushkin refers to The Wealth of Nations in his 1833 verse-novel Eugene Onegin.

Irrespective of historical influence, however, The Wealth of Nations represented a clear shift in the field of economics, similar to Sir Isaac Newton's Principia Mathematica for physics, Antoine Lavoisier's Traité Élémentaire de Chimie for chemistry, or Charles Darwin's On the Origin of Species for biology.
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On The Wealth of Nations (Books That Changed the World) As one of the first titles in Atlantic Monthly Press’ “Books That Changed the World” series, America’s most provocative satirist, P. J. O’Rourke, reads Adam Smith’s revolutionary The Wealth of Nations so you don’t have to. Recognized almost instantly on its publication in 1776 as the fundamental work of economics, The Wealth of Nations was also recognized as really long:  the original edition totaled over nine hundred pages in two volumes—including the blockbuster sixty-seven-page “digression concerning the variations in the value of silver during the course of the last four centuries,” which, “to those uninterested in the historiography of currency supply, is like reading Modern Maturity in Urdu.” Although daunting, Smith’s tome is still essential to understanding such current hot-topics as outsourcing, trade imbalances, and Angelina Jolie. In this hilarious, approachable, and insightful examination of Smith and his groundbreaking work, P. J. puts his trademark wit to good use, and shows us why Smith is still relevant, why what seems obvious now was once revolutionary, and why the pursuit of self-interest is so important.
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Ground breaking stuff.

 

The Theory of Moral Sentiments ex Wiki
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Broadly speaking, Smith followed the views of his mentor, Francis Hutcheson of the University of Glasgow, who divided moral philosophy into four parts: Ethics and Virtue; Private rights and Natural liberty; Familial rights (called Economics); and State and Individual rights (called Politics).

More specifically, Smith divided moral systems into:

Hutcheson had abandoned the psychological view of moral philosophy, claiming that motives were too fickle to be used as a basis for a philosophical system. Instead, he hypothesised a dedicated "sixth sense" to explain morality. This idea, to be taken up by David Hume (see Hume's A Treatise of Human Nature), claimed that man is pleased by utility.

Smith rejected his teacher's reliance on this special sense. Starting in about 1741, Smith set on the task of using Hume's experimental method (appealing to human experience) to replace the specific moral sense with a pluralistic approach to morality based on a multitude of psychological motives. The Theory of Moral Sentiments begins with the following assertion:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.

Smith departed from the "moral sense" tradition of Shaftesbury, Hutcheson, and Hume, as the principle of sympathy takes the place of that organ. "Sympathy" was the term Smith used for the feeling of these moral sentiments. It was the feeling with the passions of others. It operated through a logic of mirroring, in which a spectator imaginatively reconstructed the experience of the person he watches:

As we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation. Though our brother is on the rack, as long as we ourselves are at our ease, our senses will never inform us of what he suffers. They never did, and never can, carry us beyond our own person, and it is by the imagination only that we can form any conception of what are his sensations. Neither can that faculty help us to this any other way, than by representing to us what would be our own, if we were in his case. It is the impressions of our own senses only, not those of his, which our imaginations copy. By the imagination, we place ourselves in his situation.

Sympathy arose from an innate desire to identify with the emotions of others. It could lead people to strive to maintain good relations with their fellow human beings and provide the basis both for specific benevolent acts and for the general social order. Thus was formed within the breast the psychological basis for the desire to obey natural laws. The Theory of Moral Sentiments culminated in man as self-interested and self-commanded. Individual freedom, according to Smith, was rooted in self-reliance, the ability of an individual to pursue his self-interest while commanding himself based on the principles of natural law.

However, Smith rejected the idea that Man was capable of forming moral judgements beyond a limited sphere of activity, again centered around his own self-interest:

The administration of the great system of the universe ... the care of the universal happiness of all rational and sensible beings, is the business of God and not of man. To man is allotted a much humbler department, but one much more suitable to the weakness of his powers, and to the narrowness of his comprehension: the care of his own happiness, of that of his family, his friends, his country.... But though we are ... endowed with a very strong desire of those ends, it has been entrusted to the slow and uncertain determinations of our reason to find out the proper means of bringing them about. Nature has directed us to the greater part of these by original and immediate instincts. Hunger, thirst, the passion which unites the two sexes, and the dread of pain, prompt us to apply those means for their own sakes, and without any consideration of their tendency to those beneficent ends which the great Director of nature intended to produce by them.

It was in the TMS that Smith first referred to the "invisible hand" to describe the apparent benefits to society of people behaving in their own interests. Smith writes (6th ed. p. 350):

... In spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose ... be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society.

In a published lecture, Vernon L. Smith further argued that Theory of Moral Sentiments and Wealth of Nations together encompassed:

"one behavioral axiom, 'the propensity to truck, barter, and exchange one thing for another,' where the objects of trade I will interpret to include not only goods, but also gifts, assistance, and favors out of sympathy ... whether it is goods or favors that are exchanged, they bestow gains from trade that humans seek relentlessly in all social transactions. Thus, Adam Smith's single axiom, broadly interpreted ... is sufficient to characterize a major portion of the human social and cultural enterprise. It explains why human nature appears to be simultaneously self-regarding and other-regarding."

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The Wiki explains all, provided the agenda does not get in the way.

Trade Explained
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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. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.
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The man was right.

1. 'Consumption is the sole end and purpose of all production'
1. Economic progress depends on a trinity of individual prerogatives:-
    pursuit of Self-interest [ or even perhaps Enlightened self-interest ]
     Division of labour  &
    freedom of trade
3. All trades, freely conducted are mutually beneficial - both sides get what they want.
5. The whole business of authority is to interfere in other people's business - that means coercion
6. Coercion destroys the mutual benefit of free trade which destroys trading, then the division of labour then our self-interest.
6. He opposed economic constraints but not personal restraints [ on brute force? ]
7. Bettering one does not mean worsening another. The cake is not a fixed size.
36. WoN is not a justification for amoral greed. It was an attempt to make life better.
44. The price is just that, indivisible. It costs what someone will pay for it.
32. The Impartial Spectator sounds rather like the reasonable man.
83. He failed to predict the Industrial Revolution even though he was a friend of James Watt. He thought it was over. He also failed to see the importance of the Joint Stock Company.
84 A power vacuum is not filled with peace and harmony. It results in more and worse power. Petty tribal chieftains who stole western Europe made Mikhail Bakunin look like a softy.
89. He did not like primogeniture or entail
91. Slaves are not cheap labour. They are idle, expensive labour that do the bare minimum badly.

Spice Trade
The spice trade was interesting, stimulating, challenging, exciting, dangerous, an excuse for murder, invasions, fraud and very profitable for the lucky, vigorous, unscrupulous or lucky. It helped generate the wealth of nations.

 

Errors & omissions, broken links, cock ups, over-emphasis, malice [ real or imaginary ] or whatever; if you find any I am open to comment.

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Updated on 03/08/2023 19:27