＂The Wealth of Nations＂ by Adam Smith： Behind the Books Series by World Library Foundation

The Behind the Book lecture series is made possible by World E-Book Library, the world's largest database of portable e-books for academic research and the World Heritage Encyclopedia, the world's knowledge at your fingertips. The wealth of nations, Adam Smith's most famous economic treaties, is comprehensive work. If you leave the market alone, will it do good or will it do evil? Adam Smith started that debate. Adam Smith was a Scottish country gentleman in an age and in a society, in a social circle, where it was actually quite fashionable to be an intellectual. His intellectual inquiries were broad and well-honed at the best universities. He became best known initially for his moral writings. His essay on moral sentiments was his initial famous work, in which he championed an idea, an observation, that humans seem to derive great personal enjoyment by seeing the well-being of other humans. Which is ironic, because when he began writing economic essays, he became most famous for championing self-interested behavior. Adam Smith's The Wealth of Nations was actually published in five volumes in 1776, which was a very important year in world history. He published at the height of revolutionary fervor, not just in Europe, but of course in the American colonies, in the nation that would eventually become the United States. A lot of the great philosophers of Adam Smith's day were writing about the rights of man and about the forms and nature of legitimate government and how to do government well. Instead of talking about the nature of legitimate government, he gravitated toward what we have come to call economy today. Changes in the way that people were making a living and how wealth was being created. It was an age of great change in production. Manufacturing was beginning, capitalization was beginning. For the first time in world history, people were using banks and stock sales to amass large amounts of cash capital, which allowed them to create incredibly large enterprises that were multinational. Colonialism figured in here as those large enterprises used raw resources from colonies in what became a global trade. Things were progressing on a scale that was vastly greater economically than they had ever progressed before in human history. And that's what Adam Smith was writing about. Instead of writing about what makes government good, he essentially wrote about what makes economy good for people. The idea that Adam Smith is most famous for is the idea of the invisible hand of the market. He was a champion of what we have come to call today the free market. People should be able to trade their goods with one another however they see fit. You should just let them go. If government had a role in the market, it was simply to guarantee the enforcement of economic contracts. If I say I'm going to pay you for the widgets that you produce, then somebody has got to see that I pay you, that I follow through. That was really the role of government. But his theory, and it was almost a moral theory of the market, was that if all the various economic players, the laborers, the producers, the manufacturers, the farmers, if everybody pursued their maximum self-interest economically, if everybody pursued maximum profit, then what would happen is that the overall market would rationalize. It would become incredibly efficient. And an efficient market created more and more wealth. If everybody pursues their self-interest, all of society will be better off. He said that this benefit of the market was like an invisible hand doing good things, even when you couldn't see it, the invisible hand of the free market. In society's economy, in society's market, the thing that created wealth better than anything else was specialization in labor. And this was a very important idea to Adam Smith. And his famous example involved the pin factory. He said that one worker who set out in the morning to produce a pin all by himself would be lucky to produce one pin in the course of a day. But in contrast to that, imagine a pin factory where workers specialize. Some workers worked with the iron ore. Some workers with the production of the pin themselves. Some workers were sharpening. Other people sold it. If you each specialized in a task, you could produce thousands of pins in the course of a day. And if you boosted productivity, you boosted wealth, and everyone was better off. So he was in favor of a society in which people had special trades. And the market itself would determine what it paid you. If your trade were in demand, you would be paid more. If your trade were not in demand, you would be paid less. And in this way, market mechanisms chose what labor was valuable. And to interfere with that caused inefficiencies in productivity. Why would the market pay someone for labor that it did not need? That would decrease productivity in society and hurt everyone. In his day, he wrote against the colonial mercantilism that he saw around him, in which colonial populations were forced to buy expensive goods by the colonial power. Any time the government foisted goods on a people, any time the government decided how the market would behave, any time the government protected trade from foreign competition, you were hurting society. You should leave the market alone because it takes care of itself with the invisible hand. The Wealth of Nations, his comprehensive work, was published in 1776. In 1778, just a couple years later, Adam Smith would leave academia and take a job as a head custom official in Britain. He was against protective tariffs and then got a high-paying government job enforcing protective tariffs. The guy was a high-minded, moral gentleman who was not afraid of sacrificing his scruples in order to take a lucrative government post. He wouldn't be the first. He's not going to be the last. He was immediately well-known in his day as a moral philosopher, as a philosopher of generosity. It would take people a while to understand the importance of his thinking in economy because, again, he was essentially inventing economic analysis. But his legacy in economic thinking through the centuries cannot be overstated. Any time you read about the free market, you can thank Adam Smith. Labor politics, you probably owe a debt to Adam Smith for defining the nature of the debate and for determining how the market takes care of itself. If Adam Smith walked into today's world and grappled with some of the great economic labor issues of the day, like outsourcing productivity or manufacturing or services to cheaper countries where wages were less, what he would say is that you should outsource your labor and your services as much as possible. You should get the work done as cheaply as you can, no matter what, because that would boost productivity and that would generate more wealth for your society. The invisible hand of the free market became an idea that remains influential today in international trade talks or labor disputes. He invented the idea of economic market analysis. And Adam Smith, more than any other individual in history, should be considered the father of economics.