An Inquiry into the Nature and Causes of The Wealth of Nations By Adam Smith 1723-1790

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An Inquiry into the Nature and Causes of The
Wealth of NationsBy Adam Smith 1723-1790

• The annual labour of every nation is the fund
  which originally supplies it with all the
  necessaries and conveniences of life which it
  annually consumes

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According to The Wealth of Nations

• Wealth is not a fixed quantity - wealth is a
  function of productivity and therefore of people,
  and of the incentives which encourage them.
• Even today, some people still mistakenly believe
  that the worlds wealth is a fixed quantity, and
  where one grows richer and another grows poorer.

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The Wealth of Nations - Division of Labor

• Nations have become wealthy because labour has
  become more productive.
• Labour is more productive because it is more
  specialized tasks have been divided and
  subdivided until anyone can easily learn to do
  any job and do it well.
• The division of labor saves time that is lost in
  passing from one species of work to another.
• The division of labour leads to invention, and it
  makes it easier for a worker to learn and become
  skilled at the job.

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The Wealth of Nations - Market and Capital Stock

• The extent of the division of labour is limited
  by the extent of the market.
• The more people there are involved in mutual
  exchange, the more specialized each can be.
• The accumulation of capital (stock) is also
  relevant - Labour can be more and more
  subdivided in proportion only as stock is
  previously more and more accumulated

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The Wealth of Nations - Liberalism

• Laissez Faire
• A system of natural liberty a nations wealth is
  increased by whatever industry is most
  profitable, i.e. whatever industry produces the
  greatest surplus, available to support further
  division of labour.
• Every man, as long as he does not violate the
  laws of justice, is left perfectly free to pursue
  his own interest his own way
• Therefore, the government should not try to
  direct industry into export industry, or into
  agriculture, or in any particular direction.

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According to Adam Smith

• Self-interest is an unchangeable part of human
  nature, so it is wise to let personal incentives
  build a richer economy.
• Strong government was a great necessity,
  particularly to create and enforce laws and to
  ensure justice.

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Adam Smith

• Government and the people should do what it does
  best
• businessmen should not control the justice
  system
• government should not try to run businesses.

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Adam Smith

• The sovereign has only three duties
• first protecting the society from violence
  and invasion
• secondly protecting every member of the
  society from the injustice or oppression of
  every other member
• thirdly erecting and maintaining certain public
  works and certain public institutions which it
  can never be for the interest of any individual,
  or small number of individuals

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According to Adam Smith

• ????
• No society can surely be flourishing and happy,
  of which the far greater part of the members are
  poor and miserable.

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According to Adam Smith

• According to Adam Smith (1723-1790) in an Inquiry
  into the Nature and Causes of The Wealth of
  Nations, wealth is a function of productivity and
  therefore of people, and of the incentives which
  encourage them.

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According to Adam Smith

• Adam Smiths economy grows to its full
  complement of riches as permitted by its laws
  and institutions, and there it rests.

Arthur W. Lewis, 1984