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The Wealth of Nations
An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of Adam Smith, published in 1776. It is a clearly written account of economics at the dawn of the industrial revolution. The work is broken down into five books between two volumes.
The Wealth of Nations is often mischaracterized and politicized. Many people are confident in their opinions regarding the author, the work, and the subject matter, yet have never read it.
In Book One: Chapters I & III illustrate the growth in division of labor. Chapter X part ii, motivates an understanding of the sunset of feudalism.
Smith's work has been described as a critique of mercantilism and a synthesis of the emerging economic thinking of his time. The book is usually considered to be the beginning of modern economics. It was written for the average educated individual of the 18th century rather than for other economists. Thus, this book remains a relatively accessible window into classical economics for the interested modern reader.
The Invisible Hand
The Invisible Hand is an often-referenced concept from the book. The idea behind the "invisible hand" is the claim that people will unintentionally improve their community through pursuit of their own wants and needs.
"...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." (Book four, chapter II)
Meritocracy is a strong theme in the work.
The Wealth of Nations came out of the Enlightenment Era in 1776. It influenced not only authors and economists, but governments and organizations. For example, Alexander Hamilton was impressed and influenced by The Wealth of Nations. It has been said that this work was a response to the French writing on the subjects of good governance, including commerce and regulation, which is partially true. However, the work is a leap forward in economics, similar to Principia for Physics and modern Mathematics and the Physical Sciences generally.
Some commentary on the work suffers from anachronism. This is the result of reading the work as though it were written today. The book is written in modern English, but there are some points to consider:
- The term Economics was not yet in use.
- Feudalism was still dominant in Europe.
- The Feudal Corporations referenced by Smith were very different from any modern corporation.
- Government Regulation: to equate Feudal Europe with the Trust Busting U.S. is erroneous.
Five editions of The Wealth of Nations were published during Smith's lifetime: in 1776, 1778, 1784, 1786, and 1789. Numerous editions appeared after Smith's death in 1790. To better understand the evolution of the work under Smith's hand, a team led by Edwin Cannan collated the first five editions. The differences were published along with an edited fifth edition in 1904 (see An Inquiry into the Nature and Causes of the Wealth of Nations, London: Methuen and Co., Ltd., ed. Edwin Cannan, 1904. Fifth edition.) They found minor but numerous differences (including the addition of many footnotes) between the first and the second editions, both of which were published in two volumes. The differences between the second and third editions, however, are major: In 1784, Smith annexed these first two editions with the publication of Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations, and he also had published the now three volume third edition of the Wealth of Nations which incorporated Additions and Corrections and, for the first time, an index. Among other things, the Additions and Corrections included entirely new sections. The fourth edition published in 1786 had only slight differences with the third edition, and Smith himself says in the Advertisement at the beginning of the book, "I have made no alterations of any kind." Finally, Cannan notes only trivial differences between the fourth and fifth editions — a set of misprints being removed from the fourth, and a different set of misprints being introduced into the fifth.
- The Wealth of Nations on the Adam Smith Institute website
- The Wealth of Nations online this is in an online-friendly format
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