A. Purpose of the Book
Wealth of Nation is written by Adam Smith which is about how market works not only in a specific field but in different countries. During the 18th century, countries have different perspectives and there were a lot of economists and philosophers who argued about markets. Adam Smith was one of them and this inspired him to do write a book that will justify his ideas. He was one of the most known philosophers in the field of political economics which made it easier for people to know his works. He wanted to share his knowledge about why some countries develop easier and faster than the others. He also wanted to emphasize how an administration should handle its wealth of nation.
As an economist, Adam Smith was pretty much involved with the political field. The book revolves with the market and how mercantilist system can affect a country. He described this system as a country can develop easier if exports are encouraged while imports are restrained. He stated that through this, a country can maintain a balanced economy because it can sustain domestic employment. This theory got famous in the Western Europe and after a while, got known all over the world. The Western Europe used this theory and became one of the exporters all over the world. However, there were still some factors that affected this system. It was the time of conflicts of different government. There were new growing industries, new policies and new competitors all over the world. There were governments who provided capital to new industries but at the same time, some governments did not. There were also some instances that the government would prohibit export materials so that other countries would not have the ability to create a specific product. Because of these instances, Smith’s “Wealth of Nation”, helped the government to have new ideas to excel their performance. It helped the developing countries to compete with other countries. It gave them the guidance to try a new system that can create new specializations and to try free trade.
B. Author’s qualifications and viewpoint
Adam Smith was born on June 16, 1723. He was known as a political economist, philosopher and author. He studied moral philosophy in University of Glasgow at the age of fourteen. He graduated at University of Oxford as a scholar in postgraduate studies. Francis Hutcheson was one of his advisors who taught him knowledge about liberty, free speech and reason. In 1748, Smith started teaching in Edinburgh about rhetoric and he worked as an academic for the last thirteen years. According to him, it was the most useful and honorable moment in his life.
Adam Smith first published his classical work in 1759 entitled “The Theory of Moral Sentiments”. It is about how mutual sympathy is the basis of moral sentiments. He got famous because of this which resulted to having new wealthy students to learn from him. He moved to Paris and met Benjamin Franklin, Turgot, Jean D’Alembert, André Morellet, Helvétius, and François Quesnay. Smith was ispired with Quesnay’s ideas which inspired him to make “The Wealth of Nation”. Smith went back home in 1766 and stayed there for the next ten year for his magnum opus. After seven years, he was elected fellow of Royal Society of London. In 1776, “The Wealth of Nation” was published which became an instant hit. Smith died in July 17, 1790 at the age of 67. He left some of his unpublished works with his instructions to destroy it if was not fit for publication. “History of Astronomy” and “Essays on Philosophical Subjects” were some of the examples of his unpublished works.
II. Critical Summary
Thesis of the Book
Wealth of Nation discussed a lot of factors that can affects country. It does not only revolve on mercantilism. It also discussed about the experiences and lives of people that time. It was the time that not all countries have specializations and they were still figuring out how they can improve their economic status. They were not a lot of policies about trading therefore not all countries were encouraged in it. The book absolutely gave the people that time on what decisions they should make.
Summary of contents
Book 1, Chapter 1
Adam Smith stated the importance of division of labor in a country. It is important for people to know where they are good at. In this way, it will be easier for them to do their jobs. It will also help a country to be organized. He used the pin-makers of England as an example. According to him, if a person does not know how to make a pin, it will be hard for him/her to make even a single one for a day. However, if he/she knows how to make one, it will be an easy job for him. This idea can work in a country if citizens know their specializations. It can also help a country to develop their specialized industry.
Book 1, Chapter 2
In chapter 2, Smith discussed that trade is an even more important act than division of labor. It is great for a country to develop a connection with the others. A country might know its specialization but it needs to develop it more. a country, in order to survive, needs to communicate to sustain its citizens’ needs. He also stated that developing countries are more curious and need to be more involved in trading.
Book 1, Chapter 3
A country does not only need to know their specializations and how trading works. They also need to know their limitations. If a country does not know, they can create too much supply that would not be bought which can result to loss. A have to know when to stop and where they should supply. He also stated that countries near water are more successful in trading because it is much easier for them to communicate with the other countries. It can still be seen until now.
Book 1, Chapter 4
The importance of money before was discussed in this chapter. Before, paying is different than today. In order to earn what a person needs, he/sshe should be wise with communicating. He/She has to understand that some people would not like his/her products so he/she should think of a strategy that can still sell his/her products. He also stated that before metal was one of the things that were traded because it was hard to be seen.
Book 1, Chapter 5
Smith started chapter 5 with his idea that a person’s financial status only depends on how much he/she can afford to buy. Therefore, money does not have any value, instead, it depends on the value of work. It is like paying for the work of the people who made it. But at the same time, he also stated that it can also be depend on what a person is willing to exchange for. The real value of it is based on the things that we can get from it while the nominal value is the amount of money itself.
Book 1, Chapter 6
There are several reasons why people are paid in different amounts. One of them is because some jobs are harder and need more skills. However, there are some reasons like depending on how much their boss makes. There are also three things that make up a product’s price. These are the profit the company wants, the labor and the rent consumed while making the product. The same thing works for a country.
Book 1, Chapter 7
There are two main things that are considered when pricing a product, the demand and the supply. The prices of a product always depend on these two. According to Smith, the natural price of a product is a direct reflection of how much a person can pay for that thing.
Book 1, Chapter 8
In this chapter, it discussed about how bossed pay wages to their employees. According to him, bosses actually agree much easier to lower the wages but they do not want the society to know about that. For him, wages have a limitation on how much it should be lower. He also discussed the difference of a laborer from a slave. But for him, slavery should never exist.
Book 1, Chapter 9
It is not true that if a company uses its resources is that they will have more profit. According to Smith, countries who engaged with trading is wealthier because they have international competitors. They also do not need to lower their prices for it to be bought.
Book 1, Chapter 10
In this chapter, Smith discussed again how employees are being paid depending on their jobs. He also discussed about how some people can be biased depending on a person’s status or age. There are some instances that government has policies or laws that affect the market competition.
Book 1, Chapter 11
Chapter 11 is about rent and how some factors affect it. According to Smith, landowners do not do anything but they still earn money which make them the worst. Prices of products and the property itself also affect rents.
Book 2, Chapter 1
The two types of savings are discussed in this chapter. The first one is the money that a person spends easily while the second one is the money a person wants to invest or also known as capital. Capital has two kinds which is the circulating capital and the fixed capital. Circulating capital is the one that does not become real money until it has been cashed in while fixed capital is the money used to improve the company.
Book 2, Chapter 2
In this chapter, the difference of gross and net revenue was discussed. He also discussed that the wealth of a person should not be based on money. He is also in favor with strict bank regulations since almost all of the people has personal savings in banks.
Book 2, Chapter 3
For Smith, there are two types of labor; productive and unproductive. People should be mindful on where they spend their money. Develop countries tend to spend their money to things that can improve their country. However, developing countries tend to spend their money to unnecessary things which do not help them to improve.
Book 2, Chapter 5
A country who has more supplies more than demand has surplus. A country’s surplus can help other countries who need their products and it also helps the country’s economic status.
Book 3, Chapter 1
According to Smith, agriculture is the most important industry in a country. The second one is manufacturing then foreign trade. He stated that the agricultural field allows citizens to survive so they need more attention than they were getting.
Book 3, Chapter 2
In this chapter, Smith emphasized how agriculture is the key to develop a country’s economy. Therefore, farmers should have enough knowledge on how landing a property works. It should not always depend on a person’s age or age. They also have to consider someone’s capability.
Book 3, Chapter 3
During Smith’s time, the government was not really in a good shape. They cannot control what was happening so not everyone had the same protection. Italy was one of the first countries who participated in trading which made them successful.
Book 3, Chapter 4
Adam Smith stated how countryside improved through the success of cities. He also stated that North America is wealthier than Europe because they give more attention on the improvement of their agricultural field.
Book 4, Chapter 1
People always have the idea that a person is considered rich if he/she has a lot of money, the same idea works on country which is not true. Money does not matter if a country does not connect or have any trading business with other countries. Trading is a way to become more wealthy because it gives them more chances especially f they export more than they import.
Book 4, Chapter 2
Adam Smith explained why selfishness can drive the society into overall success. It is because it gives people more determination and gives a productive behavior. It will pursue them to make their products to be better.
Book 4, Chapter 3
Adam Smith explained what would happen if a country imports more than it exports. People need to understand that importing and exporting is both important but they also have to understand that the value of what it produces and consumes matter too.
Book 4, Chapter 5
Smith discussed about “bounties”. It is the idea that the government will give people money so that they will be more determined to produce. He argued that there is no point with government manipulating the industry because in the end of t day, it always depends on the merchants and producers.
Book 4, Chapter 7
The 18th century was the time that colonies were developed. It affected countries and for him, colonies helped one in order to be wealthier. It is because they were much more careful and they influenced other countries at the same time.
Book 4, Chapter 8
In this chapter, Smith discussed how mercantilism works in a country. Some government discouraged importing because they thought that it would make them easier to be wealthy. But for him, economies should consider consumptions more than productions.
Book 4, Chapter 9
He pointed out again the importance of agriculture in a country in this chapter. He did not think that giving money to farmers to produce more can help the economic growth. Instead, he showed the importance of free market in a country.
Book 5, Chapter 1
Different countries have differrent policies. But for Smith, every country should give importance with paying the military because they protect the country. He also emphasized the status of public good. According to him, richer people should pay higher taxes.
Book 5, Chapter 2
It is important that everyone is paying their taxes. For Smith, there should not have any dates on when to pay taxes but it should depends on when it is convenient for a person to pay.
Book 5, Chapter 3
A country should always work in any way because money should always revolve to have its value. In this final chapter, Adam Smith stated that England should accept that there will be circumstances that they should stop acting powerful.
C. Author’s use of evidence to support the thesis and secondary points.
A. Contribution of the book
B. Overall worth of the book