Adam Smith Wealth of Nations Assessment

  • Length: 15 pages
  • Sources: 1
  • Subject: Economics
  • Type: Assessment
  • Paper: #84292384

Excerpt from Assessment :

Give me that which I want, and you shall have this which you want, is the meaning of every such offer" (Smith, 1776, p. 118-119).

The unintentional consequence is thee same as it was before: an increasingly respectable and thriving nation, one so much so that it is as if shaped by what Smith deems the "invisible hand," from which Smith thus concludes that "it is the necessary, certain propensity in human nature . . . To truck, barter, and exchange one thing for another" (Smith, 1776).

Also of significance is the interplay and conflict between self-love and benevolence by way of "sympathy" that would serve as the template on which all of subsequent economic theory would be founded. Consider the fact that most of economic theory is essentially a debate between the virtues of individualism and benevolent altruism by way of the state as intermediary. In short, economic theory concerns but two phenomena only: production as the goal of the most efficient combinations of human labor when combined with capital and the subsequent distribution of such. Smith explains:

"What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable" (Smith, 1776).

But this is the issue: once production has been effected the hugely important question of how to distribute it arises. It is this question that implicitly informs Smith's political economy.

That Wealth of Nations and the Theory of Moral Sentiments, flowed from the same pen may be regarded as enigmatic. However, it is important to underscore the fact that to deny inconsistency between the Theory of Moral Sentiments and the Wealth of Nations is not to deny the existence of tension between ethics and economics in the thought of Adam Smith. Smith likely assumed that readers of the Wealth of Nations would also have read the Theory of Moral Sentiments. It is certainly to the latter that one must turn before the dimension of Smith's thought can be fully illuminated, as it is only in the Theory of Moral Sentiments that readers are confronted with a full treatment of the complex psychology of self-love. Smith exhibits a scientific purpose in Wealth of Nations, much in the same way as he had years before with the Theory of Moral Sentiments, both of which arguably utilize means in direct pursuit of the ends of revealing the hidden foundations of decent society.

Adam Smith is traditionally considered to be one of the principal founders of scientific economics and the first great advocate of economic liberalism based on the principle of laissez-faire. This principle appeared before Smith, of course, but it was Smith, who, through his famous parable of the invisible hand, first imbued it with a potency it has held, aside from the Keynesian interlude, ever since.

"Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry 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." (Smith, 1776).

Perhaps the most well-known of Smith's theories is that of the aforementioned "invisible hand," which states that "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" (Smith, 1776). The disciples of what we call neoliberalism claim Adam Smith as their prophet, the first to demonstrate how the pursuit of self-interest spontaneously generates the best possible social order, the maximum good for all, the best allocation and full employment of a society's resources.

The idea is hardly new. The capability of a well-ordered polity to exploit selfishness to the greater good, without duress or overt design, has been depicted by many other scholars, with perhaps the most well-known being that by Bernard Mandeville in Fable of the Bees (Mandeville. 1988). Adam Smith's role of consequence is that he takes the proposal earnestly, elaborates it admirably, and scrutinizes all of its consequences. In Book Three of the Wealth of Nations, Smith attempts to explain the mechanism by which feudal economic and social relations in Europe eventually came to be transformed into relations typical of and dependent on capital markets. The feudal varieties were exemplified by the sway and clout of larger landowners, who sustained countless retainers. However, Smith argues that, with the steady manifestation of lavish possessions, the grand proprietors chose to garnish themselves rather than to maintain their retainers:

"For a pair of diamond buckles perhaps, or for something as frivolous and useless, they exchanged..,the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them" (Smith, 1980, pp. 418-119).

Smith notes that powerful landholders, faced with the realities of their retainers dismissed coupled with their tenants newfound independence, ultimately bargained their power away "not like Esau in time of hunger and necessity, but in wantonness of plenty, for trinkets and baubles fitter to be the playthings of children than the serious pursuits of men" (Smith, 1980, p. 421).

Wealth of Nations illustrates how self-interest, controlled by sympathy and inhibited by economic competition, leads to a prevalent affluence that Adam Smith calls "universal opulence" (Smith, 1776). How? Individuals want to generate more so that they are free to consume more. and, according to Smith, the answer to generating more lays in the division of labor. When workers specialize, they become more productive; on top of this, opportunities to mechanize become easier to identify and exploit. Purposefully failing to cite documentary sources, quantitative evidence, or empirical calculations to provide support to the latter argument, Smith instead provides a plausible hypothetical narrative to bridge the gap between earlier and later stages of society. His account is consistent with known and/or accepted facts, as well as with an understanding of psychology, illustrated by his astute observation that "all for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind" (Smith, 1980, p. 418).

Adam Smith is a great believer in machines. But the division of labor can flourish only in a system that lets people trade their labor, and the goods they produce, without interference. Smith, exhibiting a deftness and skill that justifies his reputation as a master rhetorician, next argues that what is true for individuals is equally true for nations:

"This great increase of the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many" (Smith, 1981).

How does Smith explain the human propensity to trade? The impactful opening chapter of Wealth of Nations, "Of the Division of Labor," is followed by Smith's attempt to explain that the division of labor is not inconsistent with human nature:

"It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people" (Smith, 1776).

He argues that the division of labor, identified as the source of opulence, cannot, at least not with his own understanding and/or interpretation of human nature, be a result of prudence or calculation but rather one of an evolutionary outcome:

"This division of labor, from which so much advantages are derived, is not originally the effect of any human wisdom, which foresees and intends the general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another" (Smith, 1776, p. 25).

He ceases at this point to further explore the "propensity to truck, barter, and exchange," with the exception of momentarily observing that the inclination may not be so much an instinct as the materialization of more universal human ability or modus operandi (Smith, 1776, p. 25).

Notably, his theory of the division of labor fails to consider the new industrial…

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