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... to justice and rights. ) As you read these extracts ask what functions he thinks governments do and do not have, and why. The Wealth of Nations is also a philosophy of history. Smith distinguishes several stages of social development culminating in "commercial civilisation", a state of considerable and growing national "wealth" (well-being). The wealth of a nation consists in the well-being of the mass of ordinary citizens: in commercial nations wealth is well-diffused, according to Smith.
However, he does not see everything in commercial civilisation in rose colour: keep an eye out for his critical comments. The underlying cause of the development of human society from the hunting to the commercial stage is one of the "propensities" of human nature, the propensity to "truck" (exchange). This leads to division of labour, which leads to increased productivity. The best contribution governments can make to the wealth of nations and to the progress of human society is to leave individuals free to follow their natural propensity to make exchanges. The edition used in the Readings is edited by R. H.
Campbell, A. S. Skinner and W. B. Todd, Oxford, Clarendon Press, 1976.
READ INTRODUCTION, paras. 1 - 5, pp. 10 - 11 In paragraph 3, "those who are not so employed" (in useful labour) means not the unemployed in the modern sense but the higher social classes, who don't work, but "many of whom" (according. to the last sentence of paragraph 4) "consume the produce of 10 times, frequently of 100 times, more labour" than those who do work. How did it come about that modern nations are wealthy enough to support such a higher class? How is it that the productivity of those who do labour is so great that they can carry such a burden? Note the heading for book I: "Of the Causes of Improvement in the productive Powers of Labour [of those who work] and of the Order according to which its produce is naturally distributed among the differnt Ranks of the people [the labourers, the higher ranks, etc. ]." Causes of increased productivity READ Chapter I pp. 13 - 15 and 21 - 2, paragraphs 1 - 3 and 9 - 10 Comments Most people these days would probably say that advances in productivity have been due to the introduction of machinery and other technology, deriving from advances in science. Adam Smith's answer is different: advances are due to increased specialisation of labour.
The work of various kinds of philosophers, scientists and engineers are examples of this division of labour. More basic than technology is the division of labour which enables technology itself to develop and progress. So specialisation is the key to human material well-being. READ Chapter II I. ii, pp. 25 - 30 Comments The division of labour is here traced back to a "propensity to truck" and also to self-love. "This division of labour... is not originally the effect of any human wisdom": compare TMS (Theory of Moral Sentiments), p. 87 "the wisdom of man, "the wisdom of God." Smith does not suppose that self-love is the same as selfishness or that it is the only or chief motive of human action (cf.
Joseph Butler in Raphael, para. 382 - 6). However, in The Wealth of Nations he analyses those social phenomena that do arise from self-love. In paragraph 2 he claims that the propensity to truck is found in no animal except man. This claim is not essential to his analysis of human economic behaviour, which will still stand even if other animals do engage in barter. paragraph 5. "brought into a common stock"; the market is a form of cooperation, a way of sharing individual talents. READ I.
iii, 1 - 4, pp. 30 - 34 Comments Standard of living depends on the productivity of labour, which depends on the division or specialisation of labour; and that depends on the extent of the market, which (initially) depends on safe water-transport. Geography is an important factor in economic history. Value and Price READ I. v. 1 - 7, pp. 47 - 50 Comments This is a classic statement of the "labour theory of value"; that the real value of a thing traded in a market is in proportion to the amount of labour required to produce it and bring it to market. Notice in paragraph 4 the references to time, difficulty and skill as dimensions of quantity of labour. Paragraphs 5 - 7 on money (not printed paper, but a commodity, gold or silver, distinguished from other commodities simply by the fact that almost any other commodity could at almost any time be exchanged for gold or silver).
Money is used as a measure of value, but fundamentally the measure of value is the labour put into making the thing and bringing it to market. READ I. vi. 1 - 10, pp. 65 - 68 Comments This chapter complicates the theory of relative prices: not only labour, but also stock (real capital -- tools, raw materials, goods awaiting sale, etc. ) and land are required for production, and the capitalist, landlord, and labourer share the price. paragraphs 1 - 4 relate to the "hunter" stage of social history. In that stage "the whole produce of labour belongs to the labourer" -- the hunter's catch belongs wholly to him. paragraphs 5 - 7 relate to a stage in which capital stock (e.
g. tools) is needed for production. paragraph 8 relates to the stage at which land has become private property. Rent is the payment for a licence to use land. Paragraph 9 reasserts the labour theory of value after what might have seemed, and perhaps is, a retreat from it. Though some of the price goes to capitalist and landlord, the value of their shares is measured by how much labour they can buy with it.
Value is measured after all not by how much labour is required to produce the thing and bring it to market, but how much labour can be bought with it. READ I. vii. 1 - 16, pp. 72 - 75 Comments Notice the distinction between "natural" and "market" price. Market price, which fluctuates from day to day, is set by fluctuating supply and demand, the natural price is the price at which supply and demand would be in long-term equilibrium (paragraph 15).
Notice "effectual" demand, paragraph 8 -- the demand of those who have the means and the will to pay the natural price. A destitute person dying of starvation has no effectual demand for food, because they can't pay for it. Wages READ I. viii. 5 - 13, pp. 82 - 85 Comments "Combinations" of workmen, i. e. trade unions, were illegal.
paragraph 13, "pretenses: " in 18 th century English "pretense" meant "something put forward", a "claim", usually with no implication of falsity. READ I. viii, 14 - 15, pp. 85 - 6 Comments Does the self-interest of the individual employer cause him to conserve human resources? Or, on the contrary, do the requirements of survival in competition with other firms drive employers to deplete human resources (as they do other resources)? "It seems impossible to reduce, for any considerable time" etc. , because the race of labourers will die out. READ I.
viii. 16 - 18, 21, 22, pp. 86 - 7. Comments Wages are highest while the economy is "progressive" or growing. READ I. 24, p. 89 Comments The "stationary state" is bad for labourers. The regressive state is worse. READ I. viii. 36, 39, 40, pp. 96 - 98 Comments paragraph 39: Cf.
Malthus and Darwin (later) paragraph 40: "The demand for men... regulates the production of men", by way of variations in infant mortality due to variations in wages -- not because parents produce children for sale! READ I. viii, 44 - 5, pp. 99 - 101 Comments paragraph 44: "Paid by the piece", i. e. "piece-work" paid by the number of items produced. paragraph 45: "it is pretended", i.
e. "claimed." Reasons for Difference in Wages READ I. x. a. 1 - 3, p. 116 Comments Note the distinction between "the whole of the advantages and disadvantages" (para. 1), on the one hand, and "pecuniary wages and profit" (para. 2) on the other. Smith does not claim that money wages and returns tend to equality in all employments. "The policy of Europe"; government policies followed in most European countries in his time. READ I. x.
b. 1, 6, 15, pp. 116 - 7, 118, 121 - 2. I. x. b. 39 - 40, p. 131 I. x. c. 1 - 5, 12, pp. 135 - 6, 138.
Comments "The property which every man has in his own labour" (para. 12): Cf. Locke. The second effect of "the policy of Europe" is to overstock some professions and drive down wages in those professions by educating aspirants at public expense. Thus scholarships etc. to encourage the education of the clergy result in low pay for clergymen, and also for writers and teachers. The usual reward of the eminent teacher bears no proportion to that of the lawyer or physician; because the trade of the one is crowded with indigent people who have been brought up to it at the public expense; whereas those of the other two are encumbered with very few who have not been educated at their own. (Paragraph 38, p. 149. ) (These days education in law and medicine is subsidised, but the length of courses reduces competition among graduates.
Even so these professions are said to be over-stocked. ) READ I. x. c. 41 - 43, 45, 59, pp. 151 - 152, 157. Comments "Settlement", paragraph 45: Support for the poor was the responsibility of the parish (a unit of local government); parishes did not allow poor workmen to come in from other parishes in case they might need support from parish rates.
The law of settlement gave local government the right to deny residence to poor people from elsewhere. Rent READ I. xi. a. 2, 5, 6, 8, pp. 160 - 2. I. xi.
p, pp. 264 - 7. Comments Of the three great orders of society -- landlords, workmen, capitalists (employers, dealers) -- the first two have an interest identical with that of "society" (of which workmen are the most numerous part), but are likely to be too ignorant to further it, the third have an interest contrary to that of society and know how to further it. (What is "the general interest of society"? Is it to attain full economic development, or to grow? ) On dealers: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices"; I. x. c. 27, p. 145. "Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters"; I. x.
c. 61, p. 157. Cf. I. viii. 13, p. 84. The capitalists are in a conspiracy against landlords and workmen, against society at large.
Smith was not the simple optimist about "commercial society" that he is sometimes supposed to have been.
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