Wealth Of Nations Summary

2413 Words10 Pages
An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith I. Introduction A. Purpose of the Book The Wealth of Nations documented the industrial development in Europe and how such a society worked. Adam Smith set himself two main problems one on the micro and the other on the macro level. The first problem was to demonstrate how a market-run economic system was integrated, how it achieved what we would call micro order. Here he begins by analyzing a complicated inquiry. The players in the market as we know, are all geared by the aim to earn profit for themselves—“to improve their status”. The question is transparent. How does a market community block selfish and opportunistic parties from restraining their fellow countrymen…show more content…
Thesis of the Book Because the market is its own regulator, Smith vehemently opposed government intervention that would interfere with the workings of self-interest and competition. Therefore, laissez-faire [an economic doctrine (literally, “leave alone” advocating that commerce and trade should be permitted to operate free of government controls] became the fundamental philosophy – not because he opposed the idea of social responsibility, but rather because he thought it would be most effectively provided by the Invisible Hand, not by the efforts of government. Wealth of Nations set forth the principles of laissez-faire economy. 1. Entrepreneurs should be free to operate their businesses in the way that will bring them the most profits. 2. What is good for the entrepreneur is good for everyone, since profits mean more jobs and more goods. The individual’s profits contribute to the nation’s profit and, therefore, to a healthy economy. 3. The duty of government is to keep peace and maintain order within the community. 4. Government should not meddle in business. When government interferes, it harms the economy, causing suffering for everyone. B. Author’s Use of Evidence to Support the Thesis and Secondary Parts 1. The Invisible…show more content…
The Division of Labor But how to enlarge sales at a time long before advertising existed as we know it? Smith’s answer was to improve productivity: Increase the output of the work force. And the road to increasing productivity was very clear. Increase the division of labor. This idea has promoted and generated international attention and helped to drive the move from land-based wealth to wealth created by assembly-line production methods driven by division of labor. One famous example Smith cited involved the labor required to make a pin. He asserted that ten workers could produce 48,000 pins per day if each of eighteen specialized tasks was assigned to particular workers. Average productivity: 4,800 pins per worker per day. But absent the division of labor, a worker would be lucky to produce even one pin per day. He applied a similar logic regarding wealth generation and efficiency to British rule over the American colonies. According to his calculations, the cost of maintaining the colonies was simply not worth the return on investment. 5. Capital and
Open Document