I have had occasion to read Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, commonly referred to as The Wealth of Nations. It is very interesting to read such a book to see how and why economics theories were developed and treated initially.#

Throughout the reading I got the impression that Smith's book is very much like a Cato free-trade book, except where the one must only refer to economic theory, the other had to create it on the fly. Perhaps only in Henry Hazlitt's Economics in One Lesson have I seen an economic text so filled with liberal philosophy.#

Below are some choice quotes...#

Smith suggests in a discussion on wages and profit that the most intelligent members of a society are the ones who are not highly specialized in some component of the division of labour:#

The common ploughman, through generally regarded as the pattern of stupidity and ignorance, is seldom defective in this judgment and discretion. He is less accustomed, indeed, to social intercourse than the mechanic who lives in a town. His voice and language are more uncouth and more difficult to be understood by those who are not used to them. His understanding, however, being accustomed to consider a greater variety of objects, is generally much superior to that of the other, whose whole attention from morning till night is commonly occupied in performing one or two very simple operations. [p. 115]

I noticed that Smith only mentions an 'invisible hand' explicitly once, and only on page 399 out of 620. It is a rather unimportant mention, but amazing how well it stuck and characterized the work. (Granted from the get-go he talks about how individual interest naturally leads to greater good, he only uses that imagery once.)#

Smith constantly mocks the mercantile system, ever so slightly:#

Nothing could be more agreeable to the spirit of that system than a sort of bounty upon the production of money, the very thing which, it supposes, constitutes the wealth of every nation. It is one of its many admirable expedients for enriching the country. [p. 493]

A quite unexpected component of the book was the large discussion of how to best change the laws involving the American colonies to the satisfaction of both parties. (Having been published in 1776, it is obvious what this was in reference to.) Smith proposes free trade and colonial representation in Parliament in proportion to its contribution to the state coffers.#

In this section, Smith gives his theory for why the American British subjects rebelled:

The leading men of America, like those of all other countries, desire to preserve their own importance. They feel, or imagine, that if their assemblies, which they are fond of calling parliaments, and of considering as equal in authority to the parliament of Great Britain, should be so far degraded as to become the humble ministers and executive officers of that parliament, the greater part of their own importance would be at end. They have rejected, therefore, the proposal of being taxed by parliamentary requisition, and like other ambitious and high-spirited men, have rather chosen to draw the sword in defence of their own importance. [p. 557]

The book closes with a concise description of the purpose of government and the benefits of free trade:#

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of tother independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintain certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society. [p. 620]