Economisc
This book is so widely cited and interpreted contrary to the author's original thought, that every economist should read it completely to avoid being misled by such incorrect interpretations.
First, let us take the "invisible hand" metaphor. When I have studied economy in the University, I was taught that almost the entire book is devoted to the "invisible hand" which means "self-corrective markets", "liberalism", "Laissez-faire" and "state non-intervention". After reading this book, I have found out that Adam Smith did use the term "invisible hand" only once in the entire book, in the discussion of domestic versus foreign trade.
To illustrate the point, let me quote the text where term "invisible hand" is used: "First, every individual endeavours to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry, provided always that he can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock. Thus, upon equal, or nearly equal profits, every wholesale merchant naturally prefers the home trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade. In the home trade, his capital is never so long out of his sight as it frequently is in the foreign trade of consumption. [...]Secondly, every individual who employs his capital in the support of domestic industry, necessarily endeavours so to direct that industry, that its produce may be of the greatest possible value. [...]As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He 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. Nor is it always the worse for the society that it was no part of it."
After reading this book, I have found out that Adam Smith was influenced by French Physiocrats. The Physiocrats saw the true wealth of a nation as determined by the surplus of agricultural production over and above that needed to support agriculture (by feeding farm labourers and so forth). Other forms of economic activity, such as manufacturing, were viewed as taking this surplus agricultural production and transforming it into new products, by using the surplus agricultural production to feed the workers who produced the extra goods. While these manufacturers and other non agricultural workers may be useful, they were seen as 'sterile' in that their income derives ultimately not from their own work, but from the surplus production of the agricultural sector.
I have found out that this book is not about "invisible hand" or "Laissez-faire". It is quite a complete study that covers almost every basic aspect of the economy, and remains an effective introduction to economics to this day.
This book is so often mischaracterized and politicized that I suggest you to read it completely by yourself. This is a must read for every economist. You can get an audio version of this book to avoid lengthy read.
Wealth of Nations
The item was exactly as described in the advertisement. The delivery time was very reasonable.
DS
Abridgement of a pivotal work
I was not impressed to find that this is an abridgement, especially considering that I found it by reading the reviews and could not discern it from the book cover at all. For this reason I have marked it down to three stars. Smith is necessary reading for anyone interested in the history of Western thought, the Enlightenment or economics, but it must be said that it is dry, if admirably clear, reading and difficult to chew and swallow. For that reason, it is disappointing to get so far in and then find that one is not getting the complete work.
There can be few books that have had such lasting influence on the cultural milieu. Unlike Marx, Smith's ideas seem to have stood up to the tide of history without being washed away, although I write at a time when the finance system appears to have just collapsed, so who knows how a little more history will judge it. At any rate, the correctness of Smith's ideas is perhaps of less import for the student of Western thought than its place in the emergence of a rationalist, secular culture. For Smith was part of the conscious project of the Enlightenment to introduce naturalistic models of our world in place of the magical thinking, in the form of divine providence, which preceded it. Smith was building a model of economy which did not rely on an external, disembodied agency but which emerged deterministically and reached equilibrium through the rule-based interactions of its component parts. His "invisible hand" replaced another.
At the same time, he was making a case for personal autonomy and the right of economic self-determination. As such, Smith combines the two most salient threads of the Enlightenment project - liberation from authority and liberation from magic. More than perhaps any other Enlightenment figure, Smith has shaped the way we think as a political culture today. As such, one must read this book to understand the legacy of the Enlightenment. It is hard going, as he was a very thorough worker and this is economics, the most dismal of sciences, but indispensable.
There is one misconception that this reading corrected for me which I ought to share, and that concerns Smith's alleged scepticism about "corporations". For Smith, and presumably for his contemporaries, this did not, as I thought, indicate opposition to public companies and multinationals in the way we would currently understand it. Rather, he referred to, and condemned, the system of closed trades and apprenticeships by which the market for certain trades was until recently widely protected from competition. I demur from taking sides in this, but it is important to mention the misunderstanding which arises out of the word "corporation", incautiously read.
Monumental Importance
The Wealth of Nations is one of the most important books ever written. In some respects the Wealth of Nations was a tract for the times. Smith penned a crippling critique of the mercantilist `Policy of Europe'. Smith, along with David Hume and David Ricardo, refuted the mercantilist case for protectionism. Much of what we read in this book is still taught in modern economics classes. Modern day protectionists still have no answer to the principles of absolute and comparative advantage, and for the basic logic of Hume's specie flow mechanism.
Smith was more than an ordinary economist. He was a visionary who saw some of the potential for progress through Globalization. Perhaps the most important concept of this book is the dynamics between division of labor, labor productivity, and the extent of markets. Smith conceived of Globalization as a process that would raise productivity as local markets expanded to national and then international scope. His example of division of labor in a pin factory is simple, but illustrative.
The most widely known part of this book is that part of the `invisible hand of markets'. Invisible hand reasoning still pervades modern economic theory, though there are some variations in how economists interpret this concept. Smith does differ from Modern economists on certain issues. Smith thought of competition as a process and of monopoly as a government grant of privilege. In these areas Smith was ahead of many modern economists. Smith also explained market prices in terms of labor content. Here is Smith's great error. Labor value theory set economics on the wrong course. Labor value theory served as the basis for Marxism. This, of course, indicates the great influence of The Wealth of Nations on world history. Without labor value theory the Marxist idea of exploitation falls apart. Smith therefore played a posthumous role in twentieth century history, especially from 1918 to 1991. Of course, we cannot blame Smith for the misuse of his ideas. Smith would have surely opposed Marxism, had he been alive to do so.
What we have in this book is a tremendous effort at discovering the proper limits between private and public institutions. Better still, Smith thought about society and institutions in evolutionary terms. This is another reason why the Wealth of Nations is preferable to modern economics texts. Smith understood the dynamics of capitalism better than many modern economists- who focus on static math models. Smith also influenced Charles Darwin with his ideas of social evolution. There is much evidence indicating that Darwin got the idea for the evolution of species by reading The Wealth of Nations. Smith therefore had great influence on the biological sciences.
Modern economists reject Smith labor value theory (ever since Menger refuted it in 1870). However, there is no denying the influence of The Wealth of Nations. All members of the educated public should read at least part of this book. The question then in which edition should you buy? The Liberty Classics edition is unabridged. The Modern Library Classics edition has margin notes that could be helpful. Given the affordability of these editions, you might consider have both on your bookshelf (I do). I would avoid the Great Mind Series altogether. The Wealth of Nations should be read because it is both a book of great historical importance and a good source for understanding modern Globalization. The labor value theory part precludes a five star rating, but anything less than four stars would be absurd.
Great to know but a burden to read
Not even Miami Beach could make me enjoy reading this book.
This book is over 200 years old and the economic system has changed a lot since then. So why should you read it then? Because most economic fundamentals are being described in this book and give you great insight in understanding the current market more. Let's just hope they don't connect Wall Street to the price of grain anymore.
It's a classic. It's a must read for economic studies. But it's a burden for the common man with his feet in the sand.
