Question

what is the valie of wealth of nation?

what is value of book wealth of nation?

Answer 1

Introductions of Book "Wealth of Nation"

According to the Oxford Learner's Dictionary, The Wealth of Nations is: “An important work of economic and social theory by Adam Smith, published in 1776.In it he analysed the relationship between work and the production of a nation's wealth.”

The Wealth of Nations by Adam Smith

By Tom Butler-Bowdon 20 Apr, 2008

By identifying economics as a field of study in its own right, Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations established a new discipline. It was the first book on economics really to catch the public’s attention, and is as much as anything else a great work of literature. Smith’s informal style, and his fearlessness in criticising the folly of rulers and the corrupting effects of vested interests, made him into a popular figure.

The effect of self-interest

Smith argues that it does not actually matter if societies are mainly driven by self-interest, since the overall effect is good. The ‘invisible hand’ of the free market makes sure that individuals acting to their own highest benefit end up elevating the whole. This is not an excuse to act greedily or unjustly. It simply means that a person’s honest labours to progress in life for the sake of himself or his family will lead to a good use of resources. A society allowed to act in this way will inevitably make the most of what it has, and over time grow prosperous. It underlined his philosophy of self-reliance: that we are more likely to help others, and be in a position to help them, when we have our own needs covered.

Wealth through specialisation

Smith believed that how wealthy a country becomes depends more than anything on the organisation of its labour force, specifically, as he put it, the ‘skill, dexterity, and judgment with which its labour is generally applied’. It also rested on the proportion of the population engaged in useful work.

He comments that in rich countries, even though many people do not work, society as a whole abundantly supplies most people’s needs. This is because rich countries characteristically have a much greater ‘division of labour’ than poor ones. There is great efficiency in dividing up tasks according to the ability of people best able to do them, and time is saved in not changing from one task to another.

But it is not just in physical production that the principle of the division of labour applies. In advanced societies, Smith writes, the creation of new ideas becomes the ‘trade’ of a whole group of people, co-existing beside the more mundane jobs. With such specialisation, ‘each individual becomes more expert in his own peculiar branch, more work is done upon the whole, and the quantity of science is considerably increased by it’. In a well-governed society, the division of labour leads to ‘universal opulence’, allowing every workers to cover their needs.

What determines value

According to Smith, value is the amount of labour that has gone into something’s creation, saving the buyer having to go through the same labour, that sets its value. People become rich by providing something of extremely high utility that saves.

How nations grow rich

Smith provides a simple recipe for how countries can become wealthy, which begins with their citizens being good savers. These savings are then invested toward productive ends.

In Smith’s time this wealth formula of savings–investment–employment was not at all the prevailing view of how nations could grow rich. The mercantilist view held that the economic object of a nation was to build up its store of gold, silver, and other precious metals, either through trade or war. Smith’s recipe, in contrast, seemed rather middle class and modest.

The other avenue by which countries could grow rich is trade. Countries who trade will always be richer than those who do not, since the trading country is able to buy raw materials that it does not have itself and turn them into manufactured goods, which are much more valuable than raw commodities and which it can then sell at great profit to other countries. Medieval European cities such as Florence amassed huge riches not by doing business simply with the countryside surrounding them, but with ‘the most remote corners of the globe’.

What not to do: Looting, wars, and luxuries

If a person spends their money on luxuries instead of building up capital, the day of financial reckoning will come. Likewise, Smith writes, a sovereign who spends huge sums on palaces, the pageantry of court, and unnecessary wars is looking for trouble.

Equally bad is the nation that believes it can get rich by looting other countries for all they are worth. Instead of plundering in search of fantastic gains, a country is better off slowly developing its own resources, and using trade to sell its surpluses and bring it what it needs to make high-value products.

Natural liberty

In Smith’s time legions of officials ensured that every possible penny could be extracted by the state through various taxes, customs, excises, and arbitrary rules. The Wealth of Nations was a success because it pointed instead to the principle of natural liberty, which assumed that people should be free to follow their economic interests with minimum government interference.

Smith insisted there were only three areas where government should have a role:

Protecting a society from invasion.

Protecting citizens ‘from the injustice or oppression of every other member of it’ with a corresponding judicial system.

Building and maintaining public works and institutions that are too expensive for a single individual to undertake, but would benefit society greatly as a whole.

All these things should be paid for through taxes. However, when something benefits only a section of society, this should be paid for either privately, or by a tax on the users. Though Smith advocated the creation of a basic schooling system, he suggested that those who benefited the most from education should also be willing to pay for it.