Notes on Adam Smith’s Wealth of Nations

I read WoN a few years back and recently dug up some notes I’d made:

Adam Smith, Wealth of Nations (abridged, edited by Kathryn Sutherland, Oxford 1993)

Book 1, Ch 1 (I.i): “The greatest improvement in the productive powers of labour…seem to have been the effects of the division of labour.” [Pin factory example.]

I.i, p18-: The woolen coat, for example…is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production.

I.i, p20: [W]ithout the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided…what we very falsely imagine [to be] the easy and simple manner in which he is accommodated. Compared, indeed, with the more extravagant luxury of the great, his accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of he latter exceeds that of many an African king, the absolute master of the lives and liberties of ten thousand naked savages.

I.ii, p22: In civilized society [man] stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient o gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is intirely [sic] independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only… It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

I.ii, p23: The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour… By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a greyhound…

I.iii, p26: As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.

I.iii, p27: As by means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country.

I.iv, p34: The word value, it is to be observed, has two different meanings… The one may be called ‘value in use;’ the other, ‘value in exchange.’ … Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.

I.v, p36: The value of any commodity…to the person who…means to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities.

I.v, p37: But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour’s hard work than in two hours easy business; or in an hour’s application to a trade which it costs ten years labour to learn, than in a month’s industry at an ordinary and obvious employment.

I.v, p40: [Labour’s] real price may be said to consist in the quantity of the necessaries and conveniences of life which are given for it; its nominal price, in the quantity of money. The labourer is rich or poor, is well or ill rewarded, in proportion to the real, not to the nominal price of his labour.

I.vi, p47: As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.

I.vii, p53: When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price… The actual price at which any commodity is commonly sold is called its market price. It may either be above, or below, or exactly the same with its natural price… The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity…

I.vii, p54: A very poor man may be said in some sense to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the commodity can never be brought to market in order to satisfy it.

I.vii, p56: The natural price, therefore, is…the central price, to which the prices of all commodities are continually gravitating.

I.vii, p60: The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken… The one is upon every occasion the highest which can be squeezed out of the buyers… The other is the lowest which the sellers can commonly afford to take, and at the same time continue their business.

I.viii, p70: The value of children is the greatest of all encouragements to marry.

I.viii, p70: China has been long one of the richest…countries in the world. It seems, however, to have been long stationary. Marco Polo, who visited it more than five hundred years ago, describes its cultivation, industry, and populousness, almost in the same terms in which they are described by travelers in the present times.

I.viii, p72: The difference between the genius of the British constitution which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies, cannot perhaps be better illustrated than by the different state of those countries.

I.viii, p78: No society can sure be flourishing and happy, for which the far greater part of the members are poor and miserable.

I.viii, p79: It is not uncommon, I have been frequently told, in the Highlands of Scotland for a mother who has borne twenty children to not have two alive… In some places one half the children born die before they are four years of age; in many places before they are seven; and in almost all places before they are nine or ten.

I.viii, p80: Every species of animal naturally multiplies in proportion to the means of their subsistence, and no species can ever multiply beyond it.

I.x, p104: That the chance of gain is naturally over-valued, we may learn from the universal success of lotteries.

I.x, p105: In order to make insurance…a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expense of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade.

I.x, p107: The dangers and hair-breadth escapes of a life of adventures, instead of disheartening young people, seem frequently to recommend a trade to them.

I.x, p122: Long apprenticeships are altogether unnecessary… The dexterity of hand, indeed, even in common trades, cannot be acquired without much practice and experience. But a young man would practise with much more diligence and attention, if from the beginning he wrought as a journeyman, being paid in proportion to the little work which he could execute, and paying in his turn for the materials which he might sometimes spoil through awkwardness and inexperience. His education would generally in this way be more effectual, and always less tedious and expensive. The master, indeed, would be a loser… But the publick would be a gainer, the work of all artificers coming in this way much cheaper to market… It is to prevent this reduction in price, and consequently of wages and profit, by restraining that free competition which would most certainly occasion it, that all corporations, and the greater part of corporation laws, have been established.

I.x, p125: The inhabitants of a town, being collected into one place, can easily combine together…[and] the corporation spirit, the jealousy of strangers, the aversion to take apprentices, or to communicate the secrets of their grade, generally prevail in them, and often teach them, by voluntary associations and agreements, to prevent that free competition which they cannot prohibit by bye-laws. The trades which employ but a small number of hands, run most easily into such combinations.

I.x, p129: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices.

II.ii, p175: The great wheel of circulation is altogether different from the goods which are circulated by means of it. [The commentary says that “Like Hume, Smith was convinced of the unimportance of money as such for the wealth of nations. In Hume’s words… “[Money] is none of the wheels of trade: it is the oil which renders the motion of the wheels more smooth and easy.’ (‘Of Money’, Essays Moral, Political, and Literary, 289).] [Note: Monetary policy involves greasing the wheel when it doesn’t turn well!!!!]

IV.ii, p291: As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can… 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. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

IV.ii, p292: To give the monopoly of the home-market to the produce of domestick industry…is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestick can be brought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful. It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own cloaths, but employs a taylor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce…whatever else they have occasion for… What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.

IV.ii, p294: Whether the advantages which one country has over another, be natural or acquired, is in this respect of no consequence. As long as the one country has those advantages, and the other wants them, it will always be more advantageous for the latter, rather to buy of the former than to make. It is an acquired advantage only, which one artificer has over his neighbour, who exercises another trade; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades…

IV.ii, p296: There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconvenience of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect, does not, perhaps belong so much to… science… as to the skill of that insidious and crafty animal… called a statesman or politician… When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all the other classes of them.

IV.ii, p297: The case in which it may sometimes be a matter of deliberation, how far, or in what manner it is proper to restore the free importation of foreign goods, after it has been for some time interrupted, is, when…were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so far into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence. The disorder which this would occasion might no doubt be very considerable.

IV.ii: Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter enflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us… The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary…[nothing] can protect him from the most infamous abuse and detraction…arising from the insolent outrage of furious and disappointed monopolists.

IV.iii: [N]ations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity… In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.

IV.iii: As a rich man is likely to be a better customer to the industrious people in his neighbourhood, than a poor, so is likewise a rich nation… A nation that would enrich itself by foreign trade is certainly most likely to do so when its neighbours are all rich, industrious, and commercial nations.

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