A Book Review on The Wealth of the Nations
In partial fulfilment of the requirements for the courseBasic Macroeconomics with TAR
Submitted by:De Los Santos, Lea T.
Mr. Ron RomeroProfessor
Bachelor of Science in Business Administration 206A
Purpose of the book
Adam’s Smith’s book The Wealth of the Nation was consist of five books. The first book speaks about the labour and hard work of individual within the nation. Adam emphasized that the wealth of the nation does not depend on the poor and the rich for it is depends on the hard work given by those who work to achieve it for the country. In this he gave advices and techniques on how to manage the task given responsibly. Work assignment and discipline does not depend on the position alone but the respect towards each other, and towards the position these people have. In the second book, it was written by Adam Smith to realize the work driven by money. One factor that a regular worker inspire to go to work because of the salary that they will receive that gives them productivity to finish a certain task. Thus, these worker contribute to growth and expansion of the company at a given moment for the efforts they have contributed that help for the progress of the company. The third book was emphasis on the nation building in case of arising agriculture that affects the nature’s value and beauty. It is good that the nation is in progress but there are certain factor that needs to be considered that might affect the continuous improvement of the environment and the country. The Fourth book speaks about Political Economy. It is about trading and communicating with the neighbouring countries, there are advantages and disadvantages with this that needs to be considered. The drawback of the trading system was discussed as well in this book for such commercialization and other businesses with other countries especially those colonizers who once colonized your own country. However, in spite of drawbacks, there are also gains and revenues that a country could get through this importation and exportation of goods with each country. Lastly, the own sovereign of the country need to take care of the wealth of their very own. Effective leaders need to assess the causes of inflow and outflow of the supplies and wealth of the particular country. More so, they can also access and control the country debt and/or losses.
Author’s qualifications and viewpoint
Adam Smith started as a student of moral philosophy at the age of fifteen. Aside from being a philosopher, he is also an economist and at that profession he started to expand his thoughts in natural liberty which later on was used as the Inquiry and Causes of the Wealth of the Nations. In 1971, he became a professor of logic at the Glasgow University where he first studied. In that University he taught in the field of ethics, rhetoric, jurisprudence, and political economy. Aside from Adam Smith famous’ Wealth of the Nation, he first published a theory in the year 1759 which entitled Theory of Moral Sentiments, which contents of his lectures at the Glasgow University. CITATION Bio l 13321 (Biography of Adam Smith, n.d.)Mercantilism was predominant during the years that Adam Smith was writing his book, Wealth of the Nations. He wanted change with regards to the Political economy of the state to turn into systematic discipline He introduced the concept of free trade and invisible hand where people were not convinced during that time because it seems impossible. He was inspired to writing his book through the great thinkers namely David Hume and Montesquieeu. Thus, the book was one of the most influential book when it comes to political and economic status of the state.
Thesis of the Book
Adam Smith’s Wealth of the Nation focused on upending the mercantilism practice of the British colony. He emphasized the importance of invisible hand in the economy of the nation to prosper future wealth. It is having a free trade with regards to working free in producing and exchanging goods with the chosen target market of the business. The entire book focused on giving lectures on how the nation would attain its future goals and managing the capital or wealth of the nation efficiently and effectively than managing the wealth of individual alone.
Summary of the Contents
In the introduction, Adam talks about the country wealth and achieving it hand on hand with its citizen but the nation seems focused on their own achievement alone that provides them satisfaction. The nation and its citizen should have the same goal and vision for wealth and ways of achieving it. Adam differentiates every country’s wealth and how that does happened. It is because of the common understanding and discipline of its citizen and leaders towards achieving its goals and objectives that they’ve set for their country.
Chapter 1: Of the Division of Labor
The division of labour focuses on a single work alone and doing your expertize on that particular job. This helps providing a better outcome on a person’s specialized work because he/she is knowledgeable about that. Thus, division of labour is not merely use in some companies today because of limited number of workers. They are looking for workers who are adaptable and willing to learn the different jobs in a certain company in case of transition. In the arena of business, it is more productive when a person focuses only on his/her specialization because he/she gives out the best with that certain task. Mr. Adam Smith still believes the effectiveness of specialization on a single task and the importance that each person contributes in achieving its goals.
Chapter 2: Of the Principle Which Gives Occasion to the Division of Labor
Division of Labor is the primary source of trading. It is the key to provide to the serving company or country the person’s knowledge and expertise. Thus, in return the person who offered his/her labor to its serving institution he would get something out of its such as salary in terms of money, food as exchange for the hard work, and anything that gives credit for the person’s effort in a certain job. It is a way of commending people’s talent in today’s society because what you offer to someone would have something in return because there is no such thing a free lunch.
Chapter 3: That the Division of Labor is limited by the Extent of the Market
There are limits in achieving a person’s specialized job. Of course, a worker must consider the factor in choosing his/her job. These factors include place of work, place you live, travel time, etc. Adam Smith suggest that in choosing place, it is better nearby water for it is easy to export goods through water based than in land based because of its convenience. It is indeed convenient to use water based shipping of products for profitable countries and the wealthier one. But there are also pitfalls in using water based for security and safety purposes of transferred products. A person must choose critically his/her target to which he/she will offer his/her specialization. Make sure to have a win-win solution over the choices that people chose to decide.
Chapter 4: Of the Origin and Use of Money
Money is an instrument use to buy the things people need and as well as the things they want. Is money really an important thing for survival? Yes indeed because it is an aid to be able to purchase the basic needs of an individual. However there are people who treat money as their life instead of an instrument to support the needs in life in order to survive.
Chapter 5: Of the Real and Nominal Price of Commodities, or their Price in Labour, and their Price in Money
The difference between Nominal and Real in the perspective of Adam Smith was addressed in this chapter. Nominal has the monetary value while real are the ones which needs in order to survive. Money has an emphasis here that basically it has no value, it is just the primary measures of the specialization of work of an individual and the terms of paying it. Money turns out to be the primary measures of willingness of an individual to engage in a certain job. After all, in today’s society you can’t survive if you don’t have money because every steps a person made needs to spend money to be able to accomplish things.
Chapter 6: Of the Component Parts of the Price of Commodities
Adam Smith discussed the factors wherein the wealth of a country coming from. Of course, the expertise of a worker that he/she given in order to accomplish a certain task needs to be pay off. People are wondering why does in the arena of working industry; salary of a worker is different from the others. It is because of different profession they get in with. The skills a worker acquire, effort, and labor has value. It is different from the others, that is why everyone has different amount of labor depending on the knowledge in a certain assignment. The measurement of knowing the acceptable salary of a worker is his/her satisfaction in exchange of his/her labor.
Chapter 7: Of the Natural and Market Price of Commodities
The standard set by the government for a certain job is called minimum wage which is the standard wage of an individual who worked for regular hours. For Adam Smith it is called natural rates of the market price of labor. This natural rates varies overtime no matter what is the status of the product. Factors that a businessman consider is the the demand of the consumer, product becoming expensive when demand is high, and vice versa. Thus, in the long run it will stick to its price, and the businessman becomes satisfied with it then it will be its natural price.
Chapter 8: Of the Wages of Labour
The basis of the wages of workers are the skills and expertise they have, and they can offer to their company or more so to the community. There are two kinds of workers, the boss and labourer which have differences with regards to the amount of salary they’d get. Bosses have more salaries than those of the workers. These workers need to satisfy the needs of their family for them to stay in a particular job. Thus, bosses need to increase their salary to be able to get workers. Obviously, these workers should satisfy of the work they have, the environment, the demand of the work, and at least the rest needed. Adam Smith stands for the practice of work weekdays while taking rest during weekends which is patronizing by many of the companies.
Chapter 9: Of the Profits of Stock
Profit is important in business because it is the basis of a company in knowing if they’re effective of their operation or not. It is also the basis of a company’s status in the market. Adam encourages readers to engage and trade the products of a business in international market because it is wealthier in return than lowering the price of a product to catch up more buyers. Adam emphasized here critical thinking and investing into wide market of business arena.
Chapter 10: Of Wages and Profit in Different Employments of Labor and Stock
Adam Smith explains why there are workers have higher pays and lower pays are because of the matter of difficulty of a job and its security. We all know that people made an effort to be able to get into certain job, hard work and skill performance counts into their wages. The job they have applied for is their responsibility and these workers need to perform better with their jobs because they get salary out of it. He also explains trading into stock has responsibility for you need to follow certain conditions so that your investment would grow. All decisions should follow certain regulations and taking responsibility of these decisions. Adam Smith expand his though that regulations from the laws must help people to improve their quality of performance in an easier way. It must be progressive and not regressive because Adam Smith does not want people having a hard time to move due to policies and regulations set up by the government.
Chapter 11: Of the Rent of Land
Rent of Land varies depending on the economic status of the state and the ability of workers to pay for the rent. Adam said that landlords are the worst kind of people because they do not exist effort to make money, they just use their property that the workers rent to make money. These landlords wait for the land renter to pay their property rent and upon this, they acquire money without any effort. Of course, the property has high value and continually increasing because people demand for it and it is the only asset that does not depreciate. Thus, knowing property does not depreciate, the prices of rent in many places are continually increasing.
Book 2: Of the Nature, Accumulation, and Employment of Stock
This book is expanding the though and understanding of an individual in the importance of saving a portion of wealth, investing and making money out of this saved wealth to be able to gain money and becoming wealthier in the future. It talks about investing in stocks and other marketable securities that helps individual to grow in the future.
Chapter 1: Of the Division of Stock
Saving money to use for future investment is called capital. It is the money invest by an individual as stock that would gain interest in the future. These stocks that an individual invest in a certain company were used by the business use to generate profits and later on pay the institutions to which they acquire their loans.
Chapter 2: Of Money considered as a Particular Branch of the General Stock of the Society, or of the Expence of Maintaining the National Capital.
Money discussed in many chapter of the book and Adam Smith really emphasized that it has no value and not that important just what particular people think it is. The value of money in an economy shrinks if it is not use and circulating in the market because there are people who hold this money tightly. The wealth of an economy could attain if there is continuous circulation of products and services in the market as well as the money as an instrument of paying it. The day’s outstanding turnover is one of the tools in measuring this in the economy. Adam suggest that the more competitions and the higher the possibility og the market to grow because many people patronize different products and result to lowering the rates of other institutions.
Chapter 3: Of the Accumulation of Capital, or of Productive and Unproductive Labor
Adam Smith differentiates the meaning of Productive and Unproductive Labor. Productive are the workers contributes something to the economy which has value. On the other hand, unproductive labor does not contribute anything that has value in the economy. Adam encourages the readers to put value in everything you make because it matters more than the money that workers attaining to have. This is the secret why there are countries that became rich because they give importance on inventing new things that are helpful and significant in helping their countries to grow.
Chapter 4: Of Stock Lent at Interest
The society patronizes lending money to businesses and putting interest on it so that the institutions will get a percentage of money from what they lend to others. Adam regarded the importance of lending in some institutions for it helps them generate their business. It is not bad to lend as long as you can pay for it. Thus, lending institution took advantage of those borrowers by setting a high interest to the lenders. Adam explained the pros and cons of banning the lending at interest because it must have for the banks and other institutions make money out of these interests. The Laws should set a minimum and maximum rate of setting interest rates in lending.
Chapter 5: Of the Different Employment of Capitals
There are different kinds of labors in different sector in the society. But Adam Smith commended the labor of the farmesr for they are the important people in the society because they contribute in providing the basic nees of people which is food. Adam also explains why government and private institutions should works separately. Government task is to provide its community the services they needed while private institutions have their own vision, mission and goals. Their differences contribute to the wealth of the economy of the country.
Book 3: Of the Different Progress of Opulence in Different Nations
Chapter 1: Of the Natural Progress of Opulence
Adam Smith commends the contributions of different sector of society in contributing wealth for the country. But most importantly, the agricultural sector because it provides the basic needs of the society. Followed by the manufacturing this sector helps in making goods for the people, lastly the foreign trade in order to be competitive with its neighbouring countries.
Chapter 2: Of the Discouragement of Agriculture in the Ancient State of Europe After the Fall of the Roman Empire
Agricultural sector as man important part of the economy should have a basis in following its rules and regulations to be able to work right and in accordance with thye law for check and balance. Adam Smith emphasized the importance of farmers is as important as bosses in the company. The farmers must also gain value out of their effort to provide goods that has value in all individuals. There is a need of improvement for agricultural land not just on the property land that use by many companies. It is more important to give time and attention into improving the agricultural lands for it is one of the important sector of the society that provide our source of living.
Chapter 3: Of the Rise and Progress of Cities and Towns, After the Fall of the Roman Empire
Looking after the fall of Roman Empire, there are changes happened in Europe. People learned to make effort for survival, they became independent and free trade happened. From the fall of Italy, it became one of the rich countries in the world and that is because the use of free trade after the fall of Rome. Adam Smith wanted all countries to use thyis, trade is effective and Europe which is a first world countries. Thus, adapting this practice of trade through agriculture would help the country attain its vision of wealth.
Chapter 4: How the Commerce of the Towns Contributed to the Improvement of the Country
Agriculture is one great factor for a country becoming wealthy. An engagement and having new land as an agricultural site is a good decision because there is so much wealth in agricultural. America is richer than England because they invest more in agriculture which makes their country grow faster. Commercial industries are important but agricultural industries are more important. Thus, people need to focus more in improving the agricultural sector of the country.
Book 4: Of Systems of Political Economy
Chapter 1: Of the Principle of the Commercial or Mercantile Systems
Introducing cheaper goods in the market would great quality would make significance in the commercial market. It wouldn’t change the value of money in a country by trading goods with other countries. It does not necessarily mean when the country has more money, it is rich. It is having more resources which make a country rich.
Chapter 2: Of Restraints Upon the Importation from Foreign Countries of Such Goods as can be Produced at Home
Having restriction in the importation of products affects the economy negatively. There are countries that are best in making a product and we need to give credit to them for that. As a citizen of a country, we know that our country is not the best in doing everything. It is not helping the economy; it is monopolizing the economy of the country. Monopoly would affect the economy of the country which makes the price of a product higher because there is no competition in the market. Trading should recognize because it makes every country wealthier through importation and exportation of products.
Chapter 3: Of the Extraordinary Restraints Upon the Importation of Goods of Almost All Kinds, from those Countries with which the Balance is supposed to be Disadvantageous
Free trade is important and taking responsibility of it is a must. Importing and exporting is a good thing for the country for it contributes to the GNP of the country. Adam Smith says that it is not bad to have more import than exports as long as it contributes profit to the country.
Chapter 4: Of Drawbacks
Entering into trading has drawbacks when the company engage in a complicated economic industry. Importing and exporting must think of the possible drawbacks and making something to resolve it. There are drawback in engaging into international market and competition and being ready to face it would help and beneficial for the company.
Chapter 5: Of Bounties
Bounties given to businesses are helpful for them but the thought that the government give these bounties to the people because they would need to produce products to be able to import it. This is uncertain because it seems like forcing to make something out of the bounties given to them. Free trade and invisible hand does not work here because the government intervenes its citizen.
Chapter 6: Of Treaties of Commerce
Trading with other countries has to have terms and conditions so that both parties would understand and comply with its agreement. It is important that both parties have the common understanding on the agreement taken on the trading commerce.
Chapter 7: Of Colonies
Colonies are the ones who lives in the states and also take care of their society. One of the important part of colonies is to take care of their ancestral lands and of the country. Each of the citizen of the country has the responsibility in the colony.
Chapter 8: Conclusion of the Mercantile System
If the country has huge amount of export than import it will have trade surplus, but for Adam Smith, this practice is called Mercantilism because it only makes your own country wealthier due to more products exports. The system of mercantilism were not created by the consumers because the producers were the ones who wanted it for their own interests.
Chapter 9: Of the Agricultural Systems, or of those Systems of Political Economy, which Represent the Produce of Land as Either the Sole or the Principal Source of the Revenue and Wealth of Every Country
In agricultural sector the wealth of the nation could established, maybe because an intelligent and hardworking individual could make money through agriculture in many ways. The output produce in agriculture would be called gross product deducted the depreciation to arrive at the net produce. The workers who take an effort to produce the certain product must be the ones who would get the profit and not the government. Government must not intervene the production, their task is to protect the farmers and other members of the society and support their advocacies to nurture and nourish the country’s agriculture.
Book 5: Of the Revenue of the Sovereign or Commonwealth
Chapter 1: Of the Expenses of the Sovereign or Commonwealth
Military forces are important for the country, they are the ones who secure the protection of the agricultural lands, property, and citizen of the country. These sector needs a high budget as well because military forces need more firearms and other equipment to protect the lands and its citizen. It is a hard responsibility to offer your life for the country to fight to justice and security of the property and welfare of country and its citizen. Public schools and institutions would help build the future of the country through free education. Adam Smith wants education for public to be excellent because it promotes social stability and open the minds of the student to what is really happening in the society. The taxes the collects to the citizen should have allocate to the needs of the members of the society for their own good. Thus, taxes should be progressive, higher taxes to richer people and lower taxes for the ones less fortunate.
Chapter 2: Of the Sources of the General or Public Revenue of the Society
During the days of Adam Smith, all expenses of the government were not came from the taxes, some these came from sovereignty of those in the position. But today, it seems the other way around, the taxes paid by the citizens of the country goes to the government’s officials pockets and kickbacks. It should be used in the public good of the infrastructures, services and improvements of public places that could be used in times of need by the citizen of the country. Taxes should be paid rightly by the citizen for it is a responsibility.
Chapter 3: Of Public Debts
Every country has its own debts to finance the security of the country. They have a loan to the World Bank in case there are equipment need to purchase such as firearms and other security equipment that could be uses in times of war. In times the country is malfunctioning and needs money to fight for justice, it is okay to get into debts as long as the country is expending the money in a rightful manner. It is not a bad image when a country is in debt, it will only have a bad image when the country wasn’t able to pay their debt in any moment.
Author’s use of evidence to support the thesis and secondary points.
Europe became the setting of the points discussed by Adam Smith, the mercantilism system of the Europe government and how points out the changes that needs to be done in order for the country achieve its wealth. His also said that the England is in mediocre position and not the best country on earth like everyone seems to think. It is indeed England as one of profitable country, but it is also trying to be one of the powerful with regards to its wealth. It seems that England cannot accept the fact that there are more powerful countries other than hers, so competition happens and England in setting its best foot forward.
Adam Smith discussed the drawbacks and leaks of the practices during mercantilism period and England. He explained the disadvantages of advantages of this practice and proposes and new and better practice that would be beneficial and helpful for a country to grow effectively. The investment of stocks, managing its debts, bounties and commerce should be considered in planning to have a wealthier economy. The drawback in investing in such businesses should also be considered and make something to troubleshoot the things that might happen in the middle of the battle. Giving importance to agriculture and other beneficial sector of economy, nourishing it in order to grow would help in providing wealth for the business and the economy.
The book is essential in managing the business economy of the country. It could also apply in the industry to help the industry ensure its wealth. Each chapter has a lesson to leave for the readers. It is breaking into pieces the topics and subtopics of each book to be able to understand well. Though, the setting of the discussion was the economic status of England, it could also apply to the Philippine economy and the small industries in the country. Points to be considered are status of the Philippine economy comparing it to that of the England. The division of labor, stocks, financial stability of the country, as well as the goods and services, political economies, economic commerce, bounties, agricultural lands and managing its debts responsibly.
The wealth of the nation is indeed helpful in understanding deeply the course economics. It is understanding the subject in the broadened perspective to which the situation is given to be able to understand and acquire lessons from these situations. I would recommend the book to the business students, professional who would want to engage in the arena of business later on, and to those professional who are already in the arena of business yet feel they’re unsatisfied with their performances. The wealth of the nation is essential to those connected and affiliated with the economic status of the state. Those individual who think they have to know more about the economics status of the state, its pros and cons, drawbacks and pitfalls, and how to manage to climb into the arena of business again successfully. Lastly, I would recommend this book to the president because is himself is the prime mover of the Philippine economy, his decision matters and can affect the status of the state. If he reads the book, at least he would get points on how to manage a better economy to attain wealth and improvement from a developing economy climbing up to a developed country.
BIBLIOGRAPHY Biography of Adam Smith. (n.d.). Retrieved from American History from Revolution to Reconstruction and beyond: www.let.rug.nl
Shmoop Editorial Team. (2008, November 11). The Wealth of the Nation. Retrieved from Shmoop: https://www.shmoop.com/wealth-of-nations/