Reading Questions: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
1. For Smith, what is "wealth"? Why does he devote his book to the subject?
2. How does Smith account for the origin and existence of the division of labour and for its tendency to increase over time? What makes an advanced division of labour so productive?
3. What role does Smith's distinction between natural and market price play in his analysis of the operation of a market economy?
4. When Smith speaks of the "natural state of things," what does he mean to convey? Is there a "state of nature" for him?
6. According to Smith, what factors may give rise to economic inequality? What factors justify and/or maintain inequality? What tend to erode it?
7. Explain Smith's distinction between "productive" and "unproductive" labour. What purpose does this distinction serve in Smith's argument?
8. What is the purpose of his discussion (Book I, Ch. 5) of the "real price" and the "nominal price"of labour? What is the productivity of labour, in these terms? What does this have to do with his overall conception of the wealth of nations?
9. What is the "natural Progress of Opulence"? Why and how did Smith think Europe's path diverged from this? Is it a contradiction to think the wealthiest nations of the world were also the ones that followed an "unnatural and retrograde order"?
10. Under Mercantilism, according to Smith, the "home trade" is "the most important of all" (Book II, p. 435). Yet, it is considered subsidiary to foreign trade. Why is the home trade so important?
11. How does Smith show that the development of commerce and the self-interest of the lords combine to produce peace? How does this commerce-inspired peace reproduce itself?
12. Smith defines the origins of "civil government" (p. 715) as the protection of the rich from the poor. Why do the poor support such a system of justice?
13. Smith asserts (e.g. pp. 781-782) that the division of labour leads to stupidity, social irresponsibility, and general softness ("public evil") amongst the "inferior ranks of people." Their "decent and orderly" conduct is thus a fundamental prerequisite for society's proper functioning, yet society's driving force, the division of labour, degrades that conduct. Is Smith giving us a theory of social decay? What is the solution that he offers?
14. Consider the manner in which Smith erects his argument in favor of laissez-faire. Is it consistently argued?
15. The Wealth of Nations is sometimes interpreted as an attempt to legitimize the activities of capitalists. How far do you think this reading of Smith is justified by the text?
16. Smith is often regarded as the founder of modern neoclassical economics, yet Marx praised him for analyzing the reproduction of surplus value. Explain (or, better, contemplate) these apparently paradoxical assessments.
17. When Smith suggests that in the "original state of things…the whole produce of labour belongs to the labourer," is he laying the foundations for a theory of exploitation?
18. How would you describe Adam Smith's "politics?" What positive role does Smith see for the state?
19. On p. 22, Smith tells us that "in a well-governed society," the division of labour will lead to universal opulence extending even to the lowest ranks. What does he mean by "well-governed society"? Does he show us how to attain one?
20. On p.86, Smith states that an artisan with a surplus will "naturally" employ more workers "in order to make a profit by their work." This model of "rational" behavior is made clear on p. 113 when Smith discussed Holland ("It is there unfashionable not to be a man of business"). But why will the artisan "naturally" invest his surplus in increased production? What happens to Smith's theory if the artisan, and many more like him, use the surplus instead to buy a beach house, or lottery tickets, or some other "unproductive investment"? What happens, in other words, in "such places" where "the trade of speculation" is predominant (p. 130)? What might be the basis for such different forms of "economic culture"? HINT: these issues are taken up in Book II. See especially, pp. 284-5, 335-7 and 341-2, regarding the need for "tolerable security" and "parsimony," for productive investment; and the negative effects of "prodigality," "misconduct," and their source in "the extravagance of government."
21. In Book I, Ch. 10, Smith discusses the concept of "perfect liberty." What is its importance to Smith's theory of equilibrium? In his discussion, it seems that perfect liberty has never, in fact, existed. Is that true? If so, what does it do to his "invisible hand” argument?