The Nature and Causes of the Wealth of Nations, Adam Smith - Essay Example

Download file to see previous pages... One of the essential ideas in “The Wealth of Nations” is the division of labour. According to Smith, the division of labour occurs due to the increase in production rather than any other factor. The division of labour, however, can only be beneficial if a nation has more industry in place. The book argues that agriculture does not produce a larger division of labour as compared to industry. According to Smith, the division of labor arises not from the innate wisdom of the masses, but due to a human tendency to barter. Smith, therefore, argues that the reasons for the specialization are due to the differences in natural talent rather than any other factor. The book also discusses the limitations of the division of labour and indicates that the division of labour is actually limited by the extent of the market. The overall limited opportunities in the market actually result into the lack of labour specialization. If a market can be expanded, the specialization of labour can further occur, and the society can benefit from more skilled workers. In 1778, Smith was appointed the Commissioner to the Customs. This experience sharpened his understanding of trading and of the manner how exchange actually took place between two parties. He designed and developed policies and methods to curb smuggling so that overall revenues could be increased. He remained single during his entire life and died in Edinburgh on July 19, 1790 (Smith, 1761 a). He was a ruthless advocate of individualism, and his interests ranged from natural theology, ethics, and jurisprudence, to economics, which may explain the cause as to why he wrote “The Theory of Moral Sentiments” (Smith, 1761 a). He denied self-love as a principle which could never be virtuous. He thought that sympathy and self-interest were complementary. He once expressed that it was not from the benevolence of the butcher, the brewer, or the baker, that a worker could expect dinner, however, in fact, each agent worked in their own self-interest (Smith, 1761 a). He also discussed the concept of money and how various commodities were used as money. He reviewed the origins of money and how different nations actually used it in order to create a medium for exchange. He also speculated how metals were used as money and how nations actually invented new methods of developing money with the purpose of creating an exchange value. Further, he also discussed nominal prices for commodities as well as prices for labour. He also outlined how prices were actually determined and what were some of their components. Smith was in favour of labour and indicated that labour was the means by which an individual earned wages in a competitive market; a labourer must produce something others valued to earn (Smith, 1761 a). “The Wealth of Nations” reveals that nature and causes of the nation’s prosperity come from the increasing of the labour division to systematize its production (Smith, 1761 a). Smith professed that individual would invest resources, e.g. land and labour, to earn the highest possible return of investment, but it must yield to the equal rate of return (Smith, 1977 b). For classical economists this was the core of Smith’s proposition of economic theory. Smith advocated equality of returns to explain the differences of salaries based on the knowledge, skills, ...Download file to see next pagesRead More