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An Inquiry into the Nature and Causes of the Wealth of Nations Paperback – Facsimile, February 15, 1977
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Before you read Wealth of Nations, ask yourself, "Why am I reading this?" If you want to get an introduction to economics, then I suggest another books. One of the "Dork's Guide to Economics"-type books would be a better choice. I'd recommend Bastiat's "The Law" (ISBN : 0255365098 ), then read Sowell's "Basic Economics" (ISBN: 0465081452) and "Applied Economics" (ISBN: 0465081436).
However, if you want an advanced study of economics, or are an historian, then read this book. It is an essential classic in American History, on par with "The Federalist," "Democracy In America," and "Common Sense." Washington embodies the moral aspect of the American Revolution, Madison the governmental aspect, Jefferson the intellectual aspect, and Smith the economic aspect. After all, it is one thing to have a revolution; it is another thing to be able to pay for it.
Smith's main weakness is that he does not deal with economic theory. The main reason for this is that he had to invent modern economics theory. He is truly the godfather of the Industrial Revolution: we could not have the financing of Carnegie and Morgan without Adam's Smiths keen insights into the nature of economics and the fallacies of mercantilism. In a word, Smith pulled the world out of Middle Ages and laid the foundation for the future world prosperity.
Another perceived weakness is that it is over 200 years old. He uses archaic language, antiquated examples, such as butcher shops, corn trade, tedious histories of government regulation, and so forth. However if you can see past the examples, which are merely "for-instances," you can see the underlying economic principles which apply to today's world of microchips, oil, and tofu. That is why I recommend a more contemporary book on economics prior to tackling Smith. You need to know what you are looking for before you can see it.
The Cannan Edition is a nice compromise between the redacted and "selections" editions (which would be good introductions prior to tackling the whole book), and the hyper-footnoted ,scholarly Glasgow Edition. The latter is too technical for a non-economist or non-historian, and you get bogged down in the quagmire of over-precise footnotes.
In his 1789 Thanksgiving Proclamation, George Washington spoke of "peaceable and rational manner" by which the nation was founded. Hand in hand with the American Political Revolution was the American Economic Revolution masterminded by Adam Smith. This book is his contribution to America prosperity, and the prosperity of the entire world..
Well, the following is a list of things not generally talked about - in my casual exposure to economics - in regards to this work.
Smith, not surprisingly for a man of the Enlightenment, was a blank slate guy. The philosopher, we're told, differs from the porter "not so much from nature, as from habit, custom, and education". Smith's professional progeny, with less justification and an autistic-like inability to model human nature, has largely kept the notion of people as malleable economic units whose value can simply be altered by some inputs of education.
This is a book on the wealth of nations, not an argument for how trade is going to pacify the world and render borders obsolete as is the gospel sometimes preached - for at least a hundred years - by advocates of globalization. While Smith acknowledges that wealthy countries make great trading partners, he also notes their wealth makes them "dangerous in war and politics". (He also makes a not entirely unconvincing argument for standing armies being necessary. Part of it rests on the general efficacy of the specialization of labor.)
He also makes some, on the face of it, surprising digressions into what sort of established church should be supported and if public education is worthwhile - all under the section on how the government should be spending its money. He's not big on established churches but thinks they are inevitable unless a country has no tradition of them - like the American colonies who were just rebelling in the "recent disturbances" at the time of the book's publication. (Though, of course, individual colonies did have established churches.) He's a supporter of everyone being educated to a certain minimum degree. Indeed, he seems to argue for a sort of licensure system in which people, before entering economic life, have to prove a minimum standard of education. But he is skeptical of public financing and administration being able to do this. And, given the state of American public education in all its aspects, his skepticism sometimes seems still relevant and appropriate.
While Smith is rightly considered a strong advocate of free trade - a large section of the book is a demolition of the then fashionable mercantile system with its attendant emphasis on gold and silver as something more than just merely convenient mediums of exchange, he does note some objections. In an age where the US Pentagon admits some of its supply chains disappear somewhere overseas, Smith's admonition that free trade should not hamper national defense seems forgotten. "Defence" notes Smith, "... is of much more importance than opulence." Smith also is not in favor of free trade for items that are taxed by the importing country. Tariffs, he argues, should equal the tax load on the native manufacturer. He also supports retaliatory tariffs, a gradual elimination of tariffs, and notes that free trade should not proceed if those it unemploys can not easily find other employment. Historically, using the argument of the re-employment of thousands of soldiers and seamen after demobilization, he doesn't see this as usually being a problem though.
Smith states four maxims of good tax policy: each citizen paying in proportion to the property the state protects and enables the accumulation of , convenience of payments, certainty of amount and time of payment, convenience of payment, and economy of collection. He seems, at one point, to argue for hidden taxes on luxury consumer goods - the goods that social custom does not dictate are essential to the lives of even the lowest class.
What isn't in the book is any sort of mention of monetary policy - governments attempting to manipulate economies by manipulating money supplies. And one also wonders what Smith would have thought of the notion of a service economy. To Smith, productive labor was only that which increased the tangible, material property of a society. No significant mention is made of the idea of intellectual property yet he notes that "philosophers or men of speculation" have invented machines that have increased production of goods.
Is Smith readable? Largely, yes. The marginal annotations of the Cannan edition are very good and help easily follow Smith's arguments and find relevant sections. There is a reason there are many famous quotes from this book. Smith is usually a lucid - and occasionally wry - author. Even though he digresses into some less - at least to me - interesting topics like the history of the Bank of Amsterdam or the specifics of Britain's deficit financing in the early 18th century, his economic history is often interesting. I don't know how kind modern scholarship has been to his economic theories on European social development post-Roman Empire and the reasons for the Reformation, but they were interesting and not implausible. He also has an section on the pragmatic reasons why slavery was not conducive to the economic development of societies.
Smith's work is largely known for being an extended apologia for the benefits of enlightened self-interest. George Stigler, in a preface that ably sums up Smith's main points, convincingly argues - though the debt is not explicit in the text - that it isn't exactly self-interest, and not socialism's and communism's essential and necessary altruism, that motivates economic efficiency. It's the private vices that become public benefits. It's a notion developed in Smith's The Theory Of Moral Sentiments and may stem from Mandeville's The Fable of the Bees: Or Private Vices, Publick Benefits (Penguin Classics).
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