An Inquiry into the Nature and Causes of the Wealth of Nations

What is this book about?

Smith examines the sources of national wealth and argues that it comes from the division of labour and capital accumulation rather than from holdings of gold and silver. He shows how prices coordinate dispersed knowledge that no one holds in full, notes that the division of labour is limited by the extent of the market, and criticizes monopoly and the political influence of merchants.

Why read it?

It established the framework of modern economics: division of labour, extent of the market, capital accumulation, and the functions of government. Note that the Smith in these pages is far more complicated than the one usually cited — he defends market coordination while warning against merchant collusion and monopoly, and leaves room for a number of public functions.

Core Ideas

• National wealth rests on the productivity of labour, and that productivity comes mainly from the division of labour.
• The division of labour is limited by the extent of the market, so trade and transport are preconditions of growth.
• Prices and profits direct resources, and self-interested action can produce unintended social outcomes.
• Government should provide defence, justice, and public works that markets struggle to supply, while guarding against merchants using legislation to restrain competition.

What questions does this book try to answer?

• What is the real source of national wealth?
• How do dispersed individual actions produce order without central direction?

Who should read it?

For readers who want the basic framework of economics. The original is enormous and digressive; most readers are better served by a reputable abridgement with commentary.