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Book 1, Chapter 11
Themes
Key
LitCharts assigns a color and icon to each theme in The Wealth of Nations, which you can use to track the themes throughout the work.
Labor, Markets, and Growth
Capital Accumulation and Investment
Institutions and Good Governance
Mercantilism and Free Trade
Money and Banking
Summary
Analysis
Before the division of labor, there is no need for stock: people simply do what they can to get what they want. They feed, clothe, and house themselves using whatever is available. But under the division of labor, people only produce one or a few things each, then trade those things for their other wants and necessities. This requires a stock of goods: necessities for sustenance and supplies to carry out one’s trade. As the division of labor advances, more people become employed in narrower positions, and more and more stock is needed to sustain them. Conversely, employers always want to grow their output, so as they accumulate more stock, they spend it on machines and specialized employees, raising the efficiency of production. Book II will focus on what stock is, how it accumulates, and what happens when people use it for different purposes.
In Book I, Smith laid out the fundamental concepts in his economic theory: the division of labor; how supply and demand determine prices in a competitive market; and how revenue breaks down into wages, profits, and rents. In the much shorter Book II, he explores capital stock, which is the foundation of nations’ wealth. Without investing capital upfront, it’s impossible to hire workers, buy materials, produce goods, and engage in commerce. And a nation’s total wealth is simply the amount of capital that its people accumulate in the aggregate. In turn, nations can enrich themselves if and only if they learn to invest their capital stock properly, so that it grows as fast and consistently as possible.
Themes
