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Summary
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
Smith begins by declaring that nations fulfill their needs through labor—this directly produces some of the things people need and enables them to buy everything else. A nation’s level of production determines its people’s living standard. This depends in part on the proportion of workers to nonworkers, and even more on the people’s level of skill and specialization. Thus, in societies based on hunting and fishing, all able-bodied people work but sometimes there is not enough food to support everyone, while more complex societies can achieve material abundance even though not everyone works.
Smith’s purpose in The Wealth of Nations is to present an innovative new theory of political economy, so he wastes no time in outlining that theory for his readers in this introduction. He makes it clear that the central question in his book is: why are some nations wealthier than others? The answer is, of course, that different nations structure their economies differently. Specifically, the division of labor determines the amount of goods and services that a country can produce with its limited population and resources. Complex divisions of labor are simply more efficient. This is the central idea that Smith explores in Book I. It’s the basis not only of everything else in The Wealth of Nations, but also of all modern economics over the last 250 years.
Themes
Book I will explain how societies achieve this complexity through a division of labor. The proportion of people who work depends on a nation’s capital stock, so Book II will explain how this capital stock is formed and how it determines who does what kind of work. Different nations prioritize different kinds of economic activities, and Book III will explain why European nations have generally favored manufacturing and trade over agriculture. Book IV will address the different theories of political economy that have arisen from, and shaped, these national policies. Finally, Book V will explain how governments (which Smith calls “the sovereign, or commonwealth”) determine their expenses, revenues, and debts.
In addition to simply providing a roadmap to this lengthy five-volume text, Smith’s “Plan of Work” can also help readers understand the deeper relationship between the ideas he explores in each Book. He explains the basic structure of economic activity (Book I), then explores how that structure naturally transforms over time (Book II), shows that his theory can correctly explain the past (Book III), explains why it is superior to other theories (Book IV), and examines its implications for government and policymaking (Book V). Put differently, Smith starts with a few key philosophical principles and proceeds by deduction, exploring those principles’ consequences. In the process, his focus also roughly turns from individual economic behavior to the structure of entire national economies—or, in modern parlance, from micro- to macroeconomics.
Themes
