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(Course Hero, 2017)
Course Hero. "The Wealth of Nations Study Guide." September 28, 2017. Accessed August 19, 2018. https://www.coursehero.com/lit/The-Wealth-of-Nations/.
Course Hero, "The Wealth of Nations Study Guide," September 28, 2017, accessed August 19, 2018, https://www.coursehero.com/lit/The-Wealth-of-Nations/.
The Wealth of Nations is divided into one, two, or three volumes, depending on the edition. This study guide examines a two-volume edition of the work. The division of the volumes comes between Book 4, Chapter 3, the last chapter in Volume 1, and Book 4, Chapter 4, the first chapter in Volume 2.
Smith first sets out to explain the relationship between labor and wealth. A nation's wealth, he says, depends both on the "skill, dexterity, and judgment" with which its labor is employed, and on the proportion of its inhabitants engaged in useful labor. The former is especially important, as shown by the fact that in wealthy countries, many people do not work at all, whereas in the "savage nations" (Smith's rather regrettable term for hunter-gatherer cultures), those who burden society excessively are killed or abandoned.
Smith then offers a book-by-book outline of the topics he plans to cover. Book 1 will deal with the basics, including the division of labor, the nature of money, and the interrelationship of wages, profits, and rent. Book 2 will cover "capital stock," or operating assets in modern economic parlance. Interactions between a nation's policies and its different industries—agriculture, manufacturing, and so forth—are handled in Book 3, with Book 4 explaining the economic theories underlying these different national policies. Finally, Book 5 will offer recommendations on taxation, government spending, and the management of national debt.
In sketching out his work, Smith describes something like the progression from microeconomics to macroeconomics in a modern college curriculum. Microeconomics concerns the decision-making of individuals and companies. It deals with answers to such questions as, "How should I invest my money?" or "What price should I charge for my work?" Macroeconomics, in contrast, involves national and international issues like taxation, interest rates, and—one of Smith's pet peeves in later chapters—the balance of trade.
Smith will interweave both perspectives in each of his five books, but Book 1 will largely focus on the "micro" point of view. Readers who have taken an introductory economics course will likely notice modern-sounding phrases (e.g., supply and demand) sprinkled throughout the opening chapters. In fact, the underlying concepts may seem familiar even when the terminology is different, as when "stock" is used to denote operating assets. Smith, it should be noted, did not invent or discover most of these fundamental ideas—he was not even the first to explain them in a systematic way. His work, however, was by far the most influential of its era when it came to popularizing these concepts among the public.