Literature Study GuidesThe Wealth Of NationsVolume 1 Book 2 Introduction Summary

The Wealth of Nations | Study Guide

Adam Smith

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The Wealth of Nations | Volume 1, Book 2, Introduction | Summary

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Summary

The topic of the next book, Smith announces, will be "stock," a term he uses to mean all sorts of assets used either for personal consumption or for making a profit. Both the types and the quantities of stock, he argues, proliferate as society progresses, since greater and more sophisticated tools are required for industry to advance. More extensive stock, he points out, allows "the same quantity of industry [to produce] a much greater quantity of work."

Smith then sets out the plan for the ensuing chapters. First, he will explain the types of stock—including money, which gets its own chapter. Then he will turn to the two main uses of stock: employing it to gain a profit directly or lending it out at interest. In the final chapter, he proposes to compare those two uses in terms of their "different effects ... upon the quantity both of national industry, and of the annual produce of land and labor."

Analysis

Smith's initial account of "stock" follows the same basic contours as his description of the division of labor. As a country develops economically, he asserts, it will have access to both more specialized forms of labor and more specialized goods on which that labor may operate. Land, as a resource, seems to be exempt from Smith's general scheme of ever-increasing specialization. The tools used to cultivate and improve the land, however, are a form of stock, and thus will grow more sophisticated as society advances.

The term "stock," as Smith uses it here, is much broader than the familiar modern sense of "a share of ownership in a company." That narrower sense, however, was also current in Smith's time as well—primarily in connection to joint stock companies, a form of early modern business structure in which shares could be bought and sold. These corporation-like entities are discussed in Book 5, where Smith takes issue with their monopolistic tendencies.

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