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Political Economy

BIBLIOGRAPHY- Smith and Marx

Guidebook to the Wealth of Nations: CH 7 Book III

Abstract 

Here Smith applies his theory to economic growth and development. Nations grow rich over time, even if not in the same way. In theory, they should first develop agriculture, then manufacture, then trade internationally. In practice, that was not the case in Europe, where this natural order was completely inverted. The barbaric invasions forced people to abandon the countryside, seeing a decline in agriculture. The merchants in towns, with the protection of the king, brought “trinkets and baubles” to the great barons from long-distance trade. The vain landlords thus sold their land and birthrights giving independence to their retainers and farmers. The merchants bought the land and brought the spirit of improvement to agriculture. The silent revolution of commerce thus brought about opulence for all as well as order and good government, but in an inverted order. 

Cournot Marked the Turn from Classical to Neoclassical Thinking

For classical economists, markets served the highest value buyers without anyone in the market needing to know that it was possible to write aggregate buyer reservation prices in the form, D = F (p). Cournot, thereby launched neoclassical economics as modelling and thinking of economic action in terms of their outcome effects, rather than their roots in human experience.

Guidebook to the Wealth of Nations: CH 8 Book IV.1-6

Abstract (Book IV 1-6)

Smith defines the Wealth of Nations as a violent attack against the mercantile order. Book IV contains his explicit attacks. The injustices and inefficiencies of the British mercantile empire are all traceable to what today we would call powerful lobbies. Their claim is that improving the balance of trade, thus increasing the amount of precious metals in Britain, is for the good of the country. But in reality it is just for the good of merchants and manufacturers. Restricting trade with drawbacks, bounties, and treaties of commerce are all examples of how special interest groups are able to capture the legislation to benefit themselves at the expense of all their fellow citizens. It is in this section that the famous “invisible hand” makes its presence. Mercantile interests claim that directing capital toward them would benefit the whole country. For Smith this is nonsense. Capital is led by an invisible hand to the most efficient and just allocation. There is no need for the “folly and presumption” of who promotes “useless or hurtful regulation” under the banner of “public good’ while it is for their own benefit at the expense of society. 

Guidebook to the Wealth of Nations: CH 9 Book IV, chapter 7-9

Abstract (Book IV 7-9)

The chapter on Colonies, the content of which will be picked up again in the last chapter of Smith’s work on public debts contains Smith’s most ferocious attacks against the mercantile system as well as some radical policy proposals. The British Empire for Smith is an apparatus constructed with the treasure and blood of innocent people, because of the influence mercantile interests have on the government. Britain should get rid of its colonies either by letting them go (though it is politically impossible) or by incorporating them into a Union, implying both taxation and representation in Parliament (which is politically possible, but unlikely). If not, war will be inevitable.  Book IV ends with the description of the other system of political economy: the one of the Physiocrats. Their emphasis on natural liberty is right, but exaggerated. They require perfect liberty for the system to work. But perfection is not for this world. Their emphasis on agriculture is also right, but exaggerated. Manufacturing and trading are also productive activities.

Guidebook to the Wealth of Nations: CH 10 Book V.1

Chapter 10: Book 5: Of the revenue of the sovereign or commonwealth
 
Abstract (Book V.1)
What are the functions of the sovereign, and what are the expenditures? Smith claims the sovereign is in charge of national defense, the administration of justice, and some public works and institutions. These functions will have different expenditures depending on historical circumstances. In particular these expenses will increase with the increase in wealth of society.  National defense in a commercial society should be professionalized and subject to the division of labor. A standing army is thus the best solution, even if the most expensive one. The administration of justice should not be a major expense if financed by user fees. Similarly, public works such as roads, bridges, canals, as well as primary education should also be self-financing through user fees. At best, in the most strenuous situations, local funds may help provide for the physical location of schools, but salaries of teachers and professors should remain based on students’ fees, to avoid the shirking derived by a remuneration fixed and independent from merit.   

Guidebook to the Wealth of Nations: CH 10 Book V.1

Chapter 10: Book 5: Of the revenue of the sovereign or commonwealth
 
Abstract (Book V.1)
What are the functions of the sovereign, and what are the expenditures? Smith claims the sovereign is in charge of national defense, the administration of justice, and some public works and institutions. These functions will have different expenditures depending on historical circumstances. In particular these expenses will increase with the increase in wealth of society.  National defense in a commercial society should be professionalized and subject to the division of labor. A standing army is thus the best solution, even if the most expensive one. The administration of justice should not be a major expense if financed by user fees. Similarly, public works such as roads, bridges, canals, as well as primary education should also be self-financing through user fees. At best, in the most strenuous situations, local funds may help provide for the physical location of schools, but salaries of teachers and professors should remain based on students’ fees, to avoid the shirking derived by a remuneration fixed and independent from merit.   

Guidebook to the Wealth of Nations: CH 11 Book V.2-3

Chapter 11: Book V.2-3

Abstract:
The government should tend to three things: national defense, administration of justice, and some public goods. The administration of justice and the public goods, which include roads, canals, and primary education, should be financed with user fees. National defense should be financed from the general revenue. The general revenue comes from taxes, and when they are not enough, from public debt. But when public debt becomes so much that any hopes of paying it down are futile, either taxes are increased or the expenses causing that debt reduced. The immense expense Britain has is the defense of the colonies. The colonies do not pay taxes enough to cover it. Even if well aware of it being a Utopia, Smith suggests to either incorporate the colonies into a full Union with Britain, which implies taxation (and representation), or letting the colonies go.  

Guidebook to the Wealth of Nations: CH 12: Legacy

Abstract:
The Wealth of Nations can be seen as a “living” book. It is a book that asks questions we are still asking today. How do we decrease poverty? How do we decrease the disruptive powers of special interest groups? How do we get a just and productive economy and thus society?

Confusions and difficulties regarding Adam Smith's Labour(ish) Theory of Value

 

Guidebook to the Wealth of Nations. CH 1: Adam Smith and the Scotland of his days

I was asked to write a Guidebook to the Wealth of Nations for a non-specialized audience.

It is not an easy task. 

There are still things in bold. They are things I need to check or make sure fit.

I deeply appreciate any comments and feedback.

Guidebook to the Wealth of Nations. CH 2: Introduction and Book I.1-3

 

Guidebook to the Wealth of Nations. CH 3: Book I.4-7

Abstract: In these four chapters, Smith deals with prices and values. Money is an instrument of trade that facilitates the exchange of the goods the consumption of which is what makes us wealthy. Money is thus not wealth, and it is not even the best instrument to measure value. Labor is the ultimate measure of value. The value of a good for a buyer is the amount of labor that buying that goods saves. The value for a seller is the amount of labor that can be bought and thus saved from the sale of the good. The price at which we buy and sell needs to include the wages of the workers, the profits of the owners of productive resources, and the rents of the landlords, if all these three factors of production are used. The natural price of a good is its average price. The market price is not necessarily the same as the natural price but it gravitates around it. 

Guidebook to the Wealth of Nations. CH 4: Book I.8-10

 

Abstract:

What determines the compensation of labor? And of profits? Under what conditions should one expect equalization of wages and of profits? Under what conditions should we expect them to differ? In these three chapters, Smith looks at the equalizing power of competition as well as of monopolies or legal privileges in determining the equality or difference between wages and profits.

Guidebook to the Wealth of Nations. CH 5: Book I.11

Abstract:

To analyze rent of land, Smith needs to abandon his previous theory of value. Rent is not determined by cost but by how much the landlord can get after all costs are paid. This will depend on how feasible it is to produce more of what it is in demand. Payment of rent will vary, in real terms, depending on the terms of the lease, which opens a digression on the price of silver. Looking at nominal prices only is misleading, since nominal prices depend both on the quantity of money, on the quantity of goods, and on their demand. We should look at relative prices instead.

Guidebook to the Wealth of Nations: CH 6 Book II

 

Abstract

Criticizing the idea that money is wealth or creates wealth, Smith introduces the idea of capital. Capital is the part of stock that yields revenue and profits, as opposed to the part of stock used for immediate consumption. Money is a peculiar part of capital because it does not yield any revenue: it is simply the wheel of circulation of trade. Similarly banks do not increase wealth, but free resources that can be used to increase trade. Trade increases when capital can accumulate, and thus support more division of labor. That the accumulation of capital rather money is the source of wealth is also testified by interest rates, which are based on the demand and supply of capital, not of money.

Labour for labour exchange in practice – co-operative experiments in United States and Great Britain between 1827 and 1860

 

Notes for a Discussion of Adam Smith and Thomas Reid: Constructivism versus Cognitive Realism?