Wealth

From Wikipedia, the free encyclopedia

For other uses, see Wealth (disambiguation).
This article needs additional citations for verification.
Please help improve this article by adding reliable references.
Unsourced material may be challenged and removed. (August 2008)

Wealth is the abundance of valuable resources or material possessions or the control of such
assets. The word wealth is derived from the old English wela, which is from an Indo-
European word stem.[1] An individual, community, region or country that possesses an
abundance of such possessions or resources is known as wealthy.

The concept of wealth is of significance in all areas of economics, especially development

economics, yet the meaning of wealth is context-dependent and there is no universally agreed
upon definition. Various definitions and concepts of wealth have been asserted by various
individuals and in different contexts.[2] Defining wealth can be a normative process with
various ethical implications, since often wealth maximization is seen as a goal or is thought to be
a normative principle of its own.[3]

Although precise data is not available, the total household wealth in the world has been estimated
at $125 trillion (USD 125 x1012) in year 2000[citation needed]. 90% of this wealth is held by people in
North America, Europe, and high-income Asian countries, and 1% of adults are estimated to
hold 40% of world wealth, a number which falls to 32% when adjusted for purchasing power
parity.[4]

Contents
[hide]

• 1 Definition
• 2 Economic analysis
• 3 Sociological treatments
o 3.1 The Upper Class
o 3.2 The Middle Class
o 3.3 The Lower Class
• 4 Distribution
• 5 Wealth in the form of land
• 6 See also
 • 7 Notes
[edit]Definition

For definitions of "wealth," see also Adam Smith, The Wealth of Nations and Max Weber, The
Protestant Ethic and the Spirit of Capitalism.

Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual
produce of the land and labour of the society". This "produce" is, at its simplest, that which
satisfies human needs and wants of utility. In popular usage, wealth can be described as an
abundance of items of economic value, or the state of controlling or possessing such items,
usually in the form of money,real estate and personal property. An individual who is considered
wealthy, affluent, or rich is someone who has accumulated substantial wealth relative to others in
their society or reference group. In economics, net wealth refers to the value of assets owned
minus the value of liabilities owed at a point in time.[citation needed] Wealth can be categorized into
three principal categories: personal property, including homes or automobiles; monetary savings,
such as the accumulation of past income; and the capital wealth of income producing assets,
including real estate, stocks, bonds, andbusinesses.[citation needed] All these delineations make wealth
an especially important part of social stratification. Wealth provides a type of safety net of
protection against an unforeseen decline in one’s living standard in the event of job loss or other
emergency and can be transformed into home ownership, business ownership, or even a college
education.[5][not in citation given]

'Wealth' refers to some accumulation of resources, whether abundant or not. 'Richness' refers to
an abundance of such resources. A wealthy (or rich) individual, community, or nation thus has
more resources than a poor one. Richness can also refer to at least basic needs being met with
abundance widely shared. The opposite of wealth is destitution. The opposite of richness
is poverty.

The term implies a social contract on establishing and maintaining ownership in relation to such
items which can be invoked with little or no effort and expense on the part of the owner
(see means of protection). The concept of wealth is relative and not only varies between
societies, but varies between different sections or regions in the same society. A personal net
worth of US $10,000 in most parts of the United States would certainly not place a person among
the wealthiest citizens of that locale. However, such an amount would constitute an extraordinary
amount of wealth in impoverisheddeveloping countries.
Concepts of wealth also vary across time. Modern labor-saving inventions and the development
of the sciences have enabled the poorest sectors of today's society to enjoy a standard of living
equivalent if not superior to the wealthy of the not-too-distant past. This comparative wealth
across time is also applicable to the future; given this trend of human advancement, it is likely
that the standard of living that the wealthiest enjoy today will be considered impoverished by
future generations.

Industrialization emphasized the role of technology. Many jobs were automated. Machines
replaced some workers while other workers became more specialized. Labour
specialization became critical to economic success. However, physical capital, as it came to be
known, consisting of both the natural capital (raw materials from nature) and the infrastructural
capital (facilitating technology), became the focus of the analysis of wealth.

Adam Smith saw wealth creation as the combination of materials, labour, land, and technology
in such a way as to capture a profit (excess above the cost of production).[6] The theories
of David Ricardo, John Locke, John Stuart Mill, in the 18th century and 19th century built on
these views of wealth that we now call classical economics.

Marxian economics (see labor theory of value) distinguishes in the Grundrisse between material
wealth and human wealth, defining human wealth as "wealth in human relations"; land and
labour were the source of all material wealth.

Some of the wealthiest people in the world are Bill Gates, Warren Buffett, and Lawrence Ellison.

[edit]Economic analysis

In economics, wealth is the net worth of a person, household, or nation, that is, the value of
all assets owned net of all liabilities owed at a point in time. For national wealth as measured in
the national accounts, the net liabilities are those owed to the rest of the world.[7] The term may
also be used more broadly as referring to the productive capacity of a society or as a contrast
to poverty.[8]Analytical emphasis may be on its determinants or distribution.[9]

Economic terminology distinguishes between two types of variables: a stock and a flow. Wealth,
as measurable at a date in time, is a stock, like the value of an orchard on December 31 minus
debt owed on the orchard. For a given amount of wealth, say at the beginning of the
year, income from that wealth, as measurable over say a year is a flow. What marks the income
as a flow is its measurement per unit of time, like the value of apples yielded from the orchard
per year.

In macroeconomic theory the 'wealth effect' may refer to the increase in aggregate consumption
from an increase in national wealth. One measure of it is the wealth elasticity of demand. It is the
percentage change in the amount demanded of consumption for each one-percent change in
wealth.

Wealth may be measured in nominal or real values, that is in money value as of a given date or
adjusted to net out price changes. The assets include those that are tangible (land and capital)
andfinancial (money, bonds, etc.). Measurable wealth typically excludes intangible or
nonmarketable assets such as human capital and social capital. In economics, 'wealth'
corresponds to the accountingterm 'net worth'. But analysis may adapt typical accounting
conventions for economic purposes in social accounting (such as in national accounts). An
example of the latter is generational accountingof social security systems to include the present
value projected future outlays considered as liabilities.[10] Macroeconomic questions include
whether the issuance of government bonds affectsinvestment and consumption through
the wealth effect.[11]

Environmental assets are not usually counted in measuring wealth, in part due to the difficulty of
valuation for a non-market good. Environmental or green accounting is a method of social
accounting for formulating and deriving such measures on the argument that an educated
valuation is superior to a value of zero (as the implied valuation of environmental assets).[12]

[edit]Sociological treatments

This section's factual accuracy is disputed. Please see the relevant

discussion on the talk page. (April 2010)
The neutrality of this section is disputed. Please see the discussion
on the talk page. Please do not remove this message until the dispute
is resolved. (April 2010)

"Wealth provides an important mechanism in the intergenerational transmission of

inequality."[5] Approximately one half of the wealthiest people in America inherited family
fortunes. But the effect of inherited wealth can also be seen on a more modest level. For
example, a couple that buys a house with the financial help from their parents or a student that
has his or her college education paid for; in both scenarios the participants are benefiting directly
from the accumulated wealth of previous generations.[5]

As a result of different economic conditions of life, members of different social classes have
different value systems and view the world in different ways. As such, there exist different
"conceptions of social reality, different aspirations and hopes and fears, different conceptions of
the desirable."[13] The way the various social classes in society view wealth vary and these
diverse characteristics are a fundamental dividing line among the classes. According to Richard
H Ropers, the concentration of wealth in the United States is inequitably distributed.[14] In 1996,
the United States federal government reported that the net worth of the top 1 percent of people in
the United States was approximately equal to that of the bottom 90 percent.[5]

[edit]The Upper Class

Upper class values include higher education, the accumulation and maintenance of wealth, the
maintenance of social networks and the power that accompanies such networks. Children of the
upper class are typically schooled on how to manage this power and channel this privilege in
different forms. It is in large part by accessing various edifices of information, associates,
procedures and auspices that the upper class are able to maintain their wealth and pass it to future
generations.[15]

[edit]The Middle Class

The middle class places a greater emphasis on income. The middle class views wealth as
something for emergencies and it is seen as more of a cushion. This class comprises people that
were raised with families that typically owned their own home, planned ahead and stressed the
importance of education and achievement. They earn a significant amount of income and also
have significant amounts of consumption. However there is very limited savings (deferred
consumption) or investments, besides retirement pensions and homeownership. They have been
socialized to accumulate wealth through structured, institutionalized arrangements. Without this
set structure, asset accumulation would likely not occur.[15]

[edit]The Lower Class

Those with the least amount of wealth are the welfare poor. Wealth accumulation for this class is
to some extent prohibited. People that receive AFDC transfers cannot own more than a trivial
amount of assets, in order to be eligible and remain qualified for income transfers. Most of the
institutions that the welfare poor encounter discourage any accumulation of assets.[15]

[edit]Distribution

Main article: Distribution of wealth

[edit]Wealth in the form of land

In the western tradition, the concepts of owning land and accumulating wealth in the form of
land were engendered in the rise of the first states, for a primary service and power of
government was, and is to this day, the awarding and adjudication of land use rights.

Land ownership was also justified according to John Locke. He claimed that because we admix
our labour with the land, we thereby deserve the right to control the use of the land and benefit
from the product of that land (but subject to his Lockean proviso of "at least where there is
enough, and as good left in common for others.").

Additionally, in our post-agricultural society this argument has many critics (including those
influenced by Georgist and geolibertarian ideas) who argue that since land, by definition, is not a
product of human labor, any claim of private property in it is a form of theft; as David Lloyd
George observed, "to prove a legal title to land one must trace it back to the man who stole it."

Many older ideas have resurfaced in the modern notions of ecological

stewardship, bioregionalism, natural capital, and ecological economics.

Adam smith wrote a book in 1776 whose title was "Wealth of Nations". In his book he discussed
the word 'wealth' through its four aspects: production of wealth, exchange of wealth, distribution
of wealth and consumption of wealth. There fore it can be said according to Adam Smith:
"Economics is a science of wealth". Wealth means goods and services transacted with the help of
money. Lets discuss four aspects of wealth; first one is production of wealth it shows as to how
goods and services are produced. Goods and services are produced by the combination of four
factors of production i.e. land, labour, capital and organization.

Second aspect is exchange of wealth there are many procedures of goods and services in a
society. Every procedure produces goods and services more than his personal requirement.
The exchange of wealth enables everyone in the society to satisfy his multiple wants. Third
aspect is distribution of wealth, which means the distribution of goods and services among
different sections or individuals of a society. As known by explanation of exchange of wealth
that procedures of goods and services exchange the surplus wealth with each other through out
the year. The last and forth aspect is consumption of wealth that is using up the utility of goods
and services for the satisfaction of wants is called the consumption of wealth.

According to Adam Smith "Economics was concerned with, An Enquiry into the Nature and
Causes of Wealth of Nations."

As per definition of Adam Smith a key position was assigned to wealth in the study of
Economics.

The first person who introduced "Economics" as a subject was Adam Smith (1723-1790). He
wrote the first book in economics entitled the "wealth of nation" in 1976. In this book he
considered economics as a subject in which we study production of wealth, distribution of
wealth, consumption of wealth and exchange of wealth.

Production of wealth means the production of goods and services by combining four factors of
production 1). Land: It is the natural resources such as Sea, Minerals, Live Stock and forest. 2).
Labor: It is the mental or physical work, which is done for the sake of reward. 3). Capital: It
means man made resources which help to produce goods and services. 4) Organization: It is the
act of combing four factors of production to produce goods and services for the sake of profit.
The production of wealth means production of goods and services.

After the completion of production process this wealth is distributed among the four factors of
production for their performance. Rent is given to land, wages to labor, and interest to capital
and profit to organization. When people get their share from the production, they use it to satisfy
their wants. They spent their income to purchase of goods and services. The surplus goods and
services are exchanged with other surplus goods and services for the satisfaction of wants.

It was criticized on Adam Smith's definition of Economics by Dr. Alfred Marshall and some
other neo classical economists on the basis of following points.
• Man occupies a primary place and wealth only a secondary one. As Marshall puts
it, Economics is "on the one side a study of wealth; and on the other side and more important
side, a part of the study of Man." But in the view of Adam Smith and other classical economists,
Economics is the study of wealth. On that point, It was criticized that the primary importance
was given to wealth and secondary to man. In this way the human being was degraded and
ignored.
• Adam Smith included only material goods in economics and excluded services i.e. doctor's,
teacher's and lawyer's services. We know that their services are also as important as goods.
• Adam Smith emphasis only to earn the wealth. They did not study about the means to earn
the wealth.
• He ignores the human welfare as compared to wealth. According to them wealth is more
important than human welfare.
• The word wealth is controversial and the majority of the people dislike it. They thought that
wealth is an evil.
• Economics was supposed to teach selfishness and came to be called a "dismal science"
Definition of Economics
Economics or Economics is the social science that studies the production,
distribution, and consumption of goods and services.
The termeconomics comes from the Ancient Greekοἰκονομία (oikonomia,"management of a
household, administration") fromοἶκος (oikos, "house")+νόμος (nomos, "custom" or "law"),
hence "rules of the house(hold)".[2]
Current economic models developed out of the broader field of politicaleconomy in the late
19th century, owing to a desire to use an empiricalapproach more akin to the physical sciences.
A definition that capturesmuch of modern economics is that of Lionel Robbins in a 1932 essay:
"thescience which studies human behavior as a relationship between ends andscarce means
which have alternative uses." Scarcity means that availableresources are insufficient to satisfy all
wants and needs. Absent scarcity andalternative uses of available resources, there is no economic
problem. Thesubject thus defined involves the study of choices as they are affected byincentives
and resources.
Economics aims to explain how economies work and how economic agentsinteract. Economic
analysis is applied throughout society, in business andfinance but also in crime, education, the
family, health, law, politics,religion, social institutions, war, science and research. The
expandingdomain of economics in the social sciences has been described as
economicimperialism.
Common distinctions are drawn between various dimensions of economics:between positive
economics (describing "what is") and normativeeconomics (advocating "what ought to be") or
between economic theoryand Applied economics or between mainstream economics
(more"orthodox" dealing with the "rationality-individualism-equilibrium nexus")and heterodox
economics (more "radical" dealing with the "institutions-history-social structure nexus").
However the primary textbook distinctionis between microeconomics ("small" economics),
which examines theeconomic behavior of agents (including individuals and firms)
and"macroeconomics" ("big" economics), addressing issues of unemployment,inflation,
monetary and fiscal policy for an entire economy.
Scope of economics
Several definition of economics have been given. For the sake of convience
let us classify the various definition into four groups:-

1.Science of Wealth.
2.Science of material well-being.
3.Science of choice making.
4.Science of dynamic growth and development.
Science of Wealth:-
“An inquiry into the nature and causes of the wealth of the nation” by
Adam Smith.
“Science which deals with wealth” by J.B.Say.
Merits
➢ It highlighted an important prolem faced by each
and every nation o the worl
The Wealth of Nations
From Wikipedia, the free encyclopedia

The Wealth of Nations

Author Adam Smith

Country United Kingdom

Genre(s) Economics

Publisher W. Strahan and T. Cadell, London

Publication date 1776

An Inquiry into the Nature and Causes of the Wealth of Nations (generally referred to by the
short title The Wealth of Nations) is the masterpiece of theScottish economist and moral
philosopher Adam Smith. First published in 1776, it is a reflection on economics at the
beginning of the Industrial Revolution and argues that free market economies are more
productive and beneficial to their societies. The book, written for the educated, is considered to
be the foundation of modern economic theory.

Contents
 [hide]

• 1 History
o 1.1 Publishing history
o 1.2 Anachronisms and terminology

• 2 Synopsis
o 2.1 Book I: Of the Causes of Improvement...
o 2.2 Book II: Of the Nature, Accumulation, and Employment of Stock
o 2.3 Book III: Of the different Progress of Opulence in different Nations
o 2.4 Book IV: Of Systems of political Economy
o 2.5 Book V: Of the Revenue of the Sovereign or Commonwealth

• 3 Reception and impact

o 3.1 United States

• 4 Two views of the "Wealth of Nations"

• 5 Contemporary evaluations
• 6 Further reading
• 7 See also
• 8 References

• 9 External links

[edit]History

The Wealth of Nations was first published on March 9, 1776, during the British Agricultural
Revolution. It influenced not only authors and economists, but governments and organizations.
For example,Alexander Hamilton was influenced in part by The Wealth of Nations to write
his Report on Manufactures, in which he argued against many of Smith's policies. Interestingly,
Hamilton based much of this report on the ideas of Jean-Baptiste Colbert, and it was, in part, to
Colbert's ideas that Smith responded to with The Wealth of Nations.

Many other authors were influenced by the book and used it as a starting point in their own
work, including Jean-Baptiste Say, David Ricardo, Thomas Malthus and, later, Karl
Marx and Ludwig von Mises. The Russian national poet Aleksandr Pushkin refers to The
Wealth of Nations in his 1833 verse-novel Eugene Onegin.
Irrespective of historical influence, however, The Wealth of Nations represented a clear leap
forward in the field of economics, similar to Sir Isaac Newton's Principia
Mathematica for physics or Antoine Lavoisier's Traité Élémentaire de Chimie for chemistry.

[edit]Publishing history
Five editions of The Wealth of Nations were published during Smith's lifetime: in 1776, 1778,
1784, 1786, and 1789. Numerous editions appeared after Smith's death in 1790. To better
understand the evolution of the work under Smith's hand, a team led by Edwin Cannan collated
the first five editions. The differences were published along with an edited fifth edition in 1904.
[1]
They found minor but numerous differences (including the addition of many footnotes)
between the first and the second editions, both of which were published in two volumes. The
differences between the second and third editions, however, are major: In 1784, Smith annexed
these first two editions with the publication of Additions and Corrections to the First and Second
Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations, and
he also had published the now three volume third edition of the Wealth of Nations, which
incorporated Additions and Corrections and, for the first time, an index. Among other things,
the Additions and Corrections included entirely new sections. The fourth edition published in
1786 had only slight differences with the third edition, and Smith himself says in
the Advertisement at the beginning of the book, "I have made no alterations of any kind."
Finally, Cannan notes only trivial differences between the fourth and fifth editions — a set of
misprints being removed from the fourth, and a different set of misprints being introduced.

[edit]Anachronisms and terminology

Some commentary[who?] on the work suffers from anachronism

[edit]Synopsis

This article's plot summary may be too long or overly

detailed. Please help improve it by removing unnecessary details and
making it more concise. (October 2009)
[edit]Book I: Of the Causes of Improvement...
Of the Division of Labour: Smith states that "the greatest improvement in the productive
powers of labour, and the greater part of the skill, dexterity, and judgement with which it is
anywhere directed, or applied, seem to have been the effects of the division of labour." To
illustrate this, he describes the extensive division of labour within the "trifling" industry of pin
manufacture, along with the astounding resultant productivity, and labourers' dexterity; then
levers this as an introductory microcosm of the greater, yet less obvious division of labour in the
broader economy. The advantages of this division were likely the driving force behind
diversification of the trades and industry, and this diversification was greatest for nations with
more industry and improvement. Agriculture is differentiated from industry for its comparative
lack of division of labour, and the attendant lack of improved productivity; hence, while poor
nations could not compete with rich nations in manufactures, they could compete in agriculture.

Smith lists three causes, arising from division, of improved productivity:

 The labourer's dexterity - due to specializing, year-round, in a specific task

 Time not wasted passing from one task to the next—as in agriculture—as well as the
more consistent and focused effort when working in just one area
 The machines and tools that have evolved in conjunction with increasingly specialized
labour

Many „natural“ differences between men are according to Adam Smith[2] only the results of the
division of labour:

"The difference of natural talents in different men is, in reality, much less than we are aware of;
and the very different genius which appears to distinguish men of different professions, when
grown up to maturity, is not upon many occasions so much the cause, as the effect of the
division of labour. The difference between the most dissimilar characters, between a
philosopher seems to arise not so much from nature, as from habit, custom, and education."

Of the Principle which gives Occasion to the Division of Labour: Chapter 2 illustrates the
growth in division of labour. Smith hypothesizes that early societies benefited from
specialization in a natural and spontaneous way - that one person may focus on hunting while
another concentrates on bow-making.

That the Division of Labour is Limited by the Extent of the Market: Chapter 3 deals with
limitations on division of labour. Smith illustrates with real world examples of how the extent of
market determines the level of division of labour and the resulting productivity improvements; it
is the extent of the market that determines the degree to which the division of labour can
proceed – the productivity gains of a limited market are limited. On the other hand, as under
competitive conditions a deepening of the division of labour lowers prices and thereby increases
sales, the division of labour leads to an extended market that permits another deepening of the
division of labour. This dynamic process creates the “Wealth of Nations.” It allowed England to
undersell all its competitors and become the workshop of the world. Monopolies and patents
may block this process, which depends on decreasing prices.
Of the Origin and Use of Money: When money was first invented, it was not well regulated,
which made agriculture and trade in commodities very difficult between individual owners.

Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price
in Money: In the first two passages Smith gives two conflicting definitions of the relative value
of a commodity. Ricardo responded to one of Smith's inconsistencies in the Preface of his
"Principles":

"The writer, in combating received opinions, has found it necessary to advert more
particularly to those passages in the writings of Adam Smith from which he sees reason
to differ; but he hopes it will not, on that account, be suspected that he does not, in
common with all those who acknowledge the importance of the science of Political
Economy, participate in the admiration which the profound work of this celebrated author
so justly excites."[3]

Adam Smith defines the value of commodities by the labour embedded and also by the
labour a good commands. Ricardo agrees with the first definition:

“The real price of every thing,” says Adam Smith[4], “What every thing really costs to the
man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really
worth to the man who has acquired it, and who wants to dispose of it, or exchange it for
something else, is the toil and trouble which it can save to himself, and which it can impose
upon other people. That this is really the foundation of the exchangeable value of all things,
excepting those which cannot be increased by human industry, is a doctrine of the utmost
importance in political economy“.[5]

For Ricardo, the value of reproducible commodities and services reflects the relative
difficulties of production counted in labour units: direct labour plus the dated labour of the
past embedded in inputs (capital) and corrected by interests. This differs from
Smith’s[6] second definition of value:

"The value of any commodity … is equal to the quantity of labour which it enables him to
purchase or command. Labour, therefore, is the real measure of the exchangeable value
of all commodities."

Ricardo[7] disagrees:

"Adam Smith, who so accurately defined the original source of exchangeable value …
speaks of things being more or less valuable, in proportion as they will exchange for
more or less of this standard measure. … [N]ot the quantity of labour bestowed on the
production of any object, but the quantity which it can command in the market: as if
these were two equivalent expressions…"

Smith’s second definition pleases neoclassical economists, who determine value

by the utility that a commodity provides a person rather than cost of production
as do classical economists.

Of the Component Parts of the Price of Commodities: Smith argues that the
price of any product reflects wages, rent of land and "...profit of stock," which
compensates the capitalist for risking his resources.

Of the Natural and Market Price of Commodities:

"When the quantity of any commodity which is brought to market falls

short of the effectual demand, all those who are willing to pay... cannot be
supplied with the quantity which they want... Some of them will be willing
to give more. A competition will begin among them, and the market price
will rise... When the quantity brought to market exceeds the
effectualdemand, it cannot be all sold to those who are willing to pay the
whole value of the rent, wages and profit, which must be paid in order to
bring it thither... The market price will sink..."[8]

To paraphrase Smith, and the first part of this Chapter, when demand exceeds
supply, the price goes up. When the supply exceeds demand, the price goes
down.

He then goes on to comment on the different avenues that people can take to
generate a larger profit than normal. Some of those include: finding a commodity
that few others have that allows for a high profit, and being able to keep that
secret; Finding a way to produce a unique commodity (The dyer who discovers a
unique dye). He also states that the former usually has a short lifespan of high
profitability, and the latter has a longer. He also notes that a monopoly is
essentially the same as the dyers trade secret, and can thus lead to high
profitability for a long time by keeping the supply below the effectual demand.

"A monopoly granted either to an individual or to a trading company has

the same effect as a secret in trade or manufactures. The monopolists, by
keeping the market constantly understocked, by never fully supplying the
effectual demand, sell their commodities much above the natural price,
and raise their emoluments, whether they consist in wages or profit,
 greatly above their natural rate. The price of monopoly is upon every
occasion the highest which can be got. The natural price, or the price of
free competition, on the contrary, is the lowest which can be taken, not
upon every occasion, indeed, but for any considerable time together. The
one is upon every occasion the highest which can be squeezed out of the
buyers, or which, it is supposed, they will consent to give: the other is the
lowest which the sellers can commonly afford to take, and at the same
time continue their business."[9]

Of the Wages of Labour: In this section, Smith describes how the wages of
labour are dictated primarily by the competition among labourers and masters.
When labourers bid against one another for limited opportunities for employment,
the wages of labour collectively fall, whereas when employers compete against
one another for limited supplies of labour, the wages of labour collectively rise.
However, this process of competition is often circumvented by combinations
among labourers and among masters. When labourers combine and no longer
bid against one another, their wages rise, whereas when masters combine,
wages fall. In Smith's day, it should be noted, organized labour was dealt with
very harshly by the law.

Smith himself wrote about the "severity" of such laws against worker actions, and
made a point to contrast the "clamour" of the "masters" against workers
associations, while associations and collusions of the masters "are never heard
by the people" though such actions are "always" and "everywhere" taking place:

"We rarely hear, it has been said, of the combinations of masters, though
frequently of those of workmen. But whoever imagines, upon this
account, that masters rarely combine, is as ignorant of the world as of the
subject. Masters are always and everywhere in a sort of tacit, but
constant and uniform, combination, not to raise the wages of labour
above their actual rate...Masters, too, sometimes enter into particular
combinations to sink the wages of labour even below this rate. These are
always conducted with the utmost silence and secrecy till the moment of
execution; and when the workmen yield, as they sometimes do without
resistance, though severely felt by them, they are never heard of by other
people" In contrast, when workers combine, "the masters..never cease to
call aloud for the assistance of the civil magistrate, and the rigorous
 execution of those laws which have been enacted with so much severity
against the combination of servants, labourers, and journeymen."[10]

In societies where the amount of labour exceeds the amount of revenue available
for waged labour, competition among workers is greater than the competition
among employers, and wages fall. Inversely, where revenue is abundant, labour
wages rise. Smith argues that, therefore, labour wages only rise as a result of
greater revenue disposed to pay for labour. Smith thought labour the same as
any other commodity in this respect:

"the demand for men, like that for any other commodity, necessarily
regulates the production of men; quickens it when it goes on too slowly,
and stops it when it advances too fast. It is this demand which regulates
and determines the state of propagation in all the different countries of the
world, in North America, in Europe, and in China; which renders it rapidly
progressive in the first, slow and gradual in the second, and altogether
stationary in the last."[11]

However, the amount of revenue must increase constantly in proportion to the

amount of labour for wages to remain high. Smith illustrates this by juxtaposing
England with the North American colonies. In England, there is more revenue
than in the colonies, but wages are lower, because more workers flock to new
employment opportunities caused by the large amount of revenue— so workers
eventually compete against each other as much as they did before. By contrast,
as capital continues to flow to the colonial economies at least at the same rate
that population increases to "fill out" this excess capital, wages there stay higher
than in England.

Smith was highly concerned about the problems of poverty. He writes,

"poverty, though it does not prevent the generation, is extremely

unfavourable to the rearing of children... It is not uncommon... in the
Highlands of Scotland for a mother who has borne twenty children not to
have two alive... In some places one half the children born die before they
are four years of age; in many places before they are seven; and in
almost all places before they are nine or ten. This great mortality,
however, will every where be found chiefly among the children of the
common people, who cannot afford to tend them with the same care as
those of better station."[12]
The only way to determine whether a man is rich or poor is to examine the
amount of labour he can afford to purchase. "Labour is the real exchange for
commodities".

Smith also describes the relation of cheap years and the production of
manufactures versus the production in dear years. He argues that while some
examples such as the linen production in France shows a correlation, another
example in Scotland shows the opposite. He concludes that there are too many
variables to make any statement about this.

Of the Profits of Stock: In this chapter, Smith uses interest rates as an indicator
of the profits of stock. This is because interest can only be paid with the profits of
stock, and so creditors will be able to raise rates in proportion to the increase or
decrease of the profits of their debtors.

Smith argues that the profits of stock are inversely proportional to the wages of
labor, because as more money is spent compensating labor, there is less
remaining for personal profit. It follows that, in societies where competition
among laborers is greatest relative to competition among employers, profits will
be much higher. Smith illustrates this by comparing interest rates in England and
Scotland. In England, government laws against usury had kept maximum interest
rates very low, but even the maximum rate was believed to be higher than the
rate at which money was usually loaned. In Scotland, however, interest rates are
much higher. This is the result of a greater proportion of capitalists in England,
which offsets some competition among laborers and raises wages.

However, Smith notes that, curiously, interest rates in the colonies are also
remarkably high (recall that, in the previous chapter, Smith described how wages
in the colonies are higher than in England). Smith attributes this to the fact that,
when an empire takes control of a colony, prices for a huge abundance of land
and resources are extremely cheap. This allows capitalists to increase his profit,
but simultaneously draws many capitalists to the colonies, increasing the wages
of labor. As this is done, however, the profits of stock in the mother country rise
(or at least cease to fall), as much of it has already flocked offshore.

Of Wages and Profit in the Different Employments of Labour and

Stock: Smith repeatedly attacks groups of politically aligned individuals who
attempt to use their collective influence to manipulate the government into doing
their bidding. At the time, these were referred to as "factions," but are now more
commonly called "special interests," a term that can comprise international
bankers, corporate conglomerations, outright oligopolies, trade unions and other
groups. Indeed, Smith had a particular distrust of the tradesman class. He felt
that the members of this class, especially acting together within the guilds they
want to form, could constitute a power block and manipulate the state into
regulating for special interests against the general interest:

"People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the public, or
in some contrivance to raise prices. It is impossible indeed to prevent
such meetings, by any law which either could be executed, or would be
consistent with liberty and justice. But though the law cannot hinder
people of the same trade from sometimes assembling together, it ought to
do nothing to facilitate such assemblies; much less to render them
necessary."[13]

Smith also argues against government subsidies of certain trades, because this
will draw many more people to the trade than what would otherwise be normal,
collectively lowering their wages.

Chapter 10, part ii, motivates an understanding of the idea of feudalism.

Of the Rent of the Land: Rent, considered as the price paid for the use of land,
is naturally the highest the tenant can afford in the actual circumstances of the
land. In adjusting lease terms, the landlord endeavours to leave him no greater
share of the produce than what is sufficient to keep up the stock from which he
furnishes the seed, pays the labour, and purchases and maintains the cattle and
other instruments of husbandry, together with the ordinary profits of farming stock
in the neighbourhood. This is evidently the smallest share with which the tenant
can content himself without being a loser, and the landlord seldom means to
leave him any more. Whatever part of the produce, or, what is the same thing,
whatever part of its price, is over and above this share, he naturally endeavours
to reserve to himself as the rent of his land, which is evidently the highest the
tenant can afford to pay in the actual circumstances of the land. Sometimes,
indeed, the liberality, more frequently the ignorance, of the landlord, makes him
accept of somewhat less than this portion; and sometimes too, though more
rarely, the ignorance of the tenant makes him undertake to pay somewhat more,
or to content himself with somewhat less, than the ordinary profits of farming
 stock in the neighbourhood. This portion, however, may still be considered as the
natural rent of land, or the rent for which it is naturally meant that land should for
the most part be let.

[edit]Book
II: Of the Nature, Accumulation, and
Employment of Stock
Of the Division of Stock:

"When the stock which a man possesses is no more than sufficient to maintain him for a
few days or a few weeks, he seldom thinks of deriving any revenue from it. He
consumes it as sparingly as he can, and endeavours by his labour to acquire something
which may supply its place before it be consumed altogether. His revenue is, in this
case, derived from his labour only. This is the state of the greater part of the labouring
poor in all countries."

II.1.1

"But when he possesses stock sufficient to maintain him for months or years, he
naturally endeavours to derive a revenue from the greater part of it; reserving only so
much for his immediate consumption as may maintain him till this revenue begins to
come in. His whole stock, therefore, is distinguished into two parts. That part which, he
expects, is to afford him this revenue, is called his capital."

Of Money Considered as a particular Branch of the General Stock

of the Society...:

"From references of the first book, that the price of the greater part of commodities
resolves itself into three parts, of which one pays the wages of the labour, another the
profits of the stock, and a third the rent of the land which had been employed in
producing and bringing them to market: that there are, indeed, some commodities of
which the price is made up of two of those parts only, the wages of labour, and the
profits of stock: and a very few in which it consists altogether in one, the wages of
labour: but that the price of every commodity necessarily resolves itself into some one,
or other, or all of these three parts; every part of it which goes neither to rent nor to
wages, being necessarily profit to somebody."

Of the Accumulation of Capital, or of Productive and

Unproductive Labour:

"One sort of labour adds to the value of the subject upon which it is bestowed: there is
another which has no such effect. The former, as it produces a value, may be called
productive; the latter, unproductive labour. Thus the labour of a manufacturer adds,
generally, to the value of the materials which he works upon, that of his own
maintenance, and of his master's profit. The labour of a menial servant, on the contrary,
adds to the value of nothing."

Of Stock Lent at Interest:

"The stock which is lent at interest is always considered as a capital by the lender. He
expects that in due time it is to be restored to him, and that in the meantime the borrower
is to pay him a certain annual rent for the use of it. The borrower may use it either as a
capital, or as a stock reserved for immediate consumption. If he uses it as a capital, he
employs it in the maintenance of productive labourers, who reproduce the value with a
profit. He can, in this case, both restore the capital and pay the interest without
alienating or encroaching upon any other source of revenue. If he uses it as a stock
reserved for immediate consumption, he acts the part of a prodigal, and dissipates in the
maintenance of the idle what was destined for the support of the industrious. He can, in
this case, neither restore the capital nor pay the interest without either alienating or
encroaching upon some other source of revenue, such as the property or the rent of
land."
The stock which is lent at interest is, no doubt, occasionally employed in both these
ways, but in the former much more frequently than in the latter."
[edit]Book
III: Of the different
Progress of Opulence in different
Nations
Of the Natural Progress of Opulence:

"The great commerce of every civilized society is that carried on between the inhabitants
of the town and those of the country. It consists in the exchange of crude for
manufactured produce, either immediately, or by the intervention of money, or of some
sort of paper which represents money. The country supplies the town with the means of
subsistence and the materials of manufacture. The town repays this supply by sending
back a part of the manufactured produce to the inhabitants of the country. The town, in
which there neither is nor can be any reproduction of substances, may very properly be
said to gain its whole wealth and subsistence from the country. We must not, however,
upon this account, imagine that the gain of the town is the loss of the country. The gains
of both are mutual and reciprocal, and the division of labour is in this, as in all other
cases, advantageous to all the different persons employed in the various occupations
into which it is subdivided."

Of the Discouragement of
Agriculture...: Chapter 2's long title is "Of the
Discouragement of Agriculture in the Ancient
State of Europe after the Fall of the Roman
Empire".

"When the German and Scythian nations overran the western provinces of the Roman
empire, the confusions which followed so great a revolution lasted for several centuries.
The rapine and violence which the barbarians exercised against the ancient inhabitants
interrupted the commerce between the towns and the country. The towns were deserted,
and the country was left uncultivated, and the western provinces of Europe, which had
enjoyed a considerable degree of opulence under the Roman empire, sunk into the
lowest state of poverty and barbarism. During the continuance of those confusions, the
chiefs and principal leaders of those nations acquired or usurped to themselves the
greater part of the lands of those countries. A great part of them was uncultivated; but no
part of them, whether cultivated or uncultivated, was left without a proprietor. All of them
were engrossed, and the greater part by a few great proprietors.
This original engrossing of uncultivated lands, though a great, might have been but a
transitory evil. They might soon have been divided again, and broke into small parcels
either by succession or by alienation. The law of primogeniture hindered them from
being divided by succession: the introduction of entails prevented their being broke into
small parcels by alienation."

Of the Rise and Progress of Cities

and Towns, after the Fall of the
Roman Empire:

"The inhabitants of cities and towns were, after the fall of the Roman empire, not more
favoured than those of the country. They consisted, indeed, of a very different order of
people from the first inhabitants of the ancient republics of Greece and Italy. These last
were composed chiefly of the proprietors of lands, among whom the public territory was
originally divided, and who found it convenient to build their houses in the
neighbourhood of one another, and to surround them with a wall, for the sake of
common defence. After the fall of the Roman empire, on the contrary, the proprietors of
land seem generally to have lived in fortified castles on their own estates, and in the
midst of their own tenants and dependants. The towns were chiefly inhabited by
tradesmen and mechanics, who seem in those days to have been of servile, or very
nearly of servile condition. The privileges which we find granted by ancient charters to
the inhabitants of some of the principal towns in Europe sufficiently show what they were
before those grants. The people to whom it is granted as a privilege that they might give
away their own daughters in marriage without the consent of their lord, that upon their
death their own children, and not their lord, should succeed to their goods, and that they
might dispose of their own effects by will, must, before those grants, have been either
altogether or very nearly in the same state of villanage with the occupiers of land in the
country."

How the Commerce of the

Towns Contributed to the
Improvement of the
Country: Smith often harshly
criticised those who act purely
out of self-interest and greed,
and warns that,

"...[a]ll for ourselves, and nothing for other people, seems, in every age of the world, to
have been the vile maxim of the masters of mankind." (Book 3, Chapter 4)
[edit]Book IV: Of
Systems of
political Economy
Smith vigorously attacked
the antiquated government
restrictions he
thought hindered industrial
expansion. In fact, he
attacked most forms of
government interference in
the economic process,
including tariffs, arguing
that this creates
inefficiency and high
prices in the long run. It is
believed that this theory
influenced government
legislation in later years,
especially during the 19th
century.

However, this was not

an anarchistic opposition
to government. Smith
advocated a Government
that was active in sectors
other than the economy.
He advocated public
education for poor adults,
a judiciary, and a standing
army—institutional
systems not directly
profitable for private
industries.

Of the Principle of the

Commercial
or Mercantile
System: The book has
sometimes been described
as a critique
of mercantilism and a
synthesis of the emerging
economic thinking of
Smith's time.
Specifically, The Wealth of
Nations attacks, inter
alia, two major tenets of
mercantilism:

1. The idea
that protectionist ta
riffs serve the
 economic interests
of a nation (or
indeed any
purpose
whatsoever) and
2. The idea that
large reserves
of gold bullion or
other precious
metals are
necessary for a
country's
economic success.
This critique of
mercantilism was
later used
by David
Ricardo when he
laid out his Theory
of Comparative
Advantage.

Of Restraints upon
the Importation...: Chapte
r 2's full title is "Of
Restraints upon the
Importation from Foreign
Countries of such Goods
as can be Produced at
Home". The "Invisible
Hand" is a frequently
referenced theme from the
book, although it is
specifically mentioned only
once.
"As every
individual,
therefore,
endeavors as
much as he can
both to employ his
capital in the
support of
domestic industry,
and so to direct
that industry that its
produce may be of
the greatest value;
every individual
necessarily labours
to render the
annual revenue of
the society as great
as he can. He
generally, indeed,
neither intends to
promote the public
interest, nor knows
how much he is
promoting it. By
preferring the
support of
domestic to that of
foreign industry, he
intends only his
own security; and
by directing that
industry in such a
manner as its
produce may be of
the greatest value,
 he intends only his
own gain, and he is
in this, as in many
other cases, led by
an invisible hand to
promote an end
which was no part
of his intention. Nor
is it always the
worse for the
society that it was
no part of it. By
pursuing his own
interest he
frequently
promotes that of
the society more
effectually than
when he really
intends to promote
it." (Book 4,
Chapter 2)

Of the extraordinary
Restraints...: Chapter 3's
long title is "Of the
extraordinary Restraints
upon the Importation of
Goods of almost all Kinds,
from those Countries with
which the Balance is
supposed to be
Disadvantageous".

Of Drawbacks: Merchants
and manufacturers are not
contented with the
monopoly of the home
market, but desire likewise
the most extensive foreign
sale for their goods. Their
country has no jurisdiction
in foreign nations, and
therefore can seldom
procure them any
monopoly there. They are
generally obliged,
therefore, to content
themselves with petitioning
for certain
encouragements to
exportation.

Of these encouragements
what are called Drawbacks
seem to be the most
reasonable. To allow the
merchant to draw back
upon exportation, either
the whole or a part of
whatever excise or inland
duty is imposed upon
domestic industry, can
never occasion the
exportation of a greater
quantity of goods than
what would have been
exported had no duty been
imposed. Such
encouragements do not
tend to turn towards any
particular employment a
greater share of the capital
of the country than what
would go to that
employment of its own
accord, but only to hinder
the duty from driving away
any part of that shares to
other employments.

Of Bounties: Bounties
upon exportation are, in
Great Britain, frequently
petitioned for, and
sometimes granted to the
produce of particular
branches of domestic
industry. By means of
them our merchants and
manufacturers, it is
pretended, will be enabled
to sell their goods as
cheap, or cheaper than
their rivals in the foreign
market. A greater quantity,
it is said, will thus be
exported, and the balance
of trade consequently
turned more in favour of
our own country. We
cannot give our workmen
a monopoly in the foreign
as we have done in the
home market. We cannot
force foreigners to buy
their goods as we have
done our own countrymen.
The next best expedient, it
 has been thought,
therefore, is to pay them
for buying. It is in this
manner that the mercantile
system proposes to enrich
the whole country, and to
put money into all our
pockets by means of the
balance of trade

Of Treaties of
Commerce:

"When a nation binds itself by treaty either to permit the entry of certain goods from one
foreign country which it prohibits from all others, or to exempt the goods of one country
from duties to which it subjects those of all others, the country, or at least the merchants
and manufacturers of the country, whose commerce is so favoured, must necessarily
derive great advantage from the treaty. Those merchants and manufacturers enjoy a
sort of monopoly in the country which is so indulgent to them. That country becomes a
market both more extensive and more advantageous for their goods: more extensive,
because the goods of other nations being either excluded or subjected to heavier duties,
it takes off a greater quantity of theirs: more advantageous, because the merchants of
the favoured country, enjoying a sort of monopoly there, will often sell their goods for a
better price than if exposed to the free competition of all other nations."
Such treaties, however, though they may be advantageous to the merchants and
manufacturers of the favoured, are necessarily disadvantageous to those of the
favouring country. A monopoly is thus granted against them to a foreign nation; and they
must frequently buy the foreign goods they have occasion for dearer than if the free
competition of other nations was admitted.

Of Colonies:

Of the Motives
for establishing
new Colonies:

"The interest which occasioned the first settlement of the different European colonies in
America and the West Indies was not altogether so plain and distinct as that which
directed the establishment of those of ancient Greece and Rome.
All the different states of ancient Greece possessed, each of them, but a very small
territory, and when the people in any one of them multiplied beyond what that territory
could easily maintain, a part of them were sent in quest of a new habitation in some
remote and distant part of the world; warlike neighbours surrounded them on all sides,
rendering it difficult for any of them to enlarge their territory at home. The colonies of the
Dorians resorted chiefly to Italy and Sicily, which, in the times preceding the foundation
of Rome, were inhabited by barbarous and uncivilised nations: those of the Ionians and
Eolians, the two other great tribes of the Greeks, to Asia Minor and the islands of the
Egean Sea, of which the inhabitants seem at that time to have been pretty much in the
same state as those of Sicily and Italy. The mother city, though she considered the
colony as a child, at all times entitled to great favour and assistance, and owing in return
much gratitude and respect, yet considered it as an emancipated child over whom she
pretended to claim no direct authority or jurisdiction. The colony settled its own form of
government, enacted its own laws, elected its own magistrates, and made peace or war
with its neighbours as an independent state, which had no occasion to wait for the
approbation or consent of the mother city. Nothing can be more plain and distinct than
the interest which directed every such establishment."

Cause
s of
Prosp
erity
of new
Coloni
es:

"The colony of a civilised nation which takes possession either of a waste country, or of
one so thinly inhabited that the natives easily give place to the new settlers, advances
more rapidly to wealth and greatness than any other human society.
The colonists carry out with them a knowledge of agriculture and of other useful arts
superior to what can grow up of its own accord in the course of many centuries among
savage and barbarous nations. They carry out with them, too, the habit of subordination,
some notion of the regular government which takes place in their own country, of the
system of laws which supports it, and of a regular administration of justice; and they
naturally establish something of the same kind in the new settlement."

Of
th
e
A
dv
an
ta
ge
s
w
hi
ch
E
ur
o
pe
ha
s
de
ri
ve
d
fr
o
m
th
e
Di
sc
ov
er
y
of
A
m
er
ic
a,
an
d
fr
o
m
th
at
of
a
P
as
sa
ge
to
th
e
E
as
t
In
di
es
by
th
e
C
ap
e
of
G
o
o
d
H
o
 pe
:

"Such are the advantages which the colonies of America have derived from the policy of
Europe. What are those which Europe has derived from the discovery and colonization
of America? Those advantages may be divided, first, into the general advantages which
Europe, considered as one great country, has derived from those great events; and,
secondly, into the particular advantages which each colonizing country has derived from
the colonies which particularly belong to it, in consequence of the authority or dominion
which it exercises over them.:
The general advantages which Europe, considered as one great country, has derived
from the discovery and colonization of America, consist, first, in the increase of its
enjoyments; and, secondly, in the augmentation of its industry.
The surplus produce of America, imported into Europe, furnishes the inhabitants of this
great continent with a variety of commodities which they could not otherwise have
possessed; some for conveniency and use, some for pleasure, and some for ornament,
and thereby contributes to increase their enjoyments."

Conclusion of
the Mercantile
System: Smith
argument abou
the internationa
political
economy oppos
d the idea of
Mercantilism.
While the
Mercantile
System
encouraged ea
country to hord
gold, while tryin
to grasp
hegemony, Sm
argued that free
trade eventually
 makes all actor
better off. This
argument is the
modern 'Free
Trade' argumen

Of the
Agricultural
Systems...: Ch
pter 9's long titl
is "Of the
Agricultural
Systems, or of
those Systems
Political
Economy, whic
Represent the
Produce of Lan
as either the So
or the Principal
Source of the
Revenue and
Wealth of Every
Country".

"That system which represents the produce of land as the sole source of the revenue
and wealth of every country has, so far as by that time, never been adopted by any
nation, and it at present exists only in the speculations of a few men of great learning
and ingenuity in France. It would not, surely, be worthwhile to examine at great length
the errors of a system which never has done, and probably never will do, any harm in
any part of the world."
[edit]Book
V
the Revenu
the Sovere
or
Commonw
Smith postulate
"maxims" of tax
proportionality,
transparency,
convenience, a
efficiency. Som
economists inte
Smith's opposit
taxes on transfe
money, such as
the Stamp Act,
opposition to ca
gains taxes, wh
not exist in the
century.[14] Othe
economists cre
Smith as one o
first to advocate
a progressive ta
[16]
Smith wrote,
not very unreas
that the rich sho
contribute to the
public expense
only in proportio
their revenue, b
something more
proportion."

Of the Expens
the Sovereign
Commonwealt
th uses this cha
comment on the
concept of taxa
and expenditure
the state. On ta
Smith wrote,

"The subjects o
ought to contrib
the support of t
government, as
possible, in pro
respective abilit
proportion to th
which they resp
under the prote
state. The expe
government to
of a great natio
expense of man
the joint tenants
estate, who are
contribute in pro
their respective
the estate. In th
or neglect of thi
consists what is
equality or ineq
taxation."

Smith advocate
naturally attach
the "abilities" an
habits of each e
of society.

For the lower e

Smith recognize
intellectually ero
effect that the
otherwise bene
division of labou
have on worker
Marx, though h
mainly opposes
Smith, later nam
"alienation,";
therefore, Smith
warns of the
consequence o
government fail
fulfill its proper
which is to pres
against the inna
tendency of hum
society to fall ap

..."the understa
greater part of m
necessarily form
ordinary employ
man whose wh
in performing a
operations, of w
effects are perh
the same, or ve
same, has no o
exert his unders
exercise his inv
finding out expe
removing difficu
never occur. He
loses, therefore
such exertion, a
becomes as stu
ignorant as it is
human creature
The torpor of hi
renders him no
incapable of rel
bearing a part i
conversation, b
conceiving any
noble, or tende
and consequen
any just judgme
many even of th
duties of private
every improved
society this is th
which the labor
is, the great bod
people, must ne
unless governm
some pains to p

Under Smith's m
government
involvement in
area other than
stated above
negatively impa
economic grow
is because eco
growth is determ
by the needs of
market and the
entrepreneurial
of private perso
shortage of a p
makes its price
and so stimulat
producers to pr
more and attrac
people to that li
production. An
supply of a prod
(more of the pro
than people are
to buy) drives p
down, and prod
refocus energy
money to other
where there is a
[18]

Of the Sources
the General or
Public Revenu
the Society: In
discussion of
in Book Five, S
wrote:

"The necessarie
occasion the gr
of the poor. The
difficult to get fo
greater part of t
revenue is spen
The luxuries an
life occasion the
expense of the
magnificent hou
embellishes an
the best advant
other luxuries a
which they poss
upon house-ren
would in genera
upon the rich; a
 of inequality the
perhaps, be an
unreasonable. I
unreasonable th
should contribu
expense, not on
proportion to th
but something m
that proportion.

Proponents of progressive taxation cite Smith[citation needed] to justify the modern

implementation of this idea, the disproportionate taxation of income.

Of War and Pu

"...when war co
are both unwilli
increase their [t
proportion to th
expense. They
fear of offendin
by so great and
increase of taxe
disgusted with t
facility of borrow
from the embar
means of borro
enabled, with a
increase of taxe
year to year, m
carrying on the
practice of perp
they are enable
possible increa
the interest on t
annually the lar
of money [to fun
...The return of
seldom relieves
greater part of t
during the war.
mortgaged for t
debt contracted
on.[20]"

Smith then goe

that even if mon
aside from futur
to pay for the d
it seldom actua
used to pay dow
Politicians are i
spend the mone
other scheme th
the favor of the
constituents. He
interest paymen
war debts conti
larger, well bey
of the war.

Summing up, if
governments ca
without check, t
are more likely
without check, a
costs of the wa
will burden futu
generations, sin
debts are almos
repaid by the ge
that incurred th