Adam Smith’s pioneering book on economics, The Wealth of Nations (1776), is around 950 pages long. Modern readers find it almost impenetrable: its language is flowery, its terminology is outmoded, it wanders into digressions, including one seventy pages in length, and its numerous eighteenth-century examples often puzzle rather than enlighten us today.
And yet, The Wealth of Nations is one of the world’s most important books. It did for economics what Newton did for physics and Darwin did for biology. It took the outdated, received wisdom about trade, commerce, and public policy, and re-stated them according to completely new principles that we still use fruitfully today. Smith outlined the concept of gross domestic product as the measurement of national wealth; he identified the huge
productivity gains made possible by specialisation; he recognised that both sides benefited from trade, not just the seller; he realised that the market was an automatic mechanism that allocated resources with great efficiency; he understood the wide and fertile collaboration between different producers that this mechanism made possible. All these ideas remain part of the basic fabric of economic science, over two centuries later.
So The Wealth of Nations is worth reading, but nearly impossible to read. What we need today is a much shorter version: one that presents Smith’s ideas, not filtered through some modern commentator, but in modern language. This book aims to do precisely that, updating the language and the technical terms, with just enough of Smith’s examples and quotations to provide a sense of colour, and with marginal notes to explain how today’s economic concepts have developed from Smith’s early ideas
The same treatment is given to The Theory of Moral Sentiments (1759) – Smith’s other great book, and the one that made him famous. A product of the philosophy course that Smith taught at Glasgow University, it explained morality in terms of our nature as
social creatures. It so impressed the young Duke of Buccleuch’s stepfather that he promptly hired Smith (on a handsome lifetime salary) to tutor the boy, and escort him on an educational journey through Europe.
With time on his hands, and new insights gleaned on these travels, Smith began sketching out the book that would become The Wealth of Nations. He spent another decade writing and polishing the text at his home in Scotland, and debating his ideas with the leading
intellectuals of the age in London. The finished book was another huge commercial success, rapidly going into several editions and translations.
It was revolutionary stuff. It hit squarely at the prevailing idea that nations had to protect their trade from other countries. It showed that free trade between nations, and between individuals at home too, left both sides better off. It argued that when governments
interfered with that freedom with controls, tariffs or taxes, they made their people poorer rather than richer.
Smith’s ideas influenced the politicians and changed events. They led to trade treaties, tax reform, and an unwinding of tariffs and subsidies that in turn unleashed the great nineteenth-century era of free trade and growing world prosperity.
How this book is laid out
In what follows, the material in normal text is the author’s condensation of Adam Smith’s arguments. The indented paragraphs are Smith’s own words. The material in italics is the author’s own explanation of what Smith is saying and why it is important.