It is well past the point where I need to describe what this book is about. So maybe it’s just worth noting that, even after I’ve been steeped for my whole life in a culture that reveres Smith as a god, there was still room to be surprised by how far ahead of its time [book: The Wealth of Nations] is. It still holds lessons on the power of institutions, on trade policy, and on why nations succeed or fail. Indeed, despite its title, I think we’ve become accustomed to thinking of Smith’s book as a mere celebration of capitalism. But no, it’s really about what it says it’s about: how nations become and remain wealthy. This includes long digressions about, say, the pernicious influence of religious education. But it also contains lots of nitty-gritty about the folly of trade restrictions and a million other things besides.

If your schooling was at all like mine, you’ve heard that [book: TWoN] was an attack on “mercantilism”, which has always been accompanied by the only use of the word “specie” that you’re likely to hear in your life. The doctrine is that a nation is wealthy or poor depending upon how many or few pieces of gold it has; this doctrine, in turn, leads to policies that aim to maximize exports (which would send, say, corn out of the country in exchange for gold coming in) and minimize imports. But this fetishization of gold and silver confuses the map with the terrain. The ultimate wealth of a society doesn’t come from how many coins it has on hand; wealth comes from the productive labor of its workers. Smith adopts the simplification — which maybe was appropriate in its time — that an hour of labor is a fungible commodity, which over all time is worth the amount of food necessary for the worker’s survival (and no more than his survival). So any measure which increases the cost of feeding the worker — like restricting corn imports to keep gold within a country’s borders — is going to increase the *real* cost of that labor, even if it’s decreasing the *nominal* cost.

That was the most surprising piece of [book: The Wealth of Nations] for me: that its most central argument is essentially about the real-versus-nominal distinction. Nowadays we’re inclined to think of real-v.-nominal as inflation-adjusted versus not, but Smith was using it in what feels like a more natural sense.

The book is well worth reading. But having worked through all 1200-odd pages of the unabridged original, I can now safely say: it is not important that you read the unabridged original. Much of it is given over to minute discussions of tax policy over the course of several centuries of British kings. Then there are many-page digressions which I thought were some sort of 20th-century British affectation when I read them in Wilson’s [book: The Victorians] or in Ernest Gellner, but apparently started hundreds of years before. A better modern edition, which would leave in only the parts that a modern reader would need to know about, would be a vast improvement over this one. I’m sure such editions exist. (And no, this is not similar to asking for an edition of Shakespeare that translates it into hip-hop idiom. Smith is interesting and readable, but his prose is not so special that it needs to be preserved.)

The edition I read also thinks it’s very important to note the differences between Smith’s first, second, and third editions in the footnotes. Turns out that’s not important; those differences amount to the use of the subjunctive “were” in place of the indicative “was”; I learned within the first couple pages to ignore the footnotes entirely.

So: worth reading, but maybe not worth reading just exactly *this*.

It was almost three years ago that I invited people to read Adam Smith with me. A couple weeks after I wrote that post, I started a new job (where I still work today), life caught up with me, and nothing came of that reading.

…*until now*.

I’ve been quite happily chugging away through [book: Wealth of Nations]. It is much, much more interesting than I ever would have guessed, because basically all anyone ever talks about in this book are a few quotes: the division of labor (starts on page 8), specifically the pin factory; self-interest (page 18); when businessmen meet, they always conspire to raise prices (page 144); and the invisible hand (page 477). The book is around 1000 pages long. Surely he has other stuff to say.

And indeed he does! I’d like here to single out just a few things:

1. Macro dictates micro:
> Masters of all sorts, therefore, frequently make better bargains with their servants in dear than in cheap years, and find them more humble and dependent in the former than in the latter. They naturally, therefore, commend the former as more favourable to industry.

I was really surprised to see that Smith appreciates the importance of macro conditions (how the economy as a whole works) on micro interactions (e.g., negotiations between boss and employee). That’s an idea that I more commonly associate with Paul Samuelson.

I also read this as an attack on the self-serving words of businessmen, and against the belief that what businessmen want is always what’s best for the society at large.

2. The importance of institutions. I don’t have a quote ready to hand for this, but he says somewhere that it’s obvious why business hasn’t returned to some country: the lack of a functioning government makes it impossible to conduct your affairs. I had thought that this idea was more associated with early-20th-century economists and their early-21st-century descendants.

3. While enumerating the different kinds of capital, we get this on page 297:
> The Second of the three portions into which the general stock of the society divides itself, is the fixed capital; of which the characteristic is, that it affords a revenue or profit without circulating or changing masters. It consists chiefly of …

> Fourthly, of the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expence, which is a capital fixed and realized, as it were, in his person. Those talents, as thy make a part of his fortune, so do they likewise of that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expence, repays that expence with a profit.

This is, in essence, what we today call “human capital”. I was shocked to read this idea in a 237-year-old book.

Now I’m eager to see whether other ideas which we consider more modern — like marginalism, say — got their start in Smith.

I’ve been obsessed for some years with the economist Sam Bowles, one of whose projects has been to return economics to its roots in larger philosophical questions. What’s important about economics is not downward-sloping demand curves, or whether people substitute chicken for beef when the latter becomes more expensive; what’s important is understanding how we build a functioning society out of members who have wildly differing conceptions of the good. More mechanical questions, like what the proper level of taxes ought to be if we want to encourage the development of renewable energy, are also important, but (as I understand Bowles) that’s not what animated our intellectual fathers.

In this light, I’m really quite charmed by how widely and deeply Smith casts his net. He’s not spending 1000 pages repeatedly informing us that the free market works best; he’s constructing a conceptual taxonomy of how economies work. It’s really a work of philosophy, studded at all points with empirical bits. If at points he’s repetitive (for instance, in the chapter distinguishing between real and nominal price levels), it’s because he’s clarifying these concepts for maybe the first time in history. (I’ll have to go read, say, the Physiocrats if I want to understand pre-Smith economics.)

It’s hard to write about this book without feeling like the worst kind of college freshman (of which I was one): “No, you guys don’t understand! The market, guys! The market!” I realize that nothing I say about Smith has gone unsaid before now. Please don’t read anything I say here as though it were novel; read it instead as one man’s revelation that Smith is just as good as everyone says he was. Reading him is going to inform my upcoming reading of, for instance, Amartya Sen.

__P.S.__: To understand Sen, I think I’m going to want to tackle the [book: Theory of Moral Sentiments] first. Approximately no one talks about this book, relative to the number who talk about [book: Wealth of Nations], but I gather that Sen thinks it’s vital.

As promised a month ago, the Adam Smith reading starts Monday. I was late, myself, to buy the books, so I only discovered a few days ago that the editions I mentioned before — Modern Library for [book: Wealth of Nations], Great Minds for [book: Theory of Moral Sentiments] — are hard to come by. They don’t look hard to come by on Amazon, but my favorite bookseller — from which I buy all my books, if I can help it — tell me that it would be hard for you fine people to find them in your own favorite local retailers.

So. What I have here next to me is the University of Chicago Press edition, which is a reprint of the apparently canonical Cannan edition. This one is unabridged, five books long, and about 1200 pages.

I hope this new edition doesn’t screw people up. I was aiming for unabridged editions before, and this is an unabridged edition. So whatever edition you have won’t be too far from what I have.

I’ve got my best people at the Harvard Book Store working ’round the clock to find me the proper edition of [book: Theory of Moral Sentiments]. When I have that one in hand, I’ll mention it here as well. But we have our hands full with [book: Wealth of Nations] for a little while.