An Inquiry into the Nature and Causes of the Wealth of Nations, commonly known as Wealth of Nations, is a 1776 book by Adam Smith. Without a doubt, is it the masterwork of the Scottish philosopher and economist. Besides, it is one of the most influential political and economic books of our time. It is somewhat of a theoretical basis for capitalism. However, Smith himself never used the word.
Further, The Wealth of Nations has fundaments in Smiths’ earlier work, The Theory Of Moral Sentiments (1759). Besides, it stands on roughly 17 years of notes. Evidently, being published five times during Smiths’ time, the work had a great reception.
It consists of a total of five books.
Book I – Of the Causes of Improvement in the productive Powers of Labor
In the first book, Smith focuses on the division of labor. According to The Wealth of Nations, the division of labor leads to an increase in production. As a consequence of diversification in manufacture, countries can develop. Additionally, he describes the origin of money.
Book II – Of the Nature, Accumulation, and Employment of Stock
Secondly, the author explains that if a person produces enough revenue to last him for months or years, he should derive extra money (stock) and reinvest it. The additional money is called capital. Moreover, Smith explains fixed capital as money used to increase production. On the other hand, buying goods and selling them for a profit is circulating capital.
Book III – Of the Different Progress of Opulence in Different Nations
According to Smith, only cooperation between rural and urban areas can achieve long-run economic growth. Because the country produces goods for the cities, the cities can grow. As a result of their surge, the rural area can develop as well.
Book IV – Of Systems of Political Economy
The fourth book of Wealth of Nations criticizes governmental interventions into the economy. Smith believes that such interventions disrupt the industry and obstruct growth. For this reason, he opposes mercantilism and advocates for a free market instead. Furthermore, he attacks the then-political system and expands the idea of the invisible hand.
Book V – Of the Revenue of the Sovereign or Commonwealth
Smith believes that the government should protect the public from oppression, injustice, and outside threats. Further on, this book of Wealth of Nations deals with taxes. Smith proposes four principles for taxes: proportionality, transparency, convenience, and efficiency. As a matter of fact, some believe that Smith supported progressive taxes.
