Smith - Wealth of nations Flashcards
What circumstances dictate a nation’s annual supply?
The produce of annual labour;
“etc., of the labour and the proportion of useful labourers, and more by the skill, etc., than by the proportion of useful labourers, as is shown by the greater produce of civilised societies.”
What produces the greatest improvement in ‘productive powers?”
The division of labor; it always increases productivity.
How does the division of labor work and what are its various effects on productivity and improvement of goods?
1) it saves time
2) it makes workers more skillful at a particular task
3) leads to innovation in technology
From what propensities does the division of labor arise? What does Smith have to say about man as an economical being, and therefore about human nature in general? How does our self-interest function?
It is in Human nature to barter and exchange items. As long as people want to trade for the things that they want, division of labor will continue to be powerful.
How are the division of labor and the markets affected by various circumstances - geography, natural resources etc?
It is the size of the market that determines division of labor. The larger the market, the greater the DoL. This is because there needs to be a market for consumption; this determines how much production there should be.
Geography- depending on the population. A person’s job depends on what kind of town they live inn.
Natural resources - better if goods are able to be transported faster e.g. near a river
How did money come about?
Before shells, metals were used as money e.g. dried cod
But people tend to prefer metal because it is durable.
What is value and what is the relationship between value and labor?
Value is associated to what it can buy. There are 2 types of value: value in use and value in exchange. e.g. water has great value in use but little in exchange while diamonds are the opposite.
The more valuable, the greater the ability to buy ‘labor’. All value is connected to human labor.
How do we arrive at situations where real and nominal prices are very different from each other? How and why do prices fluctuate over time?
Nominal - the amount that we pay for e.g gas
Real - the value of necessities such as food and water
Smith calls it real since it is related to the ‘real needs’ of human life.
Prices fluctuate depending on the scarcity of the metal. “by the richness or barrenness of the mines which supply the market with that metal,”
What is Smith’s definitions of ‘productive’ and ‘unproductive’ labor?
Productive labour adds to the value of the object being created.
Unproductive labor doesn’t add value e.g a household servant.
What does he mean when he talks about ‘stock’? How does he distinguish between capital and revenue?
stock- the commodities that can be used to earn revenue and employ labor. e.g. food, clothes, machines, buildings
capital - stock that is used for revenue
revenue- earnings gained from utilising capital
What makes up Smith’s discussion of the ‘commercial’ or ‘mercantile’ system, as he says in his chapter title?
Mercantile - the idea that if one country is richer, another gets poorer; hence, countries try to bring money in without letting any escape.
Smith says that this idea is bad because a country with a lot of money doesnt mean that it is well off if the people don’t have access to other resources.
What is the connection between individual success and the economic success of a nation, according to Smith?
Famous claim: the overall good of society is better if each individual pursues their own selfish interests. This is because it will force for prices to decrease and more production and better quality.. Hence, by limiting individual success, it will hurt the economy since people are not motivated to decreases prices and increase quality.
Under what circumstances is it desirable, or not desirable, to put restrictions on imports and exports, or other areas of production?
desirable - international trade and taxes to raise funds for public institutions.
Why does Smith advocate for education? What does his proposed system of education look like (take note of its connection to martial activity)?
“The publick can impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education, by obliging every man to undergo an examination or probation in them”
education should be funded through public revenue
What negative effects could the division of labor have upon workers?
lack of diverse skill
