Notes on the Margins of Adam Smith’s Wealth of Nations Mohamed El-Hodiri Kansas, Fall 2005
BOOK I • Chapter VII. Micro economics Natural Price: = Natural Wage bill+ Natural Rental bill + Natural Profit of stock bill Market Price: = Market Wage bill + Market Rental bill + Market Profit of stock bill • Chapter VIII. Labor economics Wages: natural and market (see p. 83 # 11). Changes in natural wages, Changes in market wages • Chapter IX. Beginnings of a theory of capital Profit of Stock: natural and market. Changes in natural POS and market POS. See p. 105 #2. • Chapter X. General Equilibrium (sort of) Wage rates and POS rates equalize across employments of labor and stock • Chapter XI. Land Economics o A. rental of land is POS on improvements (start at the margin) see p. 160 # 2 o B. embryonic differential rent see p 162, # 1 o C. on the margin market shenanigans o D. History on the sub-super margin E. First period 195 F. Second period G .Third period H. Embryonic monetary economics I., J, K, M, N. Continued monetary theory o O .Improvements and natural price (Technological progress) o P. More economic history
BOOK II. Capital Theory • Intro o Necessity of accumulation at the onset of division of labor o Deepening of capital as labor divides more o feedback • Chapter I. Division of Stock o Micro Poor people do not have capital gains (nor dividends); they live on subsistence and have opportunity to accumulate. People earning above subsistence can consciously accumulate in order to derive future income. The potion not consumed goes into: • Circulating capital • Fixed capital • Proportions vary by occupation o Macro (National accounts). National Stock (meaning National Wealth) divides to: Consumption Stock Fixed Capital Stock • Machinery • Structures • Improvements on Land • Improvements on Labor Circulating Capital • Transactions fund • Consumer goods inventory • Goods in process inventory • Undistributed finished goods inventory • Chapter II. Of money Considered as a particular Branch of the Stock of the Society or of the expense of maintaining National Capital. Aggregate money as the stock that produces transactions services. Or the productivity of pure finance capital.
BOOK III Economic Growth and Development; the evidence. • Chapter I. The Natural Rate of Growth
o Urban-rural trade benefits both. o Urban centers evolve when there is no free land o Export lead Egypt China North America • Chapter II. Decline due to no trade because of decrease in agricultural activity o Subsistence o Share croppers Coloni Partiari . No improvements
• Chapter III. Rise and Progress of Urban centers o Role of good government o Contact with others and taste for refinements
• Chapter IV. Commerce of urban centers induced improvement of rural regions
BOOK IV Systems of Political Œconomy. Trade Policy
• Chapter I. Of the principle of mercantile System o Question “wealth as money” o Gold to a Spaniard, Sheep/horse to a Tartar (our nomads and their nomads) o Diamonds are a girl’s best friend? o Money measures value, if no value is generated the what is the worth of money o Europeans and the accumulation of gold and silver at all costs o Argue for trade not gold • Chapter II. Of restraints upon the importation from foreign countries of such goods as can be produced at home.
o Monopoly at home o Duties and domestic prices o Capital account (investors from abroad) o Losses to service sector (commercial margin • Chapter III.. Protectionism to solve trade deficits problems • Chapter IV. What is wrong with this picture • Chapter V. Export subsidies • Chapter VI. Of treaties of Commerce • Chapter VII. Of Colonies o a. Motives for establishing new colonies o b. Causes of prosperity of new Colonies o c. Of the advantages that Europe has derived from the discovery of America, and from that of a passage to the East Indies by the Cape of Good Hope. • Chapter VIII. Conclusion of the Mercantile System
• Chapter IX. Of the Agricultural Systems or of those Systems of Political Œconomy which represent the Produce of Land as either the sole or the principal Source Of Revenue and Wealth of every Country.
BOOK V Of the Revenue of the Sovereign or Commonwealth
• Chapter I. Of the Expences of the Sovreign or Commonwealth o A. Of the expence of Defence Defense ids first duty in primitive all are worriers-hunters Shepherds are seasonal worriers distribution of income through gracious hospitality and of wealth through raids. In Agricultural societies need to specialize in war Standing Army as result of specialization Cost to society and benefit of standing army o B. Of the Expense of Justice Second duty: protect every citizen from other citizens Hunters have no property Civil government supposes a certain subordination. Possible causes are: • Superiority of personal qualifications • Superiority of age • Superiority of fortune • superiority of birth • Top of hierarchy is the sovereign history of how that evolves • Financing the expense of justice (court fees) o C. Of the Expence of Publick Works and publick institutions Third duty of sovereign is to construct and maintain infrastructural works esp. when the benefits can not be individually assigned • Public works and institutions for facilitating Commerce o In general o In particular • Of the expence of the Institutions for the Education of Youth • Of the expence of the Institutions for the Instruction of People of all Ages. • Of the Expence of supporting the Dignity of the Sovreign
• Chapter II. Of the sources of the general or public Revenue of the Society o A. Of Funds or Sources of Revenue Which may particularly belong to the Sovereign or Commonwealth (publicly owned assets) o B. Of Taxes Taxes upon rent; taxes upon rent of land Taxes which are proportional , not to rent, but to produce of land Taxes upon rent of houses Taxes upon profit or upon revenue arising from Stock Taxes upon profit of particular employments Appendix Taxes upon wages of labor Equal Burden Consumption taxes
• Chapter III. Of Public Debts o Stages of history when borrowing is not necessary o Debts incurred in emergencies o Intergenerational fairness o Internal balance o External balance