The Wealth of Nations

Several things surprised me about this book.

First, it turns out it is extraordinarily readable. I was concerned going in that a five hundred page economics textbook from the seventeen hundreds might get a little dry. In fact, the language was just old enough to sound wonderful, but not so old it was hard to read. It did sometimes get a little slow, especially when Smith got in to the gritty details of "current" English tax policy, but for the most part, the arguments moved along with a certain brisk logic that I actually enjoyed reading quite a bit. All in all, it was a much faster, easier read than I had anticipated.

Second, it also turns out that reading it is a very good conversation starter. I was absolutely shocked at how many people had read (or had started reading) The Wealth of Nations. I had kinda figured it was one of those books that everybody talked about and nobody read--you know, a classic. It seems I was wrong. A lot of people have read it. (To be fair, I do run in fairly geeky circles...) That's a good thing. Everyone who wants to comment on economics should first have to read this book. (Although there's some irony in that statement as compulsion of basically any sort is entirely against Smith's program...)

Finally, it made me hate the federal government for something I already knew they did. Don't get me wrong. I always hate the federal government, but usually I am very good at coming up with reasons to do so on my own. When I get a new reason, it's typically because I find out they're doing something I didn't know they were doing. If I know the program exists, I have usually already thought of all the reasons to hate it. Like I said, I'm good at that. Then Adam Smith pointed out that collecting an income tax is actually an extraordinarily invasive thing for the government to do. And you know what? He's got a really good point. What business of Uncle Sam's is it how much money I make? Why do I have to inform the federal government every single time I get a paycheck? Heck, my own parents don't know how much money I make. Why, why, why should the federal government know more about my financial situation than my own parents?? For that matter, the federal government probably knows more about my financial situation than I do! (This one is probably my own fault, but still...) (Also, for the record, I always hated the income tax, but only on the "the government is taking my money" level. I guess I've just grown up with it so the privacy thing never occurred to me.)

As you may have realized by now, this post may turn into a bit of an anti-government rant. I don't generally want this blog to be political, but I'm reviewing The Wealth of Nations. There's no getting around it for now.

The funny thing is, Smith does not come across as nearly anti-government as I think I do. In fact, he sometimes seems to go out of his way to say positive things about governmental economic regulations, but it's almost always things like (I paraphrase) "the law enforcing the price to be below this value was a wise one since the market price was well below that anyway." In other words, the good laws are the ones that don't do anything. To be fair, he does have plenty of criticism for various regulations.

He also has lots of criticism for the mercantile system. I was very happy to see this because I have also been opposed to the mercantile mindset since I heard of it. Granted, my response has been, "That seems really dumb. Am I missing something." And his was more, "It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing. Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it." (And so on for several chapters.) Nevertheless, I do feel vindicated that I independently reached the same conclusion as Adam Smith.

My only complaint is that The Wealth of Nations was written so long ago. His discussion of money and monetary policy was fascinating, but he takes a gold or silver standard completely for granted. I would be very interested to see what he makes of a paper money system decoupled from any precious metal, or, stranger still, a system like bitcoin, where the money isn't even a physical thing. He also used lots of examples from history or "current" events that I wasn't familiar with, and I think certain points would have been a little clearer if I had been more aware of circumstances he was discussing.

I realize that this review is not providing very much of an overview of the book. There's a good reason for that. This is a book proposing an entire economic system. No overview could do justice to it. It's just too big a topic. I thought about starting this post with a particularly good or representative quote, but there are too many good ones. I couldn't choose. You're just going to have to read it for yourself. I promise it's worth it.