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Adam Smith: Of the Natural Progress of Opulence

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Mia Cardona

on 24 March 2015

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Transcript of Adam Smith: Of the Natural Progress of Opulence

Adam Smith: Of the Natural
Progress of Opulence

About Adam Smith
Wealth of Nations
Discusses the evolutionary process from the levels of culture to the modern econonmic state of England in 1776.
Hunter-gatherer Modern Commercial
Best economic results: Self-Interest+Gain
Results: General improvement of society due to the individual producing more wealth; greater the wealth of the nation + greater wealth for the individual
Theory of Moral Sentiments
Of the Natural Progress of Opulence
Microcosm- a representation of something on a smaller scale, of the Capitalism's progress as Smith perceived it as
Before the industrial revolution and the American revolution
His main idea and perpective: natural progression of wealth and emphasizes the interchange between the country and the town, not international trade.
"The great commerce is that bewtween town and country, which is obviously advantageous to both."
Born in Kirkcaldy, Scotland
Known as the father of modern econ.
Attended Glasgow University and received a degree from Oxford
1751-Became a professor at Glasgow University: Logic Moral philosophy
Incuding: theology, ethics, justice, political economy
An Inquiry into Nature and Causes of the Wealth of Nations
Theory of Moral Sentiments
Suggests a social order: Altruism
Altruism: system where individuals work together to help one another
"The invisible hand"-A metaphor to illustrate how free market and capitalism create events for the greater good of society without government intervention.
Insets | Paragraph 1
The Great Commerce
Currency and exchange system: Mutual
Country supplies raw materials to manufacture
Town sells part of manufactured produce back
Town gains wealth and subsitence from country
Revenue ($) + Population = extensive market
Adam Smith's home bias: Commerce should stay between the country and adjacent town not far away
Insets | Paragraph 2
"The cultivation of the country must be prior to the increase of the town, though the town may sometimes be distant from the country from which it derives is subsistence."
In order for the industry to obtain luxury and conveniency: needs subsistence
The surplus produce of the country consitutes maintenance of the town
Surplus decreases then subsistence decreases
Surplus increases then subsistence increases
Subsistence: Not always deriven from neighbor country or territory- but can be from distant countries
Insets | Paragraph 3
"This order of things is favored by the natural preference of man for agriculture."
Man for Land
(General) Natural inclinations: Equal/nearly equal profits choose to utilize their capital
Human institutions prevented these inclinations causing territorial land's improvement
Suggests that cultivating the land is manageable over human error
The pleasures of living on the land:
Gain tranquility of the mind
Injustice of human laws do not disturb it
The real destination of man: primitive employment
Insets | Paragraph 4
"Cultivators require the assistance of artificers, who settle together and form a village, and their employment augments with the improvement of the country."
Artificers help cultivate the land
Artificer/artisan: smiths, carpenters, wheel-wrights and plough-wrights, masons, etc
Farmer vs Artificer: Mutual servants
Artificer: (Occasionally) need one another for assistance, are not permanently situated, can together make and augment a town
Cultivation + demand from the country - human institution (morality) = Progressive wealth in every political society
Insets | Paragraph 5+6
"In the American colonies an artificer who has acquired sufficient stock becomes a planter instead of manufacturing for distant sale, as in countries where no uncultivated land can be procured."
The Two Artificers:
Uncultivated land: North American colonies
Artificer aquires more stock than necessary does not attempt distant sale
Becomes a planter: self-employed, cultivates on land, subsistence from labor of the family
Results: Master and independent
No uncultivated land: Countries (European)
Artificer aquires more stock than necessary can attempt distant sale
Creates subdivision and improvement of the market
Insets | Paragraph 7
"Manufactures are naturally referred to foreign commerce."
Preference: (High to Low)
1. Agriculture
2. Manufactures
3. Foreign Commerce
Why? Employement security
Surplus produce with no demand at home in exchange for surplus produce (abroad) with some demand
If the society has not:
aqcuired sufficient capital to cultivate lands
improve the raw product through manufacture
Then, raw produce should be exported
Ex: Egypt, China, Indostan: high degree of opulence
North American and West Indian colonies progress through exporting surplus goods
Insets | Paragraph 8+9
"So the natural course of things is first agriculture, then manufactures, and finally foreign commerce.
But this order has been in many respects inverted."
Natural Order
Greater part of the capital directed to:


foreign commerce

Lands culitvated: before town can establish
Modern states of Europe: inverted
Government at fault for unnatural order: foreign commerce introduces finer manufacture in which both improved agriculture
How do Adam Smith's ideals contrast to the views of Karl Marx?
Adam Smith VS Karl Marx
Limited role of government
Free market:
Choice of Prices and Production
"Invisible hand"
Emphasis on individual wealth
One occupation
One class, one property
Government intervention
Shared wealth
Emphasis on general wealth
Opportunity to become whatever you consider as leisure
Full transcript