Editing Adam Smith (section)

===''The Wealth of Nations''===
{{Main|The Wealth of Nations}}

Disagreement exists between classical and neoclassical economists about the central message of Smith's most influential work: ''An Inquiry into the Nature and Causes of the Wealth of Nations'' (1776). Neoclassical economists emphasise Smith's [[invisible hand]],<ref>Smith, A., 1976, ''The Wealth of Nations'' edited by R.&nbsp;H. Campbell and A.&nbsp;S. Skinner, ''The Glasgow edition of the Works and Correspondence of Adam Smith'', vol. 2a, p. 456.</ref> a concept mentioned in the middle of his work – Book&nbsp;IV, Chapter&nbsp;II – and classical economists believe that Smith stated his programme for promoting the "wealth of nations" in the first sentences, which attributes the growth of wealth and prosperity to the division of labour. He elaborated on the virtue of prudence, which for him meant the relations between people in the private sphere of the economy. He planned to further elaborate on the virtue of justice in the third book.<ref name="The Theory of Moral Sentiments"/>

Smith used the term "the invisible hand" in "History of Astronomy"<ref>Smith, A., 1980, ''The Glasgow edition of the Works and Correspondence of Adam Smith'', vol. 3, p. 49, edited by W.&nbsp;P.&nbsp;D. Wightman and J.&nbsp;C. Bryce, Oxford: Clarendon Press.</ref> referring to "the invisible hand of Jupiter", and once in each of his ''[[The Theory of Moral Sentiments]]''<ref>Smith, A., 1976, ''The Glasgow edition of the Works and Correspondence of Adam Smith'', vol. 1, pp. 184–185, edited by D.&nbsp;D. Raphael and A.&nbsp;L. Macfie, Oxford: Clarendon Press.</ref> (1759) and ''The Wealth of Nations''<ref>Smith, A., 1976, ''The Glasgow edition of the Works and Correspondence of Adam Smith'', vol. 2a, p. 456, edited by R.&nbsp;H. Cambell and A.&nbsp;S. Skinner, Oxford: Clarendon Press.</ref> (1776). This last statement about "an invisible hand" has been interpreted in numerous ways.

[[File:19th-century building at location where Adam Smith lived, 1767-1776.jpg|thumb|[[Adam Smith House|Later building on the site]] where Smith wrote ''The Wealth of Nations''|alt=A brown building]]
<blockquote>As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.</blockquote>

Those who regard that statement as Smith's central message also quote frequently Smith's dictum:<ref>Smith, A., 1976, ''The Glasgow edition'', vol. 2a, pp. 26–27.</ref>

<blockquote>It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.</blockquote>However, in ''The Theory of Moral Sentiments'' he had a more sceptical approach to self-interest as driver of behaviour:<blockquote>How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.</blockquote>[[File:Wealth of Nations.jpg|thumb|upright|The first page of ''The Wealth of Nations'', 1776 London edition|alt=The first page of a book]]
In relation to [[Bernard Mandeville|Mandeville]]'s contention that "Private Vices ... may be turned into Public Benefits",<ref>Mandeville, B., 1724, ''The Fable of the Bees'', London: Tonson.</ref> Smith's belief that when an individual pursues his self-interest under conditions of justice, he unintentionally promotes the good of society. Self-interested competition in the free market, he argued, would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services. Nevertheless, he was wary of businessmen and warned of their "conspiracy against the public or in some other contrivance to raise prices."<ref>Smith, A., 1976, ''The Glasgow edition'', vol. 2a, pp. 145, 158.</ref> Again and again, Smith warned of the collusive nature of business interests, which may form cabals or [[Monopoly|monopolies]], fixing the highest price "which can be squeezed out of the buyers."<ref>Smith, A., 1976, ''The Glasgow edition'', vol. 2a, p. 79.</ref> Smith also warned that a business-dominated political system would allow a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation. Smith states that the interest of manufacturers and merchants "in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public ... The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous but with the most suspicious attention."<ref>{{cite magazine |last=Gopnik |first=Adam |title=Market Man |magazine=[[The New Yorker]] |date=10 October 2010 |issue=18 October 2010 |page=82 |url=https://www.newyorker.com/arts/critics/books/2010/10/18/101018crbo_books_gopnik |access-date=27 April 2011 |archive-date=5 March 2011 |archive-url=https://web.archive.org/web/20110305185415/http://www.newyorker.com/arts/critics/books/2010/10/18/101018crbo_books_gopnik |url-status=live }}</ref> Thus Smith's chief worry seems to be when business is given special protections or privileges from government; by contrast, in the absence of such special political favours, he believed that business activities were generally beneficial to the whole society:

<blockquote>It is the great multiplication of the production of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of society. (''The Wealth of Nations,'' I.i.10)</blockquote>

The neoclassical interest in Smith's statement about "an invisible hand" originates in the possibility of seeing it as a precursor of [[neoclassical economics]] and its concept of [[General equilibrium theory|general equilibrium]]; [[Paul Samuelson|Samuelson]]'s "Economics" refers six times to Smith's "invisible hand". To emphasise this connection, Samuelson<ref>Samuelson, P.&nbsp;A./Nordhaus, William&nbsp;D., 1989, ''Economics'', 13th ed., N.Y. et al.: McGraw-Hill, p. 825.</ref> quotes Smith's "invisible hand" statement substituting "general interest" for "public interest". Samuelson<ref>Samuelson, P.&nbsp;A./Nordhaus, William&nbsp;D., 1989, idem, p. 825.</ref> concludes: "Smith was unable to prove the essence of his invisible-hand doctrine. Indeed, until the 1940s, no one knew how to prove, even to state properly, the kernel of truth in this proposition about perfectly competitive market."

[[File:Smith - Inquiry into the nature and causes of the wealth of nations, 1922 - 5231847.tif|thumb|170px|1922 printing of ''An Inquiry into the Nature and Causes of the Wealth of Nations,'' edited by [[Edwin Cannan]]]]
Conversely, classical economists see in Smith's first sentences his programme to promote "The Wealth of Nations". Using the physiocratical concept of the economy as a circular process, to secure growth the inputs of Period 2 must exceed the inputs of Period 1. Therefore, those outputs of Period 1 which are not used or usable as inputs of Period 2 are regarded as unproductive labour, as they do not contribute to growth. This is what Smith had heard in France from, among others, [[François Quesnay]], whose ideas Smith was so impressed by that he might have dedicated ''The Wealth of Nations'' to him had he not died beforehand.<ref>{{harvnb|Buchan|2006|p=80}}</ref><ref>Stewart, D., 1799, ''Essays on Philosophical Subjects, to which is prefixed An Account of the Life and Writings of the Author by Dugald Stewart, F.R.S.E.'', Basil; from the Transactions of the Royal Society of Edinburgh, Read by Mr. Stewart, 21 January, and 18 March 1793; in: The Glasgow edition of the Works and Correspondence of Adam Smith, 1982, vol. 3, pp. 304 ff.</ref> To this French insight that unproductive labour should be reduced to use labour more productively, Smith added his own proposal, that productive labour should be made even more productive by deepening the [[division of labour]].<ref>{{cite journal|last=Bertholet|first=Auguste|date=2021|title=Constant, Sismondi et la Pologne|url=https://www.slatkine.com/fr/editions-slatkine/75250-book-05077807-3600120175625.html|journal=Annales Benjamin Constant|volume=46|pages=80–81}}</ref> Smith argued that deepening the division of labour under competition leads to greater productivity, which leads to lower prices and thus an increasing standard of living—"general plenty" and "universal opulence"—for all. Extended markets and increased production lead to the continuous reorganisation of production and the invention of new ways of producing, which in turn lead to further increased production, lower prices, and improved standards of living. Smith's central message is, therefore, that under dynamic competition, a growth machine secures "The Wealth of Nations". Smith's argument predicted Britain's evolution as the workshop of the world, underselling and outproducing all its competitors. The opening sentences of the "Wealth of Nations" summarise this policy:

<blockquote>The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes ... . [T]his produce ... bears a greater or smaller proportion to the number of those who are to consume it ... .[B]ut this proportion must in every nation be regulated by two different circumstances;
* first, by the skill, dexterity, and judgment with which its labour is generally applied; and,
* secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed [emphasis added].<ref>Smith, A., 1976, vol. 2a, p. 10, idem</ref></blockquote>

However, Smith added that the "abundance or scantiness of this supply too seems to depend more upon the former of those two circumstances than upon the latter."<ref>Smith, A., 1976, vol. 1, p. 10, para. 4</ref>

In ''The Wealth of Nations'', Smith states four maxims of taxation: (1) equality (people must contribute to the support of the government in proportion to their abilities), (2) certainty (the time, manner, and quantity of tax imposed must be certain, transparent, and not arbitrary), (3) convenience for taxpayers, and (4) economy in tax collection.<ref name=":0">{{Cite book |last=Lin |first=Shuanglin |title=China's Public Finance: Reforms, Challenges, and Options |publisher=[[Cambridge University Press]] |year=2022 |isbn=978-1-009-09902-8 |edition= |location=New York, NY}}</ref>{{Rp|page=2}} According to Smith, "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more in that proportion".<ref name=":0" />{{Rp|page=98}}

Smith wrote that a government is duty-bound to provide public services that "support the whole of society" like provide public education, transportation, national defense, a justice system, public safety, and public infrastructure to support commerce.<ref name=":0" />{{Rp|page=163}}