Study Guide

The Wealth of Nations

By Adam Smith

The Wealth of Nations Introduction

Have you ever heard that old saying, "The road to hell is paved with good intentions"? Well if not, now you have. This saying basically says that people often do more harm than good when they try to help others: not a cheery thought.

And that's exactly what Adam Smith believes when it comes to running a country's economy. He thinks that everything will work out fine as long as everyone pursues their own selfish interests and the government doesn't do anything to keep them from doing so.

Sounds simple, right? But why then does it sound so wrong to so many people? Aren't we all supposed to help each other?

It's fair to say that there was some wild stuff going on in the world when Adam Smith first published The Wealth of Nations in 1776. There was that whole bloody revolution in America where the United States kicked out the British and became an independent country. Meanwhile, Adam Smith was writing to show the world that it would be a good thing for Britain if it lost control over its colonies and let them become independent nations.

The reason was because Smith knew that keeping control over these countries was costing more than the countries were worth. But the overall result of Smith's work would do more than punch colonialism in the stomach. It would lay the groundwork for the theory of "free trade," which continues to be the most dominant economic theory in the world almost 250 years later.

So what is free trade economics? Well it's basically the theory that if governments get out of the way and allow people to follow their selfish business interests, more cool stuff will get created, prices will go down, and everyone will live better lives.

That's because the supply of certain goods will always follow the public demand for those goods. So the market will always give people what they want in ways that government interference could never hope to accomplish. At the end of the day, you have a theory about how the whole world can get rich all at once. That was a wacky idea in Smith's time, and many people today still find it hard to believe.

But hey: hear him out and see what you think.

What is The Wealth of Nations About and Why Should I Care?

Sometimes a person says "Why should I care?" and you think, "Huh. Good question." But when it comes to The Wealth of Nations, this question can sound a bit silly once you realize just how much Adam Smith's thinking has touched ever aspect of your life.

That TV you own might have cost ten thousand dollars instead of two hundred without the thinking of Adam Smith. Just take a walk around your house sometime and check out all the products that weren't made in your home country. The reason you can afford to have them is because they come from an international market, where stiff competition and innovation have made the products both better and cheaper. And that might not be the case if Adam Smith had never written The Wealth of Nations.

Next time you're walking around, pay attention to how many people have cell phones—everyone, right? Then just think for a second how this incredible technology was only a dream to the richest people in the world thirty years ago. Free trade has allowed people from all over the world to pool their talent and hard work to create things we never thought were possible. And in the coming years, this process will continue.

But it's not just sunshine and smartphones for fans of Adam Smith. There is still a raging debate in many parts of the world about whether free trade is as good as people say it is. After all, a lot of people in your home country or town have probably lost their jobs because their companies have decided to move somewhere with cheaper workers.

Adam Smith would tell you to have faith that this is a good thing in the end, but many people are willing to march in the streets to show their disagreement. When it comes down to it, you'll have to decide for yourself how you feel about free trade. And hey— once you've read The Wealth of Nations, you'll be a lot more informed about the subject than your average Joe or Jane.

The Wealth of Nations Resources

Websites

Adam Smith: The Father of Economics
Check out this link to visit a think tank that's devoted to continuing the legacy of Adam Smith's thinking. It'll give you a decent sense of just how influential this guy continues to be in today's world.

Adam Smith International
This business has named itself after Adam Smith to show its commitment to applying free-market solutions to real-world problems.

Adam Smith Conferences
As you can probably tell by now, any organization that mentions Adam Smith will usually be business-focused in some way. These folks organize conferences all over the world so people can get together and talk about how Adam Smith's ideas can continue to improve the world.

Articles and Interviews

Adam Smith: The Father of Economics
This article (and brief video) walks you through Adam Smith's life and explains how his ideas basically created the study of modern economics that is taught in high schools and universities all over the world today.

Bringing Dead Economists Back to Life: Adam Smith on the Financial Crisis
Anyone remember the U.S. financial crisis of 2008? Well you should because it's still influencing the world today. And this article talks all about how Adam Smith's ideas might apply to the situation.

Smith's Word
This article looks at some of the places where people are most likely to misquote Adam Smith and confuse his ideas. Be sure to check this out if you want to call someone out on their lies about Smith.

Video

Why Is The Wealth of Nations So Important?
We tried to answer this already in our "Why Should I Care?" section. But be sure to check out this video more a more in-depth look at all the ways Smith continues to influence the world today.

Adam Smith Vs. Karl Marx
This video creates the ultimate grudge match, pitting Adam Smith's ideas against those of his greatest critic, Karl Marx. You'll have to watch to find out how they stack up.

The Invisible Hand: 60-Second Adventures in Economics
This video will give you the fastest explanation of Adam Smith's theory that you're likely to find on the internet.

Audio

The Wealth of Nations: Book 1 (Audio)
Eyes getting tired? Well they should be, because The Wealth of Nations is one heavy book. Why not kick back and let YouTube do the reading for awhile?

The Wealth of Nations, Book 2 (Audio)
On a roll? Why stop now?

Book 3
Hurry up and gather your friends. He's about to start talking about opulence and sobriety.

Images

What a Hunk
Who can disagree with a face like that?

Sketch in Profile
It's probably not a coincidence, but this economist sure looks like he belongs on a ten-dollar bill.