The original book seemed a little too unwieldy for me so I read the cliff notes over at Grade Saver. Here is what I learned…
1. The division of labor increases productivity and therefore increases wealth. Instead of producing all the things you need, produce one in excess and trade for everything else.
2. Human beings are natural traders. They give things they have in abundance for other things they want.
3. “Improvements to art and industry are made only when there is an assurance of a large market that will be able to absorb the products of labor.”
4. A large population is needed to ensure a market for your goods. This is why urban developments have naturally formed.
5. Thriving economies are dependent on people who are motivated by self-interest.
6. “A situation in which the market price of labor is either significantly above or significantly below its natural price will be checked by actions of the laborers, who either devote themselves to a particular employment due to the high wages, or who turn their attention to other employments because wages are too low.”
7. Growth is necessary in all economies. “In a stagnant economy, even a wealthy one, the lowest classes will be desperately poor.”
8. Writers and entertainers are maintained by the annual produce of the productive land and labor of a country. There can’t be a country of only entertainers. “Unproductive labor is not unnecessary or useless, but it does not create economic surpluses. It is funded from labor that does indeed create these surpluses.”
9. Once a society reaches a high level of opulence, resources get diverted to increasing amounts of unproductive labor, leading to decline.
10. “It takes a strong legal system for capitalism to flourish, because those who are prepared to invest must have the confidence that their capital will be protected.”
11. “It is the nature of governments to hold tightly to their power, even if increased freedom would benefit the people and the economy.”
12. “Anything that is self-sustaining may not be defined as unproductive.”
13. “Perfect liberty [is] the only effective way to render the annual production the greatest possible.”
14. “The wealth of nations consists not in money, but in the consumable annual goods annually produced by the labor of the society.”
The book also had insight into the economy of the American colonies right before the revolutionary war.
I read the summary of this book because I’m getting the impression that politicians are bamboozling us when it comes to economics. I wanted to reach back to a source that is untainted with modern capitalist thought.
The more of this type of reading I do, the more I come to the conclusion that liberal economic policies based on a welfare or equality model is incompatible with growing and robust economies where actual wealth is generated. Capitalists take a large risk through investment, and only in societies where they feel that risk will be rewarded will such an investment occur. Understanding the fundamental rules of economics allows you to make sense of government action today and how they will fall far short of their intended purposes.
Read More: The Wealth Of Nations