Adam Smith: First Principles

Sundial

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The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life.

The first, most basic insight of The Wealth of Nations is that it is not gold, or money, that makes nations rich, but the productivity of their workers.

According therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion.

But 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.


A nation may divided into two classes: the class of those who work, and the class of those who consume without working. The total produce of a nation is divided between those two classes.

Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production...

without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated.


No one exists by his own labor alone. Everyone, in a civilized society, owes his possessions not to his his own efforts, but to the efforts of thousands of others.

Moreover, those possessions are the product of civilization itself.
 
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expat_panama

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... insight of The Wealth of Nations is that it is not gold, or money, that makes nations rich, but the productivity of their workers...
The entire text of Smith's The Wealth of Nations is at Bibliomania: Free Online Literature and Study Guides. Smith had a lot on the ball for the late 1700's and we've not only learned a lot since his time but our present day world is a heck of a lot different than the one he wrote about.

Don't get me wrong, understanding Smith's thinking is all well and good, but so is understanding what happened afterwards --things like the American and French revolutions, the industrial age, several world wars (not to mention Napoleon) etc. Let's say that Smith built a pretty good framework, and facing the overwhelming gaps in his ideas began as early as the Irish potato famine.
 
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It doesn't change the basic framework, that the division of labor is the way to prosperity. And the other basic framework is that politicians are not frugal, not honest, not really tuned into the best interest of the citizen. And that the individual person is the best judge of his own interest.

Of course, politics has moved on. But the same rules apply.

Of course, the best reading is in the last two books. It really is a good read, once you get past the digression on Silver. Which is best skipped, as it is overly topical to the 18th century.

And lets not forget that Smith didn't get it all right. We still suffer because of his labor theory of value.
 
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Sundial

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Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased...

The value which the workmen add to the materials, therefore, resolves itself in this case into two parts, of which the one pays their wages, the other the profits of the employer upon the whole stock of materials and wages which he advanced.

People are employed only to the extent that the employer can sell their labor for more than what he's obligated to pay them. A worker, in other words, supports not only himself, but also his employer.

No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.

The people who do the work should be allowed to keep a reasonable share of the value of what they produce. According to Smith, this is "but equity" (justice).
 
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Sundial

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... insight of The Wealth of Nations is that it is not gold, or money, that makes nations rich, but the productivity of their workers...
The entire text of Smith's The Wealth of Nations is at Bibliomania: Free Online Literature and Study Guides. Smith had a lot on the ball for the late 1700's and we've not only learned a lot since his time but our present day world is a heck of a lot different than the one he wrote about.

Don't get me wrong, understanding Smith's thinking is all well and good, but so is understanding what happened afterwards --things like the American and French revolutions, the industrial age, several world wars (not to mention Napoleon) etc. Let's say that Smith built a pretty good framework, and facing the overwhelming gaps in his ideas began as early as the Irish potato famine.
The modern monetary system is fundamentally different from the days when money had something to do with gold and silver.
 

expat_panama

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...The modern monetary system is fundamentally different from the days when money had something to do with gold and silver.
Please say what you mean. Gold standard? The UK did not base the Pound Sterling on gold. Are you thinking current dollars can't be exchanged for gold or silver? They can. You're thinking that they didn't have inflation back then? They did and it could get far worse than anything we've seen in 50 years.
 
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See Post #4, which quotes it.

it is the basis for Marx's theories.

Smith was trying to explain value in terms of what people were willing to give up for something else, but folks ran off with the theory and said labor was the only real measure of value.
 

sparky

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See Post #4, which quotes it.

it is the basis for Marx's theories.

Smith was trying to explain value in terms of what people were willing to give up for something else, but folks ran off with the theory and said labor was the only real measure of value.
Marx knew the power of prostituting LVT BM


The rate of profit is positive in the system of prices of production if and only if some workers are exploited. Michio Morishima stated and proved this mathematical theorem in his interpretation of Marx's economics


The Labor Theory of Value - A FAQ
 
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Sundial

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...The modern monetary system is fundamentally different from the days when money had something to do with gold and silver.
Please say what you mean. Gold standard? The UK did not base the Pound Sterling on gold. Are you thinking current dollars can't be exchanged for gold or silver? They can. You're thinking that they didn't have inflation back then? They did and it could get far worse than anything we've seen in 50 years.
I mean there was a time when the government could run out of money - that's no longer the case.
 

psikeyhackr

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What did Adam Smith say about Enlightened Self Interest?

Since double-entry accounting is 700 years old and smartphones have more processing power than 1980s mainframes how much should the average American know about economics these days?

How can anyone be enlightened without knowing about planned obsolescence? How can economists be doing their jobs if they don't talk about the depreciation of all of the consumer junk? But maybe their job is to LIE.

Adam Smith and Karl Marx did not live in planned obsolescence economies. That is a 20th century phenomenon.

[ame=http://www.youtube.com/watch?v=I5DCwN28y8o]The Light Bulb Conspiracy - YouTube[/ame]

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psik
 

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the wealth of nations is certainly one of the most interesting books i have ever read.
 

bripat9643

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No one exists by his own labor alone. Everyone, in a civilized society, owes his possessions not to his his own efforts, but to the efforts of thousands of others.

Moreover, those possessions are the product of civilization itself.
You have a special talent for misinterpreting what you do not understand.
 

bripat9643

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I mean there was a time when the government could run out of money - that's no longer the case.
That's true. Now it just prints as much as it wants, just like a counterfeiter - and I mean exactly like a counterfeiter.

The tragic thing is that economic ignoramuses like you approve of that.
 

bripat9643

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...The modern monetary system is fundamentally different from the days when money had something to do with gold and silver.
Please say what you mean. Gold standard? The UK did not base the Pound Sterling on gold. Are you thinking current dollars can't be exchanged for gold or silver? They can. You're thinking that they didn't have inflation back then? They did and it could get far worse than anything we've seen in 50 years.
That is complete horseshit. The Pound Sterling was backed by gold, and inflation during the last 50 years is far far worse than anything we experienced for the 130 years we were under the gold standard. In fact, the dollar was worth more at the end of those 130 years than at the beginning.

If I were you, I would refrain from demonstrating your ignorance any further.
 

expat_panama

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...there was a time when the government could run out of money - that's no longer the case.
Governments have always able to make more money, and governments have always been limited by available resources that their money could buy. Smith's 1700's no longer exist and today's world is so much more interconnected with cheaper transportation, information, communication, and technology while labor's gotten far more expensive. That's why in today's world Smith's statement -
...Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased...
- is well, stupid.

Smith's day had a unit of food per season by a farmer working pretty much as he had since caveman days. Today we got capital equipment and agritech increasing that farmers seasonal output by a factors of several thousands. That means today's food is 99.9% capital and information with a tenth% labor.
 
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expat_panama

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...The UK did not base the Pound Sterling on gold... ...they didn't have inflation back then? They did and it could get far worse than anything we've seen in 50 years.
That is complete horseshit. The Pound Sterling was backed by gold, and inflation during the last 50 years is far far worse than anything we experienced for the 130 years we were under the gold standard...
OK, you know far more than I ever will about horseshit so you win on that. What my head is stuck in is money --history and how it works.

Since the Saxons the pound sterling was silver, not gold, and while silver's trading value for food/labor jumps all over the place like gold, it jumps differently. In the past four decades alone an ounce of gold could buy as little as 20 oz. of gold to as much as 90. No connection other than the fact that they're both erratic, which is why currency fixed on one precious metal saw all other prices go crazy.

Today we hold prices to what we actually buy --stuff like clothes, food, housing. Year/year inflation for that stuff peaked far higher before the 1930's than anything in the past half century. Worse yet the inflation peaks would be followed by horrific deflation. OK, so in the 1920's when inflation topped 25% and then plunged below -25% we came out where we started. Big deal. That's not stable, unless we're back with the kind of stable filled with horseshit.
 

sparky

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But no fiat has ever remained stable Expat. You see, they can't survive unless there's some tether to reality, despite the abuse of it

for instance, you've noted that the dollar no longer has the "Payable to the bearer on demand" passage on it, coins are no longer rare earth, etc

you'll also note that Gold would need to be about $2800 an Oz to back up US currency (an almost 10 yr old stat), so the goldbugs taking up the slack on that inversly proportional benchmark aren't really doing as good as they may think

We've had a long history of on/off fiat here, if it reaches critical mass, the dollar will simply be a piece of paper

Further, as Gold is illegal to own, any intrinsic theory of value would thus be mutually agreed on , and placed elsewhere

~S~
 
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sparky

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What did Adam Smith say about Enlightened Self Interest?


Adam Smith and Karl Marx did not live in planned obsolescence economies. That is a 20th century phenomenon.
a good , if not debate worthy point, so>>>>

Fiat Money -Rome — The DenariusAlthough Rome didn’t actually have paper money, it provided one of the first examples of true debasement of a currency. The denarius, Rome’s coinage of the time, was, essentially, pure silver at the beginning of the first century A.D. By A.D. 54, Emperor Nero had entered the scene, and the denarius was approximately 94% silver. By around A.D.100, the denarius’ silver content was down to 85%.

Emperors that succeeded Nero liked the idea of devaluing their currency in order to pay the bills and increase their own wealth. By 218, the denarius was down to 43% silver, and in 244, Emperor Philip the Arab had the silver content dropped to 0.05%. Around the time of Rome’s collapse, the denarius contained only 0.02% silver and virtually nobody accepted it as a medium of exchange or a store of value


http://www.rapidtrends.com/examples...-throughout-history-could-the-us-repeat-this/

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fascinating
 

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