Origin. Purpose. Value. Limitation.
Source: Adam Smith, Wealth of Nations, Book IV (1776)
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 eases, 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.
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 eases, 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.
Origin
An Inquiry into the Nature and Causes of the Wealth of Nations is a primary document that was written by economist and philosopher Adam Smith. The book was first published in 1776 in Scotland. It is regarded as the continuation of his first book The Theory of Moral Sentiments. The document being analyzed is an excerpt from Book IV of his works. The excerpt addresses the ideas of self-interest and the invisible hand of competition.
Background
In the eighteenth century, Europe witnessed a steady rise in population. There was a decrease in death due to fewer wars, fewer epidemics, and better hygiene and sanitation. In addition, improvement in agricultural methods increased the food supply. Due to the rise in population the demand for food, jobs, goods, and services also increased. However, the population rise also emphasized social inequality and political corruption.
During the eighteenth century, economic systems began to transform. Previously, nobles held a great deal of privileges and enjoyed profits for farming. Many of the peasants were to obey nobles and were not allowed to negotiate their wages. In the eighteenth century, the nobility’s political and social authority decreased especially in France after the death of Louis XIV in 1715. Economic changes included the spread of commercial capitalism in Western Europe because of the increase in trade and merchant banking. Consequently, money flowed from the monarchs and nobles to the merchant class.
The eighteenth century was only known as the Enlightenment period as people focused on their own needs and desires. Many also paid attention to the welfare of society. The Enlightenment encouraged freedom of thought and belief, a free market economy, rationalism, cultural optimism, and human rights. Many discouraged medieval guilds that restricted people from certain professions. There was a shift to the focus of the relationship between the individual and society. Enlightenment ideas were spread through writings that were translated to provide accessibility.
Purpose
An Inquiry into the Nature and Causes of the Wealth of Nations was a book that carried the revolutionary beliefs and ideas of economist Adam Smith. The book was intended for both the government and the people. Adam Smith intended to introduce new economical concepts and policies that he believed would further develop society.
Value
The excerpt from The Wealth of Nations provides insight into the emphasis on the individual during the Enlightenment period. From the very beginning of the passage, Smith discusses how the “individual…neither intends to promote the public interest, nor knows how much he is promoting it.” Smith argues that the natural individual only cares about their self-interest and does not realize the impact he or she has on the development of society. Smith takes an economic and social perspective when approaching individualism. For instance, he states that “By preferring the support of domestic…industry, [the individual] intends only his own security.” The passage reflects the individualistic approach of the Enlightenment. In terms of political systems, the Enlightenment discouraged the belief that absolute rulers had natural divinity. Instead, many believed that political authority should be based on an agreement among individuals to promote their rational self-interest. In addition, the Enlightenment also promoted individual freedom and the tolerance of religion. Individuals such as Voltaire and Pierre Bayle encouraged tolerance in terms of religious beliefs. By doing so, many appreciated personal freedoms and were able to place more value on the individual. Smith writes, “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” Historians are able to learn that individuals such as Smith cared about individual needs, but were also concerned with the development of society. Smith’s The Wealth of Nations echoes many characteristics of the Enlightenment, especially the benefits of individualism to society.
The excerpt from The Wealth of Nations provides insight into the economic and social climate in eighteenth century Europe. Smith is able to highlight the spread of capitalism in Europe. Smith writes, “By preferring the support domestic to that of foreign industry, he intends only his own security…its produce may be the greatest of value.” He argues that placing more attention on domestic consumers rather than foreign trade can help the economy flourish. Smith’s beliefs reflect the Enlightenment idea that more value should be placed on the individual and that people should have more purchasing power. For instance, Smith argues that the “invisible hand” of competition that exists in a capitalistic economy will automatically guide society in the right direction. Historians are also able to identify the flaws of the mercantile system that existed in eighteenth century Europe. Smith discourages mercantilism stating that he has “…never known much good done by those who affected to trade for the public good.” Through Smith’s argument historians are able to identify that in the mercantile system, a nation’s focus during the Enlightenment was on exporting goods in order to gain more power. Smith’s argument indicates the Enlightenment idea that rather than focusing on exports, it is more profitable to focus on meeting the demands of the consumer. Essentially, through The Wealth of Nation, historians are able to comprehend the Enlightenment ideas that existed regarding the economy and the flaws of the traditional mercantile economy.
Limitations
In the excerpt of The Wealth of Nations, Smith’s vague arguments and diction prevents historians from fully understanding the ideas of the Enlightenment. For instance, Smith writes that the individual does not intend to promote “public interest.” However, Smith never clearly provides an explanation of what these public interests are. Thus, historians are unable to educate themselves regarding the political and economic climates which may have influenced “public interest.” Another instance of Smith’s unclear argument is when he states that he has “never known much good done by” merchants. Though Smith is clear about his disapproval of the mercantile system, he does not provide a reason behind his stance. Historians are in some ways unable to further understand the mercantile system that existed during the Enlightenment and why many great thinkers disliked it. In addition, Smith does not clearly provide his rationale behind why society should pursue the interests of the individual. Essentially, Smith’s lack of clarity weakens his argument, and limits historians’ understanding of the Enlightenment.
An evident limitation of the excerpt from The Wealth of Nations is the very narrow perspective of the argument. Throughout the passage Smith fails to address the opposition and only provides his ideas. The sole perspective prevents historians from understanding society’s beliefs as a whole during the Enlightenment. Furthermore, the first person perspective weakens Smith’s argument since most of his ideas are based on opinions rather than facts. For instance, he states “I have never known much good done” by merchants. As previously mentioned, Smith does provide valid reasons, but merely states his opinion. Thus, Smith narrow perspective limits historians understanding of society’s ideas and beliefs during the Enlightenment.
An Inquiry into the Nature and Causes of the Wealth of Nations is a primary document that was written by economist and philosopher Adam Smith. The book was first published in 1776 in Scotland. It is regarded as the continuation of his first book The Theory of Moral Sentiments. The document being analyzed is an excerpt from Book IV of his works. The excerpt addresses the ideas of self-interest and the invisible hand of competition.
Background
In the eighteenth century, Europe witnessed a steady rise in population. There was a decrease in death due to fewer wars, fewer epidemics, and better hygiene and sanitation. In addition, improvement in agricultural methods increased the food supply. Due to the rise in population the demand for food, jobs, goods, and services also increased. However, the population rise also emphasized social inequality and political corruption.
During the eighteenth century, economic systems began to transform. Previously, nobles held a great deal of privileges and enjoyed profits for farming. Many of the peasants were to obey nobles and were not allowed to negotiate their wages. In the eighteenth century, the nobility’s political and social authority decreased especially in France after the death of Louis XIV in 1715. Economic changes included the spread of commercial capitalism in Western Europe because of the increase in trade and merchant banking. Consequently, money flowed from the monarchs and nobles to the merchant class.
The eighteenth century was only known as the Enlightenment period as people focused on their own needs and desires. Many also paid attention to the welfare of society. The Enlightenment encouraged freedom of thought and belief, a free market economy, rationalism, cultural optimism, and human rights. Many discouraged medieval guilds that restricted people from certain professions. There was a shift to the focus of the relationship between the individual and society. Enlightenment ideas were spread through writings that were translated to provide accessibility.
Purpose
An Inquiry into the Nature and Causes of the Wealth of Nations was a book that carried the revolutionary beliefs and ideas of economist Adam Smith. The book was intended for both the government and the people. Adam Smith intended to introduce new economical concepts and policies that he believed would further develop society.
Value
The excerpt from The Wealth of Nations provides insight into the emphasis on the individual during the Enlightenment period. From the very beginning of the passage, Smith discusses how the “individual…neither intends to promote the public interest, nor knows how much he is promoting it.” Smith argues that the natural individual only cares about their self-interest and does not realize the impact he or she has on the development of society. Smith takes an economic and social perspective when approaching individualism. For instance, he states that “By preferring the support of domestic…industry, [the individual] intends only his own security.” The passage reflects the individualistic approach of the Enlightenment. In terms of political systems, the Enlightenment discouraged the belief that absolute rulers had natural divinity. Instead, many believed that political authority should be based on an agreement among individuals to promote their rational self-interest. In addition, the Enlightenment also promoted individual freedom and the tolerance of religion. Individuals such as Voltaire and Pierre Bayle encouraged tolerance in terms of religious beliefs. By doing so, many appreciated personal freedoms and were able to place more value on the individual. Smith writes, “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” Historians are able to learn that individuals such as Smith cared about individual needs, but were also concerned with the development of society. Smith’s The Wealth of Nations echoes many characteristics of the Enlightenment, especially the benefits of individualism to society.
The excerpt from The Wealth of Nations provides insight into the economic and social climate in eighteenth century Europe. Smith is able to highlight the spread of capitalism in Europe. Smith writes, “By preferring the support domestic to that of foreign industry, he intends only his own security…its produce may be the greatest of value.” He argues that placing more attention on domestic consumers rather than foreign trade can help the economy flourish. Smith’s beliefs reflect the Enlightenment idea that more value should be placed on the individual and that people should have more purchasing power. For instance, Smith argues that the “invisible hand” of competition that exists in a capitalistic economy will automatically guide society in the right direction. Historians are also able to identify the flaws of the mercantile system that existed in eighteenth century Europe. Smith discourages mercantilism stating that he has “…never known much good done by those who affected to trade for the public good.” Through Smith’s argument historians are able to identify that in the mercantile system, a nation’s focus during the Enlightenment was on exporting goods in order to gain more power. Smith’s argument indicates the Enlightenment idea that rather than focusing on exports, it is more profitable to focus on meeting the demands of the consumer. Essentially, through The Wealth of Nation, historians are able to comprehend the Enlightenment ideas that existed regarding the economy and the flaws of the traditional mercantile economy.
Limitations
In the excerpt of The Wealth of Nations, Smith’s vague arguments and diction prevents historians from fully understanding the ideas of the Enlightenment. For instance, Smith writes that the individual does not intend to promote “public interest.” However, Smith never clearly provides an explanation of what these public interests are. Thus, historians are unable to educate themselves regarding the political and economic climates which may have influenced “public interest.” Another instance of Smith’s unclear argument is when he states that he has “never known much good done by” merchants. Though Smith is clear about his disapproval of the mercantile system, he does not provide a reason behind his stance. Historians are in some ways unable to further understand the mercantile system that existed during the Enlightenment and why many great thinkers disliked it. In addition, Smith does not clearly provide his rationale behind why society should pursue the interests of the individual. Essentially, Smith’s lack of clarity weakens his argument, and limits historians’ understanding of the Enlightenment.
An evident limitation of the excerpt from The Wealth of Nations is the very narrow perspective of the argument. Throughout the passage Smith fails to address the opposition and only provides his ideas. The sole perspective prevents historians from understanding society’s beliefs as a whole during the Enlightenment. Furthermore, the first person perspective weakens Smith’s argument since most of his ideas are based on opinions rather than facts. For instance, he states “I have never known much good done” by merchants. As previously mentioned, Smith does provide valid reasons, but merely states his opinion. Thus, Smith narrow perspective limits historians understanding of society’s ideas and beliefs during the Enlightenment.