Question

summary of book the wealth of nations

Answer 1

The Wealth of Nations was written by Adam Smith, and is seen as one of the key developments in the economic fraternity. It is due the findings of this very book, that the writer has correctly been coined as the Father of Economics.

The book revolves around the simple thinking, that the ultimate goal for all individuals is satisfaction of their needs and goals for which it is necessary to increase the flow of money in any economy and to indulge in free trade which will help in increasing domestic as well as international production.

He also stated the need for abolishing of taxes and allowing for international trade to take place without major restrictions in place. This he said would allow for increased production levels and better conditions for most economies.

The book also states, the role of demand and supply in the economy which he says to be the invisible hand. Adam Smith stated that government should not control the price of goods and services, but rather the forces of demand and supply should allow for the prices to be set.

The Book also emphasizes on the fact, that division of labour is the most important factor which determines the wealth of any nation. He says that a country should engage in production of those goods and services on which it has a comparative advantage.

For example, a country like the United States of America is rich in Capital and should thus produce those goods which require larger capital investments. Countries such as India on the other hand should focus on labour intensive techniques which are in abundance in the country.

He says that the availability of resources is different in different countries, and accordingly the country should specialize in production of selected goods which would allow it to grow in the long term.

We can summarize the contents into the following major advocates which were stated: -

1) Self Interest of Consumers lead to an increase in demand which help producers as well to increase production levels and benefits the society at large.

2) Governments focus should be limited to politics and administration. The markets are fully capable of devising the prices of goods and services with the help of the invisible hand i.e. the forces of demand and supply.

3) Free Market Economy in which taxes are reduced help countries in growing.

4) Division of Labour can help in specialized production which will lower costs in comparison to other countries and allow for sales of goods and services which are better priced in the international markets due to free economies.

Please feel free to ask your doubts in the comments section if any.