Adam Smith and the Wealth of Nations

1. Seventeen seventy-six marked the publication in England of one the most influential books of our time, The Wealth of Nations.

2. Written by Adam Smith, it earned the author the title “The Father of Economics”.

3. Smith objected to the principal economic beliefs of his day.

4. He differed with the physiocrats who argued that land was the only sources of wealth.

5. He also disagreed with the mercantilists who measured the wealth of a nation by its money supply, and who called for government regulation of the economy in order to promote a “favorable balance of trade”.

6. In Smith’s view, a nation’s wealth was dependent upon production, not agriculture alone.

7. How much it produced, he believed, dependent upon how well it combined labor and other factors of production.

8. The more efficient the combination, the greater the output, and the greater the nation’s wealth.

9. The heart of Smith’s economic philosophy was his belief that the economy would work best if left to function on its own without government regulation.

10. In those circumstances, self-interest would lead business firms to produce only those products that consumers wanted, and to produce them at the lowest possible cost.

11. They would do this, not as a means of benefiting society, but in an effort to outperform their competitors and gain the greatest profit.

12. But all this self-interest would benefit society as a whole by providing it with more and better goods and services, at the lowest prices.

13. To explain why all society benefits when the economy is free of regulation, Smith used the metaphor of the “invisible hand”:

14. “Every individual is continually exerting himself to find the most advantageous employment for whatever capital he can command.

15. It is his own advantage, and not that of society, which he was in mind,…but he is in this, as in many other cases, led by an invisible hand to promote an end which was no

part of his intention, for the pursuit of his own advantage necessarily leads him to prefer that employment which is most advantageous to society”.

16. The “invisible hand” was Smith’s name for the economic forces that we today would call supply and demand, or the marketplace.

17. He sharply disagreed with the mercantilists who, in their quest for a “favourable balance of trade”, called for regulation of the economy.

18. Instead, Smith agreed with the physiocrats and their policy of “laissez faire”, letting individuals and businesses function without interference from government regulation or private monopolies. In that way, the “invisible hand” would be free to guide the economy and maximize production.

19. The Wealth of Nations goes on to describe the principal elements of the economic system.

20. In a famous section, Smith turned to the pin industry to demonstrate how the division of labor and the use of machinery increased output.

21. “On man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations …”

22. Although modern technology has improved the methods by which pins are produced, the principles pertaining to the division of labor remain unchanged.

23. Similarly, other sections dealing with the factors of production, money and international trade are as meaningful today as when they were first written.

Vocabulary

earn – зарабатывать object – возражать

depend upon – зависеть от … combination – соединение belief – убеждение circumstances – обстоятельства self-interest – личный интерес outperform – превосходить competitor – конкурент

invisible-hand – невидимая рука continually – постоянно

exert – напрягать

advantageous employment –преимущественная работа (занятие)

pursuit – преследование interference – вмешательство

pin industry – производство булавок increased output – увеличивать выпуск meaningful – важное значение

Exercises

II. Find the Russian equivalents:

Differed with the physiocrats, nation’s wealth, dependent upon production, output, pin industry, government regulation, to gain, the greatest profit, function without interference, the use of machinery, invisible hand, advantageous employment, the division of labor, the use of machinery, government regulation, favorable balance of trade.

III. Find the English Equivalents:

Влиятельная книга, отец экономики, богатство нации, более эффективно, сердце экономической философии Смита, зарабатывать большую прибыль, частная монополия, разделение труда, улучшить баланс торговли, личный интерес.

IV. Fill in the gaps with the words and expressions from the text:

1. He differed with the … who argued that land was the only sources of … .

2. In Smith’s view, a nation’s wealth was dependent upon …, not … alone.

3. The heart of Smith’s economic philosophy was his belief that the economy would work … if left to function on its own … government regulation.

4. To explain why all society benefits when the economy is free of regulation, Smith used the metaphor of the … .

5. The “invisible hand” was Smith’s name for the … that we today would call supply and demand, or the … .

6. The “invisible hand” would … to guide the economy and … production.

7. Smith turned to the pin industry to demonstrate how the … and the use … increased output.

V. Answer the questions:

1. Which book was published in 1776?

2. Did Smith object to the principal economics beliefs?

3. What was Smith view on a national’s wealth?