Cheap The Wealth of Nations

First off, this book is a classic and cannot be ignored by anyone claiming to have interest in economics or political economy. In this review, I shall address a few points only (obviously the ones that I found most interesting).

The division of labour. Although the conclusions should seem obvious to anyone with even scant knowledge of economics, this section really was the most interesting. Smith goes through the logic of why the division of labour is crucial to the economy. My reading of the famous "pin-maker" analysis was quite interesting as well.

Labour theory of value. Admittedly, Smith confused me with his labour theory of value and has left me with more questions regarding his beliefs than answers. Perhaps I am missing something so I would appreciate it if other reviewers could point me in the right direction if I am. Smith begins by making a distinction between "real" and "nominal" price. The "real" price is the long term value of a product based on the amount of labour required to produce it. The "nominal" price is the price the good currently trades at. The "real" and "nominal" prices can differ due to a myriad of short term factors, but long term, a good will tend to converge on the "real" price. Now, as long as the labourer produces and sells his product (i.e. realizes the entire price), this theory seems logical. Smith, however, soon brings in capital (profits) and land (rent) into the equation. All of a sudden, value no longer only contains the labour required to produce the good, but rent and profit as well (rent going to the landowner and profit going to the capitalist). Smith seems to assume these as givens. As far as I can tell, he offers no logical reason as to why this should be so. But the problem, obviously, is that this is no longer really a labour theory of value because the amount of labour required to produce the product is not the only component in price. I didn't read anything in this book that explains the contradiction.

Interest rates. I'll make one comment here. Smith's suggestion that interest rates be held at a low level, and direct the extra liquidity into only commercial loans seems a bit naive. How do you control this exactly? Furthermore, I fail to comprehend how someone can make the argument that this is not inflationary and unsustainable.

Mercantilism. I'll keep this brief. Smiths' demolition of mercantilist thought was thorough and brilliant. He left absolutely no escape valve for mercantilist thought.

Government's role in the economy. This section was particularly interesting. Would Smith be a liberal or conservative in the modern world? He most certainly would not be a libertarian given his approval for quite an extensive role for government in society.Get more detail about The Wealth of Nations.