The Wealth of Nations by Adam Smith Book 1 and the introduction

Adam Smith is considered the father of economics and now I know why. I read chapter one and the introduction of Adam Smith's, The Wealth of Nations. If we as Americans read and understood what Adam Smith was telling us in 1776, maybe we wouldn't be in the economic situation we are in now. The aspects I will discuss in this essay are the devaluation of currency, price of commodities and price of labour and wages.

Smith gives an excellent history and lesson on money and how metals were first chosen as a means of exchange because of their portablility and stability. Then he talks about how rulers would issue coins that actually contained less gold or silver than they did previous and how this devalued the money which would lead to inflation. I wish we understood this concept today. The dollar isn't even backed by anything, all it is is a piece of paper and in many cases today it's not even a piece of paper; it's just a number in a computer somewhere. No wonder we are experiencing massive inflation now. We don't have a stable means of exchange. It's unfortunate we left the gold standard, we are paying the price now.

Another very interesting and applicable point Smith makes in this first book is that prices are almost always measured by the amount of corn or wheat that can be bought. In times of plenty the price of food is lowered and price of luxuries are increased, but in times of scarcity, the price of food will rise and luxuries may no longer even be exchanged. People will not care for extras, just the necessities in times of scarcity. Food is always necessary and is a good measure of the economy. He also discussed the interesting idea that laborers earn more money in times of plenty and are more independent than in times of scarcity. He says the opposite is also true:

"Masters of all sorts, therefore frequently make better bargains with their servants in dear that in cheap years, and find them more humble and dependent in the former than in the latter. They naturally therefore, commend the former as more favourable to industy." (towards the end of Chapter VIII Of the Wages of Labour)

He also points out that the masters, landlords and farmers, often make a better profit in dear years because the price of labour is less. Another interesting point he brought up earlier in this chapter is that wages for laborers are the highest when the economy is growing rapidly. He says:

"It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordinigly, in the richest countries, but in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest."

This was an excellent read and very thought provoking. I highly recommend this book especially if you want to learn more about Economics. So many things begin to make sense under this new light. Adam Smith is very exact and uses many case studies from history to illustrate his points. If you are willing to take the time to really delve in and understand his points, then you can certainly draw parallels to the present. Good luck, thanks for reading!!