Notes On Adam Smith, The Wealth Of Nations

2019/10/06

Last updated on: 2019/11/23

Components of the natural price of a commodity

The components are rent, labor and profit. Rent goes to capitalists, labor goes to the worker, and profits goes to the employer. Price of labor seem the be cost of an average life. Profit is proportional to the capital deployed to make commodity, say a number like 10%, regardless of the price of rent and labor in different places. Rent is called interests or use of money.

The natural and market price of a commodity.

Causes of changes of supplies:

• Artificial manipulation of price by monopoly
• Trade secret, which is unlikely to keep long.
• Manufacture secret (technological secret) which is likely to last long, even outlive the creator
• Natural causes, applicable to some commodities such as fruits and vegetables

Causes of Demand

• Short term durable commodities can fluctuate more than the durable one.

The increase of revenue due to the increase of market price goes to one of the price components, i.e. rent, labor, and profit. Demanding for produced commodities, increases the profits. Demanding of producing commodities, increases the labor price.

The wage of labor

• Does not depend on the wealth of the nation. The wage depends on the increase of wealth in the state
  1. When the wealth of the nation is increasing, employers compete for labor, then labor wage increase.
  2. When the wealth of the nation is stagnant, labor wage is unchanging, or even decreasing
  3. When the wealth of nation is decreasing, labor wage is decreasing. Life on the lower rank people are miserable. There are few jobs.
• Wage and population. It is unclear what is cause, and what is effect. The increasing of wage is often accompanied by the increase in the population, and the increase of wage often comes with the decreasing in the population.
• The increase of wage, encourages lower rank to have more children. Children in a nation that is increasing in its wealth can be a fortune to the parents, Whereas, in a stagnant nation, the parents have enought wage only to support his children, so that his children remains as the same working class.

Of the profits of stock

• Profits of stock is positively related to interests of money.
• Higher wages tend to mean lower profits of stock.
• Profits in the country villlage tend to be bigger than the one in the city.
• Impact of the rise of profits of stock to the price is much bigger than that of wages. The former is a geometric increase to the price, because rise of profit of a stock encourages the increase in all other stock profit. Whereas, rise of wage is a arithmetic growth.
• A society with interest of money high in expense of the profit is decaying and stagnant one.

Inequalities arise from the nature of the employments themselves

In a society with free choice on the occupations, the wage will go towards the equal, because an occupation with higher wage attract more people and lower its wage eventually to the ordinary one. However, there are higher wages in some occupations, due to:

• Hardship of an occupation
• High expanse on learning the occupation (use of technologies)
• high degree of loyalty needed
• Low probability of success in landing the occupation.
• More inconstancy of the occupation (salary job vs contract job)

Inequalities occasioned by the policy of Europe

The inequalities chiefly in the three following ways:

1. By restricting competition in some emploayments to a smaller number of people.
2. By increasing employment in others beyond what is naturally would be.
3. By obstructing the free circulation of labor and stock, both from employment to employment, and from place to place.

Restricting competition in some employments to a smaller number of people

To serve an apprenticeshop in twon, under a master properly qualified, is commonly the necessary requisite for the freedome on carrying on a trade. Some type of apprenticeship requires as much as seven years under a master, and for some, one master can only have one or two apprentices. These customs are written in laws in some countries. Masters who violates the law are subject to punishment, such as paying find. As an example, by the 5th of Elizabeth, the Satue of Apprenticeshop was enacted. The law is general enough that it seems to apply to all places in England. In practice, it applies only to towns.

Apprenticeship gives no security against fraud. The stamp on the woollen cloth, give purchaser much greater security. The instituion of long apprenticeships has no tendency to form young people to industry. An apprentice is likely to be idle, and likely so because he has no interest in doing otherwise. Long apprenticeships are unneccessary. The instruments and tools master used to make trade, are farily invented and well understood, to explain to young man of how to apply the instruments and how to construct the machine. The explaination requires lessons of a few words. To removing the apprenticeships, masters will be losers and even apprentices will be losers due to more competition, but the public will benefit, because their trades will be cheaper.

The government of towns-corporate was altogether in the hands of traders and artificers. The government manifest interest of every particular class of them to understock the market. The classes are eager to establish regulation to comply with other classes. For exmaple, a class was obliged to buy stocks from other classes in town, often dearer. In turn, other classes buy its stocks dearer.

Every town draws its whole subsistence, and all materials of its industry from the: country.

The industry which is carried on in towns is, everywhere in Europe, more advantageous than that which is carried on in the country. Simple observation that more people have acquired great fortune from samll beginings, by trade and manufactures, the industry which properly belong to twon than that of the country.

The inhabitants of town being collected into one place, can easily combine together. Insignificant trades in town can easily be combined.

Increasing employment in others beyond what is naturally would be

It had been the case in England that government or public organization provide free education to professional education to young people. Few would be willing to pay the expense by themselves. The graduates are willing to be paid less than what it actually can be paid. The competition drives the wages down.

There had been an attempt to enact laws to set minimum wages by the government. It had been no effect on the actual wage. The labor is willing to take on less wage due to competition, and the employer depends ont he labor to drive profits.

Unprosperous race of men, commonly called men of letters, are pretty much in the situation in which they are educated largely at the expense of the public, and churches. Their numbers are so great, that it reduces their price of their labor to a very low recompense. Before the invention of the art of printing, the only employment by which a man of letters could make anything by his talent, was what of a public or private teacher. Before the invention of the art of printing, a scholar and a beggar seem to have been terms near synonymous. Different governors of universities, often appears to give license for them beg.

Of the rent of land

• Rent is the price paid for the use of land. Landlord endeavours to leave tennant no greater share of the produce than what is sufficient for tennant to keep up with stock, pay for labor, purchases and keep ordinary profits.
• The rent, is frequently no more than a reasonable profit or interest for stock laid out by the landlord upon its improvement.
• The rent of land is naturally a monopoly price: the rent is not proportional to what the landlord may have laid out for improvement of the land, or what the landlord can afford to ake, but to what the tenant can afford to give.
• The rent is effects of wages and profits.

Of the produce of land which always affords rent

• Rent of land taht produce human food (such as corn) regulates the rent of the part of other cultivated land. If any other land afford less rent, the land will be immediately turn to use of human food land, which offers more rent.
• The advantage which the landlord derives from such improvements of land (or conversion of land to produce other stocks) is, at most times, just sufficient to compensate the original expense of making them. For exmaple, improve of land of corn to wine.

Of the produce of Land, which sometimes does, and sometimes does not afford rent

• Human food seems to be the only produce of land, which always and necessarily affords some rent to the landlord. Other sorts of produce sometimes may, and sometimes may not according to the circumstances.
• There are some land produce is barely sufficient to pay the labor, replace, together with profits.
• The landlord of coal mine allow nobody else to work them without paying some rent, and nobody can afford to pay any.
• Coal mine can afford any rent, depends partly upon its fertility, and partly upon its situation. The productions of distant coal mines can never be brought into competition with one another.
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