the Wealth of Nations

In the Wealth of Nations (1776) Smith describes the economy as a self-contained system functioning through an internal mechanism formed by division of labour and exchange.

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In this system the good of society (increasing wealth) is brought about through the actions of individual economic agents pursuing their own individual interests, interacting on the basis of the natural propensity to exchange. Thus the self-regulating character of the system depends on human nature; and on the actions of individuals who are isolated from one another in their pursuit of their own interests, but also dependent on one another for the realization of those interests. In the Lectures on Jurisprudence (1762-4) Smith explains the propensity to exchange (or “disposition to barter”, etc.) as the result of the natural desire to persuade. He also makes it clear that the desire to persuade is not directed by economic self-interest, and does not have any necessary connection to exchange or economic activity. This argument is clearly connected to a line of thought in his earlier book, The Theory of Moral Sentiments (1759), in which he connects the desire to be believed, or to persuade, with the necessity of relations with other individuals as a condition for individuality (that is, for the characteristics necessary in order to be an individual). He also argues for the necessity of relations as a condition for individuality in saying that another basic human desire is that of being beloved. These, earlier, ideas suggest an idea of individuals and society in which relations among individuals are much more fundamental than those described in the Wealth of Nations, and in which the economy cannot be a self-contained, natural system in which the social good can only be realized because individuals are isolated from one another yet also inter-dependent. What would an economy based on these more fundamental relations among individuals look like? How would it differ from the economy described in the Wealth of Nations?

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