* book: The Wealth of Nations by Adam Smith

While reading Why Wages Rise I noted a lot of similarities with what Adam Smith says. Related comments and quotes from The Wealth of Nations follow:

DIVISION OF LABOR
* The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to be the effects of the division of labour. wn9

* Pin-making factory example: Each person (trained and working together in a pin-making factory) might be considered as making four thousand eight hundred pins in a day. But, independently and without training, they certainly could not each of them have made twenty, perhaps not one pin in a day. wn11. So, the advantage of division of labor in this example is somewhere between 200:1 and 4800:1.

* In every other art and manufacture, the effects of the division of labour are similar to what they are in this very trifling one. wn12

* This great increase of the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances;
1. to the increase of dexterity in every particular workman;
2. to the saving of the time which is commonly lost in passing from one species of work to another; and
3. lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. wn14

* The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. wn25

* And thus the certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business. wn25

ADVANTAGES OF TRADE
* When the division of labor has been once thoroughly established, it is but a very small part of a man’s wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for. wn33

* Unlike most animals, man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. … He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer. … We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. wn24

* Among men, on the contrary (vs animals), the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other man’s talents he has occasion for. wn26

* David Ricardo’s Theory of Comparative Advantage, argues that “even if a country has no absolute advantage in any product (ie. it is not the most efficient producer for any good), the disadvantaged country can still benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of production.”

VALUE
* The real price of everything, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. wn43

* Labour was the first price, the original purchase money that was paid for all things. wn44

* Wealth is the quantity either of other men’s labour, or, what is the same thing, of the produce of other men’s labour, which enables him to purchase or command. wn44

WAGE DIFFERENTIALS
* Wages vary with five circumstances:
1. agreeableness of the employment,
2. cost of learning the business,
3. constancy of employment,
4. trust to be reposed,
5. probability of success. wn140

but three things are necessary as well as perfect freedom;
1. the employments must be well known and long established, since new trades yield higher wages, and higher profits;
2. the employments must be in their natural state, since the demand for labour in each employment varies from time to time and profits fluctuate with the price of the commodity produced; and
3. the employments must be the principal employment of those who occupy them, since people maintained by one employment will work cheap at another. wn161

PRICE
* The component parts of the price of commodities are:
1. Quantity of labour is originally the only rule of value, allowance being made for superior hardship, and for uncommon dexterity and ingenuity. Such talents can seldom be acquired but in consequence of long application, and the superior value of their produce may frequently be no more than a reasonable compensation for the time and labour which must be spent in acquiring them.
2. The profits of the owner of the whole stock of materials risked and wages which he advanced (in addition, possibly, to his own wages for inspection and direction).
3. The rent to the landlord of the land used. wn71

* The rent of land … is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give. wn200

* It is not because wealth consists more essentially in money than in goods, that the merchant finds it generally more easy to buy goods with money, than to buy money with goods; but because
- money is the known and established instrument of commerce, for which everything is readily given in exchange, but which is not always with equal readiness to be got in exchange for everything.
- The greater part of goods besides are more perishable than money, and he may frequently sustain a much greater loss by keeping them.
- Over and above all this, his profit arises more directly from selling than from buying …
he is upon all these accounts generally much more anxious to exchange his goods for money, than his money for goods. wn551.

Reference:
The Wealth of Nations, Adam Smith
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