Wealth of Nations

Social and Political Philosophy
Kim Slawson
16 November 2000

Adam Smith's radical (for his time) ideas about political economy have influenced virtually all of today's governments' economic theories. The laissez faire model for capitalism (libertarian capitalism, perhaps) owes much to Smith's treatise. Smith's intent, however, was not only to put forth his unconventional ideas on economics, but also to address the social issues of the day which troubled him; namely, unequal distribution of power (resulting in some cases in monopolies), and the degree to which personal liberty was devalued in favor of distribution of labor and capital to provide maximum benefit to the socio-economic hegemony of the day.

In The Wealth of Nations, Adam Smith asserts the following: "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society." Smith goes on to say " . . . every individual who employs his capital in the support of domestic industry, necessarily endeavours so to direct that industry that its produce may be of the greatest possible value." To wit, that each individual employs his capital to his own ends, which, unbeknownst to the individual, acts as an "invisible hand" to best shape the market to the ends of all individuals in society.

In making these points, however, Smith makes some hefty assumptions. Namely, he is optimistic when he states that everyone seeks the employ that will provide them with maximum advantage. There are, and have always been, those who do not work as hard as they could, whether due to laziness or apathy. Smith also makes a large assumption in thinking that the occupation a person chooses is necessarily of the greatest possible benefit to society at large. He does little to support this assertion, and less to explain the career choices of those not truly in a position to choose. Smith's model fails to acknowledge either of these classes of individuals, and as such, is incomplete.

When people are concerned about their future economic security, they often do a lot of thinking over the question of how to preserve their wealth.  It is during times of inflation or currency collapse that calls for returning to a gold standard become increasingly common.

However there are alternatives to both gold and fiat currency.

You could have a grain-standard, where paper notes were backed by grain, but grain is perishable... though it wouldn't go as quickly as a fruit-backed currency.

You could have a technology-standard, where paper notes were backed by computers, televisions, and cars, but all of those lose value because technology advances and old models are thrown out.

You could have a housing-standard, where paper notes were backed by places to live, but homes deteriorate over time as well.

If you wanted a currency that was by definition not going to inflate or deflate, then you would back it with the basket of goods used to calculate things like the consumer price index... of course, those goods are all perishable to some degree. If you then decided to build in a natural devaluation to the currency you issue, then you're not really preserving the wealth you supposedly got. 

Organizing a gl0d-strike.

If you had some indestructible material that was lightweight and easy to recognize (say gl0d), then you might use that as currency - but it is purely a social construction. If one person accumulates vast amounts of this "gl0d" and the rest of the population resented him and were vindictive, they would simply organize a gl0d-strike and stop accepting it as money, thus effectively rendering that person broke.

The wealth of nations.

Ultimately though, you have to look beyond personal finances to the big picture of how what you consider to be wealth gets to you. If you want food, you have to ensure there are enough food producers. If you want LCD monitors, you have to ensure there are enough LCD monitor producers. Because humans have become so economically specialized, each person can no longer produce everything he wants by himself. Like it or not, if you want to be wealthy, it has to be collective wealth. You have to ensure the people around you can produce the things you need. This may be at a community level, maybe a national level, maybe a global level. You have to stop worrying so much about how much gl0d you can gather, but how you can help the people around you to produce the things you want. You'd have to get them access to resources, technology, knowledge, equipment, etc, but not only that, you also have to make sure they're relatively happy. If they're a bunch of pissed off producers, that makes it less likely for you to get access to the things you want.