The last post from business book reviews was about the top 25 business books of all time, so now we will countdown that list bringing you more in depth information about each book on the list, to try provide you with enough to make a decision on whether you want a copy or not. So starting at the back, number 25, The Wealth of Nations by Adam Smith.
Source: Amazon.com
Using a vast historical database and plenty of everyday examples Adam Smith lays the foundations of modern economics without the formalization which would come later.
He starts by exploring the need for specialization of labour once societies advance beyond the hunter gatherer phase. As a result each individual is incapable of sustaining his basic needs and thus must purchase these using his labour which Smith views as the source of all value. As a result demand and supply is created for such labour.
He makes the natural assumption that each individual pursues their best interests.
He foreshadows the concepts of marginal utility and scarcity in determining the shapes of demand curves for commodities. ( He never actually mentions curves ).
Similarly, he describes the three factors determining supply prices for commodities ( rent of land, wages and capital costs ) and the various factors which influence them ( the equivalent of modern supply/demand curves for each factor ).
He puts these together under ideal circumstances to show how supply and demand meet to clear markets ( equilibrium in modern language ).
He then turns to macroeconomics laying the foundations for GDP and shows how capital can be distributed to "unproductive labour" ( that labour used to maintain productive labour ) such as doctors lawyer entertainers etc and "productive labour" ( that labour used in the manufacture and distribution of raw and finished products ). He explores the consequences of various distribution of each from both the micro and macroeconomic perspective.
He concludes by emphasizing the importance of government in providing international and domestic security as well as providing public works and institutions especially education.
Naturally this requires state revenue and he devotes almost one entire "book" to taxes.
He delves briefly into political economy especially merchantilism and it's detrimental effects to society at large.
A great introduction to modern economics that is often missed in didactic lectures. This book gives the motivation for many modern economic concepts that is often lost in mathematical formalism.
By Rehan Dost
