The origin point. Smith's argument that specialization and voluntary exchange create wealth still underlies most of what follows. Often misread as a simple endorsement of greed; actually a nuanced account of how self-interest, constrained by competition and moral sympathy, tends toward social benefit.
Smith published in 1776 the first systematic account of how a commercial economy produces wealth. He opens with the division of labour, using the pin factory to show that specialisation multiplies output far beyond what individual effort explains, and argues that the division of labour is limited by the extent of the market, which makes transport, trade and market size the determinants of productivity.
He then develops the price mechanism, distinguishing natural price from market price and explaining how competition drives the second toward the first. His account of self-interest as the source of provision, stated through the butcher, brewer and baker, is the passage most quoted and most often stripped of its context. The invisible hand appears once in the entire work, in a passage about domestic investment preference.
Book four is a sustained attack on mercantilism, arguing that treating exports as gain and imports as loss confuses money with wealth, and that restrictions imposed to protect domestic producers transfer wealth from consumers to those producers. Smith is explicit that merchants and manufacturers lobby for these restrictions against the public interest, and that any regulation proposed by them deserves suspicion.
Book five covers the proper functions of government, which Smith takes to include defence, justice, public works, education and certain infrastructure that private parties will not provide. He supports progressive taxation and criticises joint stock companies with separated ownership and management. The work is long, digressive and contains extended historical material on grain prices and silver that few readers need. The labour theory of value it uses was superseded. Modern quotation of Smith frequently misrepresents him, particularly on the role of government and on the trustworthiness of businessmen.
Readers who want the primary source on markets, specialisation and trade rather than the version of Smith used in political argument.
Scottish moral philosopher at the University of Glasgow who founded modern economics with The Wealth of Nations in 1776.
The Wealth of Nations set out how division of labour, self-interest and competitive prices coordinate production without central direction, and it supplies the vocabulary economics still argues in: specialisation, capital accumulation, natural and market price. The Theory of Moral Sentiments supplies the other half, placing exchange inside a system of sympathy and judgement.
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