The passage under analysis is taken from the work written by Adam Smith. The name of the work is “An Inquiry into the Nature and Causes of the Wealth of Nations”. The book is commonly known as “The Wealth of Nations”. The passage can be found in the middle of Chapter VII of the Book I entitled “Of the Natural and Market Price of Commodities”. Adam Smith wrote the book in 1776. The author of the work was an outstanding philosopher and one of the first economists who contributed significantly to the modern development of the economy. The book was written at the beginning of the Industrial Revolution. It defined general notions that promoted the development of the economy. Nowadays, Smith’s ideas are classified as the classical economy.
Adam Smith wrote his book at the beginning of the Industrial Revolution. The Industrial Revolution should be regarded as the watershed moment in the history. It has changed the world dramatically. Industrial revolution commenced in the United Kingdom and soon expanded in the other countries of Western Europe. The primary change during that period concerned the substitution of the ways of productions. Thus, machines replaced people.
It was the age when the intensive usage of water and steam power began. Factories started using coal and other fuels in their work. According to historical evidence, people were against such drastic changes as far as they were afraid that they would be left without work. However, the later data showed that the standard of living of most people increased with the progress of manufacturing. New employment opportunities appeared, and the general income of people arose. The Industrial Revolution was followed by a substantial growth of population. The rapid progress led to new challenges concerning the proper division of labor force, the activities of free markets, and revenue-related issues.
Adam Smith provides readers with his understanding of the nature of the economy in “The Wealth of Nations”. The work comprises of five books. In the first two books, the general idea of the author refers to the division of labor. Smith emphasizes the significance of labor division and pays attention to the fact that it makes the nations prosperous. The author explains that the division of labor leads to the situation when every employee has to conduct the particular task, and it makes the work more efficient. In these books, Smiths also dwells on the nature of money and pricings. In the third book, the author proceeds to the description of the evolution of societies and their economic growth. In the fourth book, he criticizes the mercantilism and introduces the notion of gross domestic product.
Finally, in the fifth book, Smith describes the role of the sovereign or government in the economy. Before the part under consideration, the author contemplates the nature of natural price and market price. He demonstrates the way the availability of particular commodities and the demand influence the price. After the passage, Smith writes about the impact of market fluctuations in price.
The passage under analysis is a sum of the ideas that have been mentioned before. Also, the extract does not only concludes but gives new directions for investigations. That is why it is significant for the paper. Thus, Adam Smith writes about the demand and quantity of commodities in the market and the way they influence the price. Smith states that “in some employments, the same quantity of industry will, in different years, produce very different quantities commodities”1. Then, he proceeds with examples proving that fact. For instance, the same amount of workers produce the same quantity of cloth annually, but the same amount of employees do not always produce the same quantity of corn or wine. The passage under analysis is central to this notion. However, the last sentence refers to the alternations in the market. It presupposes that the issue is not fully investigated and gives a hint about the following development of content.
“The Wealth of Nations” is of great significance for the modern world economy as far as it is the first book about free markets and labor division. Despite its importance, there are a few flaws in the book. Adam Smith dwells on his understanding of pricing. However, he fails to give a profound explanation of pricing. Smith’s theory of value is the second aspect that is not exactly clear and does not fall under the current understanding of value. The author considered that the word “value” had two different meanings. The first meaning was “value in use” while the second – “value in exchange”.
Smith failed to understand the paradox of water-diamond that presupposed the problem with the high cost of diamonds and their extreme uselessness in comparison to water. Besides, some scholars argue that there is no “invisible hand of the market” described by the author. What concerns the very passage, I do believe that it is still of great significance for the economy. Smith manages to provide profound examples to prove his opinion. The book has much more accomplishments rather than failures. Adam Smith’s understanding of economy became vital for modern business.
Bibliography
Smith, Adam. The Wealth of Nations. London: Harriman House Limited, 2007. Web.