The Wealth of Nations by {author}: summary and why it matters

What it argues

Smith set out to explain why some nations are rich and others poor. His answer begins with the division of labor: when work is split into specialized tasks, output per worker rises many times over, and the extent of the division is limited by the extent of the market. Trade, therefore, expands wealth by widening the market.

Prices, wages and profits, he argued, are set by competition among people pursuing their own interest, and in this setting individuals are led as if by an invisible hand to serve the public good they never intended. He attacked the mercantilist belief that a nation grows rich by hoarding gold and running trade surpluses, and he attacked the monopolies, privileges and trade restrictions that protected merchants at the consumer's expense.

The state, in his scheme, has three duties: defense, justice, and certain public works and institutions that private interest will not supply. Smith also wrote at length on taxation, public debt, colonies and education.

Why it matters

Almost every later argument for free trade, competition and limited government goes back to this book, and so does much of the criticism of cronyism and business lobbying. Smith was no uncritical friend of merchants; he warned that people of the same trade seldom meet without a conspiracy against the public.

The book also reminds readers that the modern case for markets began as a moral and practical attack on privilege, not a defense of the rich.

About the author

The book came out in March 1776, the year of the American Declaration of Independence, after about a decade of work in Kirkcaldy, Scotland, where Smith had retired on a pension as tutor to the Duke of Buccleuch. It was an immediate success and went through several editions in his lifetime. Smith, who never married, is buried in Edinburgh's Canongate Kirkyard.

Who should read it

Readers who want to meet the source rather than the slogans. It is very long and wanders, so begin with Book I, the first three chapters, and Book IV on mercantilism, then follow your interests.