Economics Philosophy

The Division of Labor and Market

• In a civilized society, individuals need the cooperation of many others to achieve their goals.
• The division of labor (DL) increases productivity and leads to an increase in incomes and spending, which in turn expands the market.
• The extension of the market requires an extension of the DL, allowing for specialization and growth.

The Accumulation of Capital

• The accumulation of capital leads to the emergence of a new class of people who hire others to work for them, creating a social relation of wages.
• This process is described in the second book of the Wealth of Nations (WON).
• The increase in employment is proportional to the increase of capital.

The Increase in the Division of Labour (Machines)

• The use of machines allows for further division of tasks in manufacturing, creating a new virtuous circle.
• This is made possible by the accumulation of capital, which enables entrepreneurs to invest in better machines and more efficient production processes.

Smith's Theory of Prices

• The theory of prices aims to show the efficiency of markets and analyze the distribution of income.
• There are two reasons to develop a theory of prices: to understand how supply and demand interact, and to determine how income is distributed among different classes of society.

Money and Price Theory

• Adam Smith raises the question of whether money is necessary to develop a theory of prices.
• Money is seen as a technology that improves over time, facilitating exchange and making it possible to elaborate a price theory.

Component Parts of the Price of Commodities

• The price of a commodity is the sum of the income paid for its production, including wages, profits, and rents.
• In the primitive state, the price of a good corresponds to the quantity of labor required to produce it.

The Sources of Growth

• The Wealth of Nations (WON) addresses the question of the sources of growth and wealth of nations.
• Wealth is produced by labor and divided by the number of inhabitants of a country, focusing on income per capita.
• The two determinants of wealth are labor productivity and the number of workers.