The Wealth of Nations

Editor’s Introduction

The first edition of the Wealth of Nations was published on the 9th of March,1 1776, in two volumes quarto, of which the first, containing Books I, II and III, has 510 pages of text, and the second, containing Books IV and V, has 587. The titlepage describes the author as “Adam Smith, LL.D. and F.R.S. Formerly Professor of Moral Philosophy in the University of Glasgow.” There is no preface or index. The whole of the Contents are printed at the beginning of the first volume. The price was £1 16s.2

The second edition appeared early in 1778, priced at £2 2s.,3 but differing little in appearance from its predecessor. Its pages very nearly correspond, and the only very obvious difference is that the Contents are now divided between the two volumes. There are, however, a vast number of small differences between the first and second editions. One of the least of these, the alteration of “late” to “present,”4 draws our attention to the curious fact that writing at some time before the spring of 1776 Adam Smith thought it safe to refer to the American troubles as “the late disturbances.”5 We cannot tell whether he thought the disturbances were actually over, or only that he might safely assume they would be over before the book was published. As “present disturbances” also occurs close to “late disturbances,”6 we may perhaps conjecture that when correcting his proofs in the winter of 1775–6, he had altered his opinion and only allowed “late” to stand by an oversight. A very large proportion of the alterations are merely verbal, and made for the sake of greater elegance or propriety of diction, such as the frequent change from “tear and wear” (which occurs also in Lectures, p. 208) to the more ordinary “wear and tear.” Most of the footnotes appear first in the second edition. A few corrections as to matters of fact are made, such as that in relation to the percentage of the tax on silver in Spanish America (vol. i, pp. 169, 170). Figures are corrected at vol. i, p. 327, and vol. ii, pp. 371, 374. New information is added here and there: an additional way of raising money by fictitious bills is described in the long note at vol. i, p. 294; the details from Sandi as to the introduction of the silk manufacture into Venice are added (vol. i, p. 379); so also are the accounts of the tax on servants in Holland (vol. ii, pp. 341–2), and the mention of an often forgotten but important quality of the land-tax, the possibility of reassessment within the parish (vol. ii, p. 329). There are some interesting alterations in the theory as to the emergence of profit and rent from primitive conditions, though Smith himself would probably be surprised at the importance which some modern inquirers attach to the points in question (vol. i, pp. 49–52). At vol. i, pp. 99, 100, the fallacious argument to prove that high profits raise prices more than high wages is entirely new, though the doctrine itself is asserted in another passage (vol. ii, p. 100). The insertion in the second edition of certain cross-references at vol. i, pp. 195, 311, which do not occur in the first edition, perhaps indicates that the Digressions on the Corn Laws and the Bank of Amsterdam were somewhat late additions to the scheme of the work. Beer is a necessary of life in one place and a luxury in another in the first edition, but is nowhere a necessary in the second (vol. i, p. 430; vol. ii, p. 355). The epigrammatic condemnation of the East India Company at vol. ii, p. 137, appears first in the second edition. At vol. ii, p. 284, we find “Christian” substituted for “Roman Catholic,” and the English puritans, who were “persecuted” in the first edition, are only “restrained” in the second (vol. ii, p. 90)—defections from the ultra-protestant standpoint perhaps due to the posthumous working of the influence of Hume upon his friend.

Between the second edition and the third, published at the end of 1784,7 there are considerable differences. The third edition is in three volumes, octavo, the first running to the end of Book II, chapter ii, and the second from that point to the end of the chapter on Colonies, Book IV, chapter viii. The author by this time had overcome the reluctance he felt in 1778 to have his office in the customs added to his other distinctions8 and consequently appears on the titlepage as “Adam Smith, LL.D. and F.R.S. of London and Edinburgh: one of the commissioners of his Majesty’s Customs in Scotland; and formerly professor of Moral Philosophy in the University of Glasgow.” The imprint is “London: printed for A. Strahan; and T. Cadell, in the Strand.” This edition was sold at one guinea.9 Prefixed to it is the following “Advertisement to the Third Edition”:—

“The first Edition of the following Work was printed in the end of the year 1775, and in the beginning of the year 1776. Through the greater part of the Book, therefore, whenever the present state of things is mentioned, it is to be understood of the state they were in, either about that time, or at some earlier period, during the time I was employed in writing the Book. To this10 third Edition, however, I have made several additions, particularly to the chapter upon Drawbacks, and to that upon Bounties; likewise a new chapter entitled, ‘The Conclusion of the Mercantile System;’ and a new article to the chapter upon the expenses of the sovereign. In all these additions, the present state of things means always the state in which they were during the year 1783 and the beginning of the present11 year 1784.”

Comparing the second and the third editions we find that the additions to the third are considerable. As the Preface or “Advertisement” just quoted remarks, the chapter entitled “Conclusion of the Mercantile System” (vol. ii, pp. 141–60) is entirely new, and so is the section “Of the Public Works and Institutions which are necessary for facilitating particular Branches of Commerce” (vol. ii, pp. 223–48). Certain passages in Book IV, chapter iii, on the absurdity of the restrictions on trade with France (vol. i, pp. 437–8 and 459–60), the three pages near the beginning of Book IV, chapter iv, upon the details of various drawbacks (vol. ii, pp. 2–5), the ten paragraphs on the herring fishery bounty (vol. ii, pp. 20–4) with the appendix on the same subject (pp. 435–7), and a portion of the discussion of the effects of the corn bounty (vol. ii, pp. 10–11) also appear first in the third edition. With several other additions and corrections of smaller size these passages were printed separately in quarto under the title of “Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations.”12 Writing to Cadell in December, 1782, Smith says:—

“I hope in two or three months to send you up the second edition corrected in many places, with three or four very considerable additions, chiefly to the second volume. Among the rest is a short but, I flatter myself, a complete history of all the trading companies in Great Britain. These additions I mean not only to be inserted at their proper places into the new edition, but to be printed separately and to be sold for a shilling or half a crown to the purchasers of the old edition. The price must depend on the bulk of the additions when they are all written out.”13

Besides the separately printed additions there are many minor alterations between the second and third editions, such as the complacent note on the adoption of the house tax (vol. ii, p. 328), the correction of the estimate of possible receipts from the turnpikes (vol. ii, p. 218, note), and the reference to the expense of the American war (vol. ii, p. 409), but none of these is of much consequence. More important is the addition of the lengthy index surmounted by the rather quaint superscription “N.B. The Roman numerals refer to the Volume, and the figures to the Page.” We should not expect a man of Adam Smith’s character to make his own index, and we may be quite certain that he did not do so when we find the misprint “tallie” in vol. ii, p. 320, reappearing in index (s.v. Montauban) although “taille” has also a place there. But the index is far from suggesting the work of an unintelligent back, and the fact that the “Ayr bank” is named in it (s.v. Banks), though nameless in the text, shows either that the index-maker had a certain knowledge of Scotch banking history or that Smith corrected his work in places. That Smith received a packet from Strahan “containing some part of the index” on 17th November, 1784, we know from his letter to Cadell, published in the Economic Journal for September, 1898. Strahan had inquired whether the index was to be printed in quarto along with the Additions and Corrections, and Smith reminded him that the numbers of the pages would all have to be altered to “accommodate them to either of the two former editions, of which the pages do not in many places correspond.” There is therefore no reason for not treating the index as an integral part of the book.

The fourth edition, published in 1786, is printed in the same style and with exactly the same pagination as the third. It reprints the advertisement to the third edition, altering, however, the phrase “this third Edition,” into “the third Edition,” and “the present year 1784” into “the year 1784,” and adds the following “Advertisement to the Fourth Edition”:—

“In this fourth Edition I have made no alterations of any kind. I now, however, find myself at liberty to acknowledge my very great obligations to Mr. Henery Hop14 of Amsterdam. To that Gentleman I owe the most distinct, as well as liberal information, concerning a very interesting and important subject, the Bank of Amsterdam; of which no printed account had ever appeared to me satisfactory, or even intelligible. The name of that Gentleman is so well known in Europe, the information which comes from him must do so much honour to whoever has been favoured with it, and my vanity is so much interested in making this acknowledgment, that I can no longer refuse myself the pleasure of prefixing this Advertisement to this new Edition of my Book.”

In spite of his statement that he had made no alterations of any kind, Smith either made or permitted a few trifling alterations between the third and fourth editions. The subjunctive is very frequently substituted for the indicative after “if,” the phrase “if it was” in particular being constantly altered to “if it were.” In the note at vol. i, p. 71, “late disturbances” is substituted for “present disturbances.” The other differences are so trifling that they may be misreadings or unauthorised corrections of the printers.

The fifth edition, the last published in Smith’s lifetime and consequently the one from which the present edition has been copied, is dated 1789. It is almost identical with the fourth, the only difference being that the misprints of the fourth edition are corrected in the fifth and a considerable number of fresh ones introduced, while several false concords—or concords regarded as false—are corrected (see vol. i, p. 108; vol. ii, pp. 215, 249).15

It is clear from the passage at vol. ii, p. 177, that Smith regarded the title “An Inquiry into the Nature and Causes of the Wealth of Nations” as a synonym for “political œconomy,” and it seems perhaps a little surprising that he did not call his book “Political Œconomy” or “Principles of Political Œconomy.” But we must remember that the term was still in 1776 a very new one, and that it had been used in the title of Sir James Steuart’s great book, An Inquiry Into the Principles of Political Œconomy: Being an Essay on the Science of Domestic Policy in Free Nations, which was published in 1767. Nowadays, of course, no author has any special claim to exclusive use of the title. We should as soon think of claiming copyright for the title “Arithmetic” or “Elements of Geology” as for “Principles of Political Economy.” But in 1776 Adam Smith may well have refrained from using it simply because it had been used by Steuart nine years before, especially considering the fact that the Wealth of Nations was to be brought out by the publishers who had brought out Steuart’s book.16

From 1759 at the latest an early draft of what subsequently developed into the Wealth of Nations existed in the portion of Smith’s lectures on “Jurisprudence” which he called “Police, Revenue and Arms,” the rest of “Jurisprudence” being “Justice” and the “Laws of Nations.” Jurisprudence he defined as “that science which inquires into the general principles which ought to be the foundation of the laws of all nations,” or as “the theory of the general principles of law and government.”17 In forecasting his lectures on the subject he told his students:—

“The four great objects of law are justice, police, revenue and arms.

“The object of justice is the security from injury, and it is the foundation of civil government.

“The objects of police are the cheapness of commodities, public security, and cleanliness, if the two last were not too minute for a lecture of this kind. Under this head we will consider the opulence of a state.

“It is likewise necessary that the magistrate who bestows his time and labour in the business of the state should be compensated for it. For this purpose and for defraying the expenses of government some fund must be raised. Hence the origin of revenue. The subject of consideration under this head will be the proper means of levying revenue, which must come from the people by taxes, duties, etc. In general, whatever revenue can be raised most insensibly from the people ought to be preferred, and in the sequel it is proposed to be shown how far the laws of Britain and other European nations are calculated for this purpose.

“As the best police cannot give security unless the government can defend themselves from foreign injuries and attacks, the fourth thing appointed by law is for this purpose; and under this head will be shown the different species of arms with their advantages and disadvantages, the constitution of standing armies, militias, etc.

“After these will be considered the laws of nations. …”18

The connection of revenue and arms with the general principles of law and government is obvious enough, and no question arises as to the explanation on these heads given by the forecast. But to “consider the opulence of a state” under the head of “police” seems at first sight a little strange. For the explanation we turn to the beginning of the part of the lectures relating to Police.

“Police is the second general division of jurisprudence. The name is French, and is originally derived from the Greek πολιτεία, which properly signified the policy of civil government, but now it only means the regulation of the inferior parts of government, viz.: cleanliness, security, and cheapness or plenty.”19

That this definition of the French word was correct is well shown by the following passage from a book which is known to have been in Smith’s possession at his death,20 Bielfeld’s Institutions politiques, 1760 (tom. i, p. 99).

“Le premier Président du Harlay en recevant M. d’Argenson à la charge de lieutenant général de police de la ville de Paris, lui adressa ces paroles, qui méritent d’être remarquées: Le Roi, Monsieur, vous demande sûreté, netteté, bon-marché. En effet ces trois articles comprennent toute la police, qui forme le troisième grand objet de la politique pour l’intérieur de l’État.”

When we find that the chief of the Paris police in 1697 was expected to provide cheapness as well as security and cleanliness, we wonder less at the inclusion of “cheapness or plenty” or the “opulence of a state” in “jurisprudence” or “the general principles of law and government.” “Cheapness is in fact the same thing with plenty,” and “the consideration of cheapness or plenty” is “the same thing” as “the most proper way of securing wealth and abundance.”21 If Adam Smith had been an old-fashioned believer in state control of trade and industry he would have described the most proper regulations for securing wealth and abundance, and there would have been nothing strange in this description coming under the “general principles of law and government.” The actual strangeness is simply the result of Smith’s negative attitude—of his belief that past and present regulations were for the most part purely mischievous.

The two items, cleanliness and security, he managed to dismiss very shortly: “the proper method of carrying dirt from the streets, and the execution of justice, so far as it regards regulations for preventing crimes or the method of keeping a city guard, though useful, are too mean to be considered in a general discourse of this kind.”22 He only offered the observation that the establishment of arts and commerce brings about independency and so is the best police for preventing crimes. It gives the common people better wages, and “in consequence of this a general probity of manners takes place through the whole country. Nobody will be so mad as to expose himself upon the highway, when he can make better bread in an honest and industrious manner.”23

He then came to “cheapness or plenty, or, which is the same thing, the most proper way of securing wealth and abundance.” He began this part of the subject by considering the “natural wants of mankind which are to be supplied,”24 a subject which has since acquired the title of “consumption” in economic treatises. Then he showed that opulence arises from division of labour, and why this is so, or how the division of labour “occasions a multiplication of the product,”25 and why it must be proportioned to the extent of commerce. “Thus,” he said, “the division of labour is the great cause of the increase of public opulence, which is always proportioned to the industry of the people, and not to the quantity of gold and silver as is foolishly imagined.” “Having thus shown what gives occasion to public opulence,” he said he would go on to consider:—

“First, what circumstances regulate the price of commodities:

“Secondly, money in two different views, first as the measure of value and then as the instrument of commerce:

“Thirdly, the history of commerce, in which shall be taken notice of the causes of the slow progress of opulence, both in ancient and modern times, which causes shall be shown either to affect agriculture or arts and manufactures:

“Lastly, the effects of a commercial spirit, on the government, temper, and manners of a people, whether good or bad, and the proper remedies.”26

Under the first of these heads he treated of natural and market price and of differences of wages, and showed “that whatever police tends to raise the market price above the natural, tends to diminish public opulence.”27 Among such pernicious regulations he enumerated taxes upon necessaries, monopolies, and exclusive privileges of corporations. Regulations which bring market price below natural price he regarded as equally pernicious, and therefore he condemned the corn bounty, which attracted into agriculture stock which would have been better employed in some other trade. “It is by far the best police to leave things to their natural course.”28

Under the second head he explained the reasons for the use of money as a common standard and its consequential use as the instrument of commerce. He showed why gold and silver were commonly chosen and why coinage was introduced, and proceeded to explain the evils of tampering with the currency, and the difficulty of keeping gold and silver money in circulation at the same time. Money being a dead stock, banks and paper credit, which enable money to be dispensed with and sent abroad, are beneficial. The money sent abroad will “bring home materials for food, clothes, and lodging,” and, “whatever commodities are imported, just so much is added to the opulence of the country.”29 It is “a bad police to restrain” banks.30 Mun, “a London merchant,” affirmed “that as England is drained of its money it must go to ruin.”31 “Mr. Gee, likewise a merchant,” endeavoured to “show that England would soon be ruined by trade with foreign countries,” and that “in almost all our commercial dealings with other nations we are losers.”32 Mr. Hume had shown the absurdity of these and other such doctrines, though even he had not kept quite clear of “the notion that public opulence consists in money.”33 Money is not consumable, and “the consumptibility, if we may use the word, of goods, is the great cause of human industry.”34