Wealth of Nations by Adam Smith
There's a classic genre of beer commercial, especially popular during football games and (now) during March Madness, that involve white men of about my age who go to great lengths -- picking up murderous hitchhikers; beaning their friends with rocks -- in order to get their hands on a bottle of beer (it's almost always a bottle, I've noticed, though the ads are for the kinds of beers one often drinks from a can). Of course, I've always recognized that these ads are stupid -- after all, no matter how much you want another beer, you can probably buy a six pack around the corner for ten bucks -- but now that I've read Adam Smith's Wealth of Nations, I have a whole new way to talk about what's stupid about them.
Before reading Smith, I would have said that the true value of any
commodity is whatever price is set for it on the open market. I would
further have said that this value is determined by supply and demand.
And I would have thought that these ideas had been first articulated by
Smith himself in Wealth of Nations. But I would have been wrong about
all of this. As I learned this week, Smith believed that the
value of a commodity has nothing to do with how much people want it.
Rather, the real value consists of the cost of the labor required to
make it, plus a proportional share of the rent of the land on which it
was grown or made, plus a reasonable profit on the capital provided for
its growth or manufacture. The job of the free market, of supply and
demand, is to assure that the
nominal value (how much money the commodity actual costs the consumer) gravitates towards this
And so, among the many things that is stupid about cutting a hole in
the back of your neighbor's refrigerator is that, by the time he gets
wise and stops putting Bud in there, you will have elevated the market
price of beer above the natural price.
I realize that this is all painfully obvious to anyone who has ever
taken Econ 101, but as it happens, I never did, which is one of the
reasons I've had this week circled on my calendar ever since I started
reading the Classics. Most of the books I'll be reading this year --
The Iliad, for example, or Don Quixote -- offer, above all, an
experience. To the extent that they have something to teach, it is
something on the order of wisdom; one doesn't read the Divine Comedy to
learn what happens to the Pilgrim. The Wealth of Nations,
however, like Darwin's Origin of Species or the Scientific Papers of
Louis Pasteur or a small handful of other books that await me in the
coming months, has knowledge to impart, and it is primarily for the
sake of this knowledge that it is still read. It happens that almost
all of these works are in fields -- evolutionary biology, chemistry,
economics -- about which I'm pretty much entirely ignorant. So I've
been looking forward to learning what these books, beginning with this
one, have to teach me.
The other side of this coin, of course, is that such books weren't written to be treated as
In fact, Wealth of Nations is a famously brutal read. And this is
another reason I've had it in my sight for months. But I have to say I
didn't find it so bad. I have no doubt that a book will come along
sooner or later that is 500 miserable pages (I start Darwin tomorrow),
but this one wasn't it. I learned perhaps more about the price in
pounds sterling of rare birds in eighteenth century England than I
needed to know, but I also learned about some things, like free trade
between nations, that are at least as relevant now as they were then.
And I learned why, so long as we're willing to pay as much for a beer
as it costs to make it and get it to us, we probably don't need to
throw rocks at anyone's head.
--CRB, March 19, 2007