Adam Smith: The Wealth of Nations

"Adam Smith: The Wealth of Nations" by Adam Smith lays the foundations of modern economics without the formalization which would come later. Adam Smith starts by exploring the need for specialization of labor once societies advance beyond the hunter gatherer phase, making the natural assumption that each individual pursues their best interests. Smith then foreshadows the concepts of marginal utility and scarcity in determining the shapes of demand curves for commodities. Similarly, he describes the three factors determining supply prices for commodities (rent of land, wages and capital costs ) and the various factors which influence them (the equivalent of modern supply/demand curves for each factor ). Smith then puts these together under ideal circumstances to show how supply and demand meet to clear markets (equilibrium in modern language). Adam Smith's "Adam Smith: The Wealth of Nations" covers macroeconomics, laying the foundations for GDP and showing how capital can be distributed to unproductive and productive labor. "Adam Smith: The Wealth of Nations" also explores the consequences of various distribution of each from both the micro and macroeconomic perspective. Adam Smith concludes by emphasizing the importance of government in providing international and domestic security as well as providing public works and institutions especially education. Naturally this requires state revenue and he devotes almost one entire "book" to taxes. Smith also delves briefly into political economy especially mercantilism and its detrimental effects to society at large. "Adam Smith: The Wealth of Nations" is a great introduction to modern economics which explains the motivation for many modern economic concepts which are too often lost today.