The Wealth of Nations: A book review by Bob Morris
The Wealth of Nations: The Economics Classic
Adam Smith with an Introduction by Tom Butler-Bowdon
Captstone Publishing Ltd./A Wiley Company (2010)
How and Why The Wealth of Nations is “one of the most important and influential books ever written.”
The title of this review is from the Foreword to this volume, written by Eamonn Butler (Director of the Adam Smith Institute), and continues as follows: The Wealth of Nations “transformed how we think about the nature of economic life, turning it from an ancient to a recognizably modern form.” Razeen Sally is Senior Lecturer in International Politic al Economy at London School of Economics and Co-Director of European Centre for Political Economy (ECIPE). In the Preface, he observes, “The governing principles of the Smithian economic system is ‘natural liberty’ (or non-intervention), which allows ‘every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.’ And as Smith goes on to say, ‘All systems of preference or restraint, therefore, being thus completely taken away, the obvious and simple system natural liberty establishes itself of its own accord.’”
Those who have read one or more of the volumes that comprise Tom Butler-Bowdon’s 50 Classics series already know that he possesses superior reasoning and writing skills as well as a relentless curiosity when conducting research on history’s greatest thinkers and their major works. For these and other reasons, I cannot think of another person better qualified to provide the introductions to the volumes that comprise a new series, Capstone Classics.
Unlike so many others, he provides more, much more than a flimsy “briefing” to the given work. In his 32-page Introduction to this edition of The Wealth of Nations, Butler-Bowdon discusses subjects and issues such as these in order to create a context, a frame-of-reference, for Smith’s insights:
o Adam Smith and the world in which he lived
o The Wealth of Nations (TWON): Its origins and influences
o The major political and economic issues that it addresses
o The meaning and significance of two terms, “wealth” and “nations,” in the book’s title
o Contemporary works with which it was compared and contrasted
o Adam Smith’s views on social relations
o How a strong market “works”
o Why specialization is “the key to prosperity”
o Smith’s views on enlightened self-interest as opposed to society’s best interests
o The crucial role of capital
o How and why Smith differentiates (in TWON) a nation’s productivity and its system of currency
o The respective roles of price and demand in a market economy
o TWON)‘s “agrarian bias”
o Smith’s views on government’s proper role
o Correlations between personal wealth and natural wealth
o Smith’s views on hum rights
There are dozens of others, of course, but hopefully these will provide at least some indication of the scope of Butler-Bowdon’s coverage in the 32-page Introduction. As indicated earlier, is to create a context, a frame-of-reference, for Adam Smith’s insights. He does so brilliantly and also in each of the other volumes in the Capstone Classics series that have been published thus far.
The Wealth of Nations: A book review by Bob Morris
The Wealth of Nations: The Economics Classic
Adam Smith with an Introduction by Tom Butler-Bowdon
Capstone Publishing Ltd./A Wiley Company (2010)
How and Why The Wealth of Nations is “one of the most important and influential books ever written.”
The title of this review is from the Foreword to this volume, written by Eamonn Butler (Director of the Adam Smith Institute), and continues as follows: The Wealth of Nations “transformed how we think about the nature of economic life, turning it from an ancient to a recognizably modern form.” Razeen Sally is Senior Lecturer in International Political Economy at the London School of Economics and Co-Director of European Centre for Political Economy (ECIPE). In the Preface, he observes, “The governing principles of the Smithian economic system is ‘natural liberty’ (or non-intervention), which allows ‘every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.’ And as Smith goes on to say, ‘All systems of preference or restraint, therefore, being thus completely taken away, the obvious and simple system natural liberty establishes itself of its own accord.’”
Those who have read one or more of the volumes that comprise Tom Butler-Bowdon’s 50 Classics series already know that he possesses superior reasoning and writing skills as well as a relentless curiosity when conducting research on history’s greatest thinkers and their major works. For these and other reasons, I cannot think of another person better qualified to provide the introductions to the volumes that comprise a new series, Capstone Classics.
Unlike so many others, he provides more, much more than a flimsy “briefing” to the given work. In his 32-page Introduction to this edition of The Wealth of Nations, Butler-Bowdon discusses subjects and issues such as these in order to create a context, a frame-of-reference, for Smith’s insights:
o Adam Smith and the world in which he lived
o The Wealth of Nations (TWON): Its origins and influences
o The major political and economic issues that it addresses
o The meaning and significance of two terms, “wealth” and “nations,” in the book’s title
o Contemporary works with which it was compared and contrasted
o Adam Smith’s views on social relations
o How a strong market “works”
o Why specialization is “the key to prosperity”
o Smith’s views on enlightened self-interest as opposed to society’s best interests
o The crucial role of capital
o How and why Smith differentiates (in TWON) a nation’s productivity and its system of currency
o The respective roles of price and demand in a market economy
o TWON‘s “agrarian bias”
o Smith’s views on government’s proper role
o Correlations between personal wealth and natural wealth
o Smith’s views on human rights
There are dozens of others, of course, but hopefully these will provide at least some indication of the scope of Butler-Bowdon’s coverage in the 32-page Introduction. As indicated earlier, is to create a context, a frame-of-reference, for Adam Smith’s insights. He does so brilliantly and also in each of the other volumes in the Capstone Classics series that have been published thus far.
Tom Butler-Bowdon: A second interview by Bob Morris
A graduate of the London School of Economics and the University of Sydney, Tom Butler-Bowdon was working as a political advisor in Australia when, at 25, he read his first personal development book, Stephen Covey’s The 7 Habits of Highly Effective People. Captivated by that and by titles by the likes of Anthony Robbins and M Scott Peck, he came to the view that this was an underrated field of writing. At 30, he left his first career to write the bestselling 50 Self-Help Classics, the first guide to the personal development literature and winner of the Benjamin Franklin Award (2004).
This book was followed by 50 Success Classics (2004); 50 Spiritual Classics (2005); 50 Psychology Classics (2007); and 50 Prosperity Classics (2008), all published in the US and UK by Nicholas Brealey. With its commentaries on over 250 books in the self-development field, the series has been published in 21 languages and is sold in over 30 countries. Tom has been described by USA Today as “a true scholar of this type of literature.
He then published Never Too Late to Be Great: The Power of Thinking Long and is now editing and writing the introductions to volumes in a new series, Capstone Classics, published by Capstone Publishing Ltd. (A Wiley Imprint). Titles now available include Niccolò Machiavelli’s The Prince, Sun Tzu’s The Art of War, Lao-Tzu’s Tao Te Ching, Plato’s The Republic, Wallace Wattles’ The Science of Getting Rich, Adam Smith’s The Wealth of Nations, and Napoleon Hill’s Think and Grow Rich.
Here is an excerpt from my second interview of him. To read the complete interview, please click here.
To read my first interview of him, please click here.
* * *
Morris: Before discussing your recently published book, Never Too Late to Be Great, a few general questions. First, who has had the greatest influence on your personal growth? How so?
Butler-Bowdon: Apart from my parents, all the great writings in the personal development and spiritual traditions, too many to mention.
Morris: The great impact on your professional development? How so?
Butler-Bowdon: Apart from bosses and colleagues, the writings of Peter Drucker in management and Al Ries in marketing.
Morris: Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.
Butler-Bowdon: Discovering the self-development literature when I was 26.
Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?
Butler-Bowdon: Beyond the content of what I learned at university in terms of politics, government and history, just to think more critically and carefully, and being aware of just how much has been written and studied in any given area that you can draw upon.
Morris: Of all the books that you have read, from which have you learned what has proven to be most valuable to you after you read it?
Butler-Bowdon: Miracles to Conversations With God, to the original spiritual texts. Now I practice meditation, so Buddhism provides me with much insight and inspiration.
Morris: Of the five 50 Classics volumes, which was the most difficult to write? Why?
Butler-Bowdon: At the time 50 Spiritual Classics seemed challenging because there seemed to be so much ground to cover, but the discipline required to do it taught me that I could tackle something even more outside my comfort zone, such as 50 Philosophy Classics, which I’m writing now.
Morris: By which criteria did you select the titles? To what extent (if any) were the criteria different from one volume to the next and/or when the selections were made? Please explain.
Butler-Bowdon: Combination of the obvious famous titles in each field, with some interesting newer ones. They had to either be bestsellers or influential, or say something new. Same process for each book.
Morris: Which of the books was the most difficult to classify? Why?
Butler-Bowdon: Perhaps 50 Prosperity Classics, because “prosperity” is not an established field like Psychology or Self-Help.
Morris: What prompted the publication of the new series of classic self-development and prosperity writings that you edited and for which you wrote the Introductions?
Butler-Bowdon: An invitation to do it from the publisher (Wiley Europe). I was happy to do it because it fits in with my larger goal of a more serious or scholarly approach to personal development.
Morris: Were there are head-snapping revelations which reading these “classics”? Please explain.
Butler-Bowdon: As the Tao Te Ching suggests, there is a force or reality behind the apparent, physical universe (call it Tao, God, Mind, implicate order), and it is this which generates everything we see. By attuning ourselves to this force or reality, not what is “apparent.”
Morris: Which of the authors of these series (i.e. Napoleon Hill, Niccolo Machiavelli, Adam Smith, Sun Tzu, and Wallace Wattles) offers the best example of someone who possesses “the power to think long”? Please explain.
Butler-Bowdon: Actually none of them is particularly interested in time; the ‘thinking long’ idea is my creation!
Morris: Frankly, I was previously unaware of Wattles when I began to read the book and thus was especially grateful for your Introduction. For others in that same situation now, why is he significant?
Butler-Bowdon: He offers the metaphysical basis for prosperity that is the basis of The Secret, but wrote about it 100 years before Rhonda Byrne.
Morris: Which additions to the series are now under consideration?
Butler-Bowdon: Have just released new Capstone editions of Plato’s Republic and Lao Tzu’s Tao Te Ching.
Morris: Here’s a two-part question. Of all the authors whose works you have read, which would you most like to interview? What would you hope to learn from that person that you do not currently know?
Butler-Bowdon: I have a special liking for the works of Catherine Ponder, the prosperity and abundance writer who helped to pioneer the field. I would be thrilled to meet her and have a long chat with her! As for an interview, I’d like to ask her many of the same questions you are asking me.
* * *
To read the complete interview, please click here.
To read my first interview of him, please click here.
Tom cordially invites you to check out the resources at these websites:
Homepage: Please click here.
Amazon Page: Please click here.
Huffington Post: Please click here.
Tom Butler-Bowdon’s website: www.Butler-Bowdon.com
Tom’s book Never Too Late To Be Great: http://amzn.to/zwxce4
There Is No Invisible Hand
Here is an excerpt from an article written by Jonathan Schlefer for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.
* * *
One of the best-kept secrets in economics is that there is no case for the invisible hand. After more than a century trying to prove the opposite, economic theorists investigating the matter finally concluded in the 1970s that there is no reason to believe markets are led, as if by an invisible hand, to an optimal equilibrium — or any equilibrium at all. But the message never got through to their supposedly practical colleagues who so eagerly push advice about almost anything. Most never even heard what the theorists said, or else resolutely ignored it.
Of course, the dynamic but turbulent history of capitalism belies any invisible hand. The financial crisis that erupted in 2008 and the debt crises threatening Europe are just the latest evidence. Having lived in Mexico in the wake of its 1994 crisis and studied its politics, I just saw the absence of any invisible hand as a practical fact. What shocked me, when I later delved into economic theory, was to discover that, at least on this matter, theory supports practical evidence.
Adam Smith suggested the invisible hand in an otherwise obscure passage in his Inquiry Into the Nature and Causes of the Wealth of Nations in 1776. He mentioned it only once in the book, while he repeatedly noted situations where “natural liberty” does not work. Let banks charge much more than 5% interest, and they will lend to “prodigals and projectors,” precipitating bubbles and crashes. Let “people of the same trade” meet, and their conversation turns to “some contrivance to raise prices.” Let market competition continue to drive the division of labor, and it produces workers as “stupid and ignorant as it is possible for a human creature to become.”
In the 1870s, academic economists began seriously trying to build “general equilibrium” models to prove the existence of the invisible hand. They hoped to show that market trading among individuals, pursuing self-interest, and firms, maximizing profit, would lead an economy to a stable and optimal equilibrium.
Leon Walras, of the University of Lausanne in Switzerland, thought he had succeeded in 1874 with his Elements of Pure Economics, but economists concluded that he had fallen far short. Finally, in 1954, Kenneth Arrow, at Stanford, and Gerard Debreu, at the Cowles Commission at Yale, developed the canonical “general-equilibrium” model, for which they later won the Nobel Prize. Making assumptions to characterize competitive markets, they proved that there exists some set of prices that would balance supply and demand for all goods. However, no one ever showed that some invisible hand would actually move markets toward that level. It is just a situation that might balance supply and demand if by happenstance it occurred.
* * *
To read the complete post, please click here.
Jonathan Schlefer is author of The Assumptions Economists Make (Belknap/Harvard, 2012). The former editor of Technology Review, he holds a Ph.D. in political science from MIT and is currently a research associate at Harvard Business School.
To read more more blog posts by Jonathan Schlefer, please click here.
Booz & Company’s “Thought Leader Interview” Series: Sylvia Nasar
Sylvia Nasar (Photo: © John Blais)
Here is the introduction to an interview of Sylvia Nasar by Rob Norton as part of “The Thought Leader Interview” series featured by strategy+business magazine, published by Booz & Company. To read the complete interview, check out other resources, sign up for free email alerts, and obtain subscription information, please click here.
* * *
The renowned author discusses how the great economists uncovered the basic truth about progress, prosperity, and productivity, and the reasons you should be careful which ideas you listen to.
Many of the powerful forces that help business, hurt business, and shape our civilization today stem directly from the theories formulated by economists in the past, put into practice in the real world. That is the subject of Sylvia Nasar’s new book, Grand Pursuit: The Story of Economic Genius (Simon & Schuster, 2011). And yet, as Nasar would be the first to acknowledge, the field of economics has suffered from a lack of respect since its formative years; Scottish essayist Thomas Carlyle dubbed it “the dismal science” in 1849. Today, when economics makes headlines, it’s typically as a whipping boy (“Why Economists Failed to Predict the Financial Crisis”) or as part of a sales pitch (“Prominent Economists Support Changes to Medicare”). Add the fact that economics has been delivered to undergraduates over the past 50 years in an off-putting package of mathematical equations and unintuitive charts, and it’s no surprise that most people tend to see it as a difficult subject producing dubious results.
But economics has in fact made profound contributions to our understanding of how society functions. Nobody has done a better job of bringing its story to life than Sylvia Nasar. Launching into her narrative via Charles Dickens and Jane Austen rather than Adam Smith and David Ricardo, she shows how some of the most important ideas of modern times came together in London in the mid-19th century, as Britain entered an era of unprecedented economic growth — the first time in human history that the living standards of average people began to rise significantly. The key insight around which the book revolves is that business productivity drives economic and societal improvement, and the book’s narrative shows us how an idea like that can be developed, debated, and accepted over the decades as empirical evidence mounts and the scholarly consensus builds.
Along the way, Nasar rights some perceptual wrongs of conventional economic history. One hero of the tale is British economist Alfred Marshall (1842–1924), who hasn’t always gotten the respect he deserves. Grand Pursuit reveals what Karl Marx was wrong about (practically everything) and why (intellectual laziness); it paints rich portraits of neglected thinkers such as prototypical feminist Beatrice Webb (1858–1943), who formulated the idea of the social safety net in the 1890s, and American economist Irving Fisher (1867–1947), who presciently discovered portfolio theory, countercyclical monetary policy, and index numbers, as well as inventing the Rolodex and founding the company that became Remington Rand. Nasar also provides carefully reported assessments of the achievements of such better-known economists as John Maynard Keynes, Friedrich August von Hayek, and — the last in her line of profiles — Amartya Sen, whose work she sees as pointing to new directions for the field.
In Nasar’s view, economics has progressed to the point where it can explain definitively how to avoid the kinds of economic catastrophes that produced the Great Depression. All the nations that have grown steadily in recent years, she believes, are following the basic economic playbook that began to take shape as Marshall visited the factories of Britain’s Industrial Revolution, whereas countries that ignore those lessons are doomed to failure. But the dismal science has less to say about how to balance the roles of governments and markets or how to determine the optimal level of taxation. As examples, she cites the United States and Sweden, two countries with very different policy and fiscal profiles, but very similar — and enviable — standards of living.
* * *
To read the complete interview, please click here.
Sylvia Nasar, a former economist herself and a writer for Fortune and the New York Times, is the author of A Beautiful Mind (Simon & Schuster, 1998), the best-selling biography of mathematician and game theorist John Nash, later adapted into a hit Hollywood film. She is also the John S. and James L. Knight Professor of Business Journalism at the Columbia Graduate School of Journalism. She discussed her research and conclusions with s+b at Booz & Company’s New York office in May 2011.
The Thought Leader Interview: Sylvia Nasar
Sylvia Nasar (Photo: © John Blais)
Here is the introduction to an interview of Sylvia Nasar by Rob Norton as part of “The Thought Leader Interview” series featured by strategy+business magazine, published by Booz & Company. To read the complete interview, check out other resources, sign up for free email alerts, and obtain subscription information, please click here.
* * *
The renowned author discusses how the great economists uncovered the basic truth about progress, prosperity, and productivity, and the reasons you should be careful which ideas you listen to.
Many of the powerful forces that help business, hurt business, and shape our civilization today stem directly from the theories formulated by economists in the past, put into practice in the real world. That is the subject of Sylvia Nasar’s new book, Grand Pursuit: The Story of Economic Genius (Simon & Schuster, 2011). And yet, as Nasar would be the first to acknowledge, the field of economics has suffered from a lack of respect since its formative years; Scottish essayist Thomas Carlyle dubbed it “the dismal science” in 1849. Today, when economics makes headlines, it’s typically as a whipping boy (“Why Economists Failed to Predict the Financial Crisis”) or as part of a sales pitch (“Prominent Economists Support Changes to Medicare”). Add the fact that economics has been delivered to undergraduates over the past 50 years in an off-putting package of mathematical equations and unintuitive charts, and it’s no surprise that most people tend to see it as a difficult subject producing dubious results.
But economics has in fact made profound contributions to our understanding of how society functions. Nobody has done a better job of bringing its story to life than Sylvia Nasar. Launching into her narrative via Charles Dickens and Jane Austen rather than Adam Smith and David Ricardo, she shows how some of the most important ideas of modern times came together in London in the mid-19th century, as Britain entered an era of unprecedented economic growth — the first time in human history that the living standards of average people began to rise significantly. The key insight around which the book revolves is that business productivity drives economic and societal improvement, and the book’s narrative shows us how an idea like that can be developed, debated, and accepted over the decades as empirical evidence mounts and the scholarly consensus builds.
Along the way, Nasar rights some perceptual wrongs of conventional economic history. One hero of the tale is British economist Alfred Marshall (1842–1924), who hasn’t always gotten the respect he deserves. Grand Pursuit reveals what Karl Marx was wrong about (practically everything) and why (intellectual laziness); it paints rich portraits of neglected thinkers such as prototypical feminist Beatrice Webb (1858–1943), who formulated the idea of the social safety net in the 1890s, and American economist Irving Fisher (1867–1947), who presciently discovered portfolio theory, countercyclical monetary policy, and index numbers, as well as inventing the Rolodex and founding the company that became Remington Rand. Nasar also provides carefully reported assessments of the achievements of such better-known economists as John Maynard Keynes, Friedrich August von Hayek, and — the last in her line of profiles — Amartya Sen, whose work she sees as pointing to new directions for the field.
In Nasar’s view, economics has progressed to the point where it can explain definitively how to avoid the kinds of economic catastrophes that produced the Great Depression. All the nations that have grown steadily in recent years, she believes, are following the basic economic playbook that began to take shape as Marshall visited the factories of Britain’s Industrial Revolution, whereas countries that ignore those lessons are doomed to failure. But the dismal science has less to say about how to balance the roles of governments and markets or how to determine the optimal level of taxation. As examples, she cites the United States and Sweden, two countries with very different policy and fiscal profiles, but very similar — and enviable — standards of living.
* * *
To read the complete interview, please click here.
Sylvia Nasar, a former economist herself and a writer for Fortune and The New York Times, is the author of A Beautiful Mind (Simon & Schuster, 1998), the best-selling biography of mathematician and game theorist John Nash, later adapted into a hit Hollywood film. She is also the John S. and James L. Knight Professor of Business Journalism at the Columbia Graduate School of Journalism. Her most recent book, Grand Pursuit: The Story of Economic Genius, was published by Simon & Schuster (2011) and is also a bestseller. She discussed her research and conclusions with s+b at Booz & Company’s New York office in May 2011.
Albert Chandler’s “visible hand”
Strategy and Structure
Abbreviated, here are the first four:
1. Administrative coordination increased productivity, lower costs, and higher profits than did the market.
2. Internalized cost-saving initiatives required the appearance of a “managerial hierarchy” that, according to Chandler, was “a defining characteristic of the modern business enterprise.”
3. Modern business enterprise first appeared when the volume of economic activities forced administrative coordination to be more efficient, profitable, and frugal than was the market.
4. Once the managerial hierarchy was formed within a company, it became more permanent and more powerful.
Mind you, these and the other four general propositions of what Chandler characterized as “the visible hand of management” describe the evolution of a process that developed in the 19th century, first with the railroads and then, over time, to most other large companies.
21st Century Strategy in Four Words
Umair Hague
21st Century Strategy in Four Words
Umair Haque
It’s as predictable as the chorus of a power ballad. Every time I discuss good and evil, howls of protest erupt. Is it polemic? Is it deliberately controversial? Isn’t hard-nosed business beyond good and evil, anyways?
Not a chance.
Here’s 21st century strategy, summarized in four words: minimize evil, maximize good.
Forget a snot-nosed punk like me for a second. Adam Smith, Jeremy Bentham, John Stuart Mill, Friedrich Hayek laid the foundations (among others) of modern econ. Smith’s Theory of Moral Sentiments — the origin of the Invisible Hand — Bentham’s utilitarianism, Mill’s theory of liberty, Hayek’s catallaxy — all were fundamentally concerned with minimizing bad, and maximizing good. Economics is, at its heart, about good and bad. “Goods” and “bads”, remember? They’re the most elementary concept in econ 101.
But, in the search for a more perfect model, they’ve “rightsbeen left behind. Econ 1.0 assumed a perfect world — one of perfect information, rationality, zero friction, etc. That world, it was said, is a utopia: yesterday’s institutions — “free” trade, property ,” annual reports, self-interested managers, etc — are able to perfectly measure and weigh goods and bads. But the real world isn’t so simple. All too often, our economy works backwards. “Bads” literally overwhelm “goods.” Evidence? Try yesteryear’s mega-banking crisis on for size.
So the central, pressing question is this: How do we design better institutions that do minimize the production of bads, and maximize the production of goods? That is, of course, what Copenhagen is really about — not carbon. It’s about redesigning the fabric of the global economy, so bads are erased, and goods pop into existence.
* * *
Umair Haque is Director of the Havas Media Lab, a new kind of strategic advisor that helps investors, entrepreneurs, and firms experiment with, craft, and drive radical management, business model, and strategic innovation. Prior to Havas, Umair founded Bubblegeneration, an agenda-setting advisory boutique that helped shape the strategies of investors, entrepreneurs, and blue chip companies across media and consumer industries. Bubblegeneration’s work has been recognized by publications like Wired, The Red Herring, Business 2.0, and BusinessWeek, and in Chris Anderson’s Long Tail, to which Umair was a contributor.
* * *
To read the complete article, check out other articles and resources, and sign up for a free subscription to Harvard Business Daily Alerts, please visit dailyalert@email.harvardbusiness.org.
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