Reply the Discussion Post and Answer the two given Questions:-
In the Wealth of Nations Chapter IX, Adam Smith talks about the basic principle of the profits of stock. One line in particular, summarizes the chapter in general: "High wages of labour and high profits of stock, however, are things, perhaps, which scarce ever go together, except in the peculiar circumstances of new colonies." Basically, when a colony increases, the amount of stock gradually decreases. Later in the chapter, he talks about the benefits of competition in a market in order to make the ordinary profit as low as possible. Do you think that this principle holds true in today's economy?
In Chapter X, Adam Smith discusses the nature of jobs. This entails how more difficult jobs pay better than easier ones. For the most part, it is all common sensical in the context of delegating value to jobs themselves. He also discusses his qualms with government regulations and restrictions on jobs. Becoming registered to do a specific job makes the wages higher for that job due to the smaller population of people with that job. Smith also critiques the government policies that increase prices on foreign goods, which intend to protect local businesses. In actuality, the policies halter the natural flow of the economy and makes the local manufacturers somewhat overprice their goods.
Book II, the topic of the nature, accumulation, and employment of stock is covered. Adam Smith points out that it is necessary to have some sort of money in order to live. The more money you have, the more likely you will be to invest and make even more. He continues on this topic to differentiate between two different types of capital. The types are fixed, which pertains to making improvements to property to increase its value, while circulating refers to tangible goods that don't equate real money until they are actually sold. Next, he differentiates between net and gross revenue, which all of you know at this point. He also talks about the importance of consumerism. How wealth isn't entirely based on how much money there is, but on how great the purchasing power is. A healthy economy has a circulating factor: hire more workers, who can go out and purchase products, which in turn makes the business do even better, and the cycle will continue to grow. Later on, he distinguishes between productive and unproductive labor. The terms are pretty self-explanatory, but the jist of it is that productive labor serves to increase wealth, while unproductive labor consumes wages without contributing to the "bigger picture."
In chapters 1 and 2 of Book IV, Adam Smith talks of the Principle of the commercial, or mercantile system, and then goes on to go into detail on the importation of foreign goods.
Smith refers to the invisible hand during his explanation on the benefit of domestic rather than foreign consumption. "By preferring the support of domestic to that of a foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce matt be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." He then concludes that pursuing ones own interest, actually helps society more than one intended. This is an interesting proposition, and it makes sense economically.
1. Do you people pursuing their selfish interests is actually a benefit to the country as a whole?
2. Does the principle of the profits of stock hold true in today's economy?