A Path Less Traveled…

Where does it come from?  It was the question that motivated Adam Smith when he wrote “The Wealth of Nations” and it is a question that came back to my mind when I started reading “The Worldly Philosophers” by Robert Heilbroner, a book that I highly recommend.

Adam Smith is widely credited with the founding of modern economic thought when he published “The Wealth of Nations” in 1776.  As Heilbroner points out this is relatively late when compared with the length of all human history.  Why so late?  He suggests that human civilization has survived through the ages through 3 methods: tradition, authoritarianism, and markets.  The first two being the most dominant through history and markets being a relatively new phenomenon.

It was through markets that Adam Smith and his generation saw the first rapid accumulation of wealth.  Not through the conquering of new lands, coming across a rich vein of gold, or through theft but by adding value in a free market.  Smith took it upon himself to answer the question of where wealth comes from.

The assumption that Smith made before answering the question is important and it is an assumption that is often lost today.  It was that poverty is the natural state of man and wealth the exception.  In Smith’s time it was an entirely safe assumption to make but today, at least in the industrialized west, the assumption is made that wealth is the natural state and poverty the exception.

Today we take wealth for granted since we have grown up with it and have never really known a world without it.  I am not stating that this is true on an individual level, most everyone has experienced a time of unemployment, I am writing of an aggregate level.  We forget that we come into this world naked and completely dependent on our parents for survival and it is only by our hands or by our minds that we accumulate wealth.

The danger in taking wealth for granted is that we are more apt to waste it or erect policies and institutions that limit its accumulation.  Or even worse encourage policies that forcibly take it away so it can be redistributed in order to solve “poverty”.  If we truly want to solve poverty then we should think about wealth, its creation, and its accumulation.