Adam Smith's Notion of Welfare

Mamta, External Ph.D 2010

Topic: Adam Smith's Notion of Welfare

Introduction

Adam Smith (1723-1790) the father of modern economics, by himself stands as an institution in the history of economic thought. His contribution to the development of economic thought can be analysed considering the influence his views and work exerted upon the moulding of future economic thought and policy.

Smith's interest in economic and social welfare was clear from his definition of political economy. Adam Smith defined political economy as a ‘branch of the science of a statesman or legislator' concerned with the twofold objective of ‘providing a plentiful revenue or subsistence for the people … and [supplying] the state or commonwealth with a revenue sufficient for the public service. It proposes to enrich both the people and the sovereign'.

The seeds of a very large number of present developments can be found in the analysis of the Smith's theory of the determinants of the level and growth of population. This contention lies in the synthesis of Smith's main work, ‘The Wealth of Nations' . In Smith's view wealth was the product supply by labour to meet the basic needs.

He begins ‘The Wealth of Nations' by making wealth an issue of whether

The nation will be better or worse supplied with all the necessaries and conveniences for which it has occasion .

In the beginning of this book, he starts with a note where he emphasises that the origin of the national wealth lies not in foreign trade or in land but in labour; and its contents are the produce of labour. In this book his prime objective was to find out the amount of wealth that a nation during any period is acquiring or achieving and to outline the conditions for rapid economic development in terms of national income by considering the real subsistence composition.

This paper attempts to analyse Smith's view regarding welfare from the perspective of humankind. This will be derived from my understanding developed from various sections of this book. Accordingly the paper is structured as follows: Section II describes labour as the real measure of wealth of a nation and interprets welfare in terms of factor influencing wages; Section III summarises the expenses of the state on defence, justice, public works/institutions, and maintenance of the state. He also proposes a structure of taxation which minimises the economic and social burden as well as wastage.

Section I. Labour and factors influencing wages

The Wealth of Nations concerns humankind's material welfare. The opening sentence of the "The Wealth of Nations" summarizes this point:

The annual