#WealthofTweets: Book IV.1

political economy wealth of nations mercantilism foreign trade public services balance of trade taxes wealth of nations project read the wealth of nations history of money smithtweets oikos oeconomics boston tea party wealth of tweets

Introduction and Chapter 1
Of the Principle of the Commercial or Mercantile System

6 Feb • 28 tweets • adamsmithworks/status/1358070589064437763

Good morning, Smithketeers! Time for Fun With 18thC Spelling! WHY does #AdamSmith, who invented modern economics, spell it with an O like some kind of crazy person? #WealthOfTweets #SmithTweets

It's because he's thinking about the Greek roots of the word. Oikos=Household and Nomia=Management [Sending some love to our friends @kefimgr] #WealthOfTweets #SmithTweets

We, the SmithTweeters, support a revival of this spelling. We're sure it won't bother any of our oeconomist friends, or their oeconomics departments. Right? #WealthOfTweets #SmithTweets

Political Oeconomy, says Smith, does two things...oh, fine. We'll go back to the modern spelling, but only because we need all our characters to tweet the last half of #WealthOfNations

Those Os add up. #WealthOfTweets #SmithTweets

(Plus, we'd probably have to capitulate to the demands of Canadian SmithTweeters and start putting Us everywhere. Where would that leave us? Oueconomy? It's too much.) #WealthOfTweets #SmithTweets

The first thing political ᴇᴄᴏɴᴏᴍʏ does is provide a plentiful revenue for the people. But Smith knows that’s backwards and he revises. It enables them to provide a plentiful revenue for themselves. That’s an important difference (IV.Intro.1) #WealthOfTweets #SmithTweets

The second thing political economy does is provide the state with enough revenue for public services. (IV.Intro.1) #WealthOfTweets #SmithTweets

There are two different systems of political economy for reaching these ends: commerce and agriculture. We’re going to start with commerce! (No cows today, folks, sorry.) (IV.Intro.2) #WealthOfTweets #SmithTweets #MaybeJustOne🐄

Smith is still really annoyed by how we talk about wealth and money as if they're the same thing. There’s not really anything he can do to stop it, but he’s going to point it out every.single.time. (IV.i.1) #WealthOfTweets #SmithTweets

More financial advice from #AdamSmith. “The great affair, we always find, is to get money.” (IV.i.1) #ThanksWeGuess #WealthOfTweets #SmithTweets

It’s not just linguistically irritating to Smith, though, to use wealth and money interchangeably. It’s WRONG to think that piling up gold and silver means a country is wealthy. (IV.i.2) #WealthOfTweets #SmithTweets

[Oh, thank goodness. Cows! They’re the money that moos.] (IV.i.2)
#WealthOfTweets #SmithTweets

#AdamSmith says that #JohnLocke says that gold and silver are wealth. Why would John Locke say that? Because gold and silver are the best portable store of value. Anything else perishes or decays. (IV.i.3) #WealthOfTweets #SmithTweets

But others admit that it’s really hard and basically fruitless to eat money, so consumables are where real wealth is at. But you should still accumulate money so you can pay for wars. (IV.i.4) #WealthOfTweets #SmithTweets

This means that nations do nutty things to guard their gold and silver, like forbidding people from taking money out of the country. VERY inconvenient for merchants. (IV.i.5–6) #WealthOfTweets #SmithTweets

As you’d predict, merchants made good and bad arguments for ending prohibitions on taking money out of country. Good ones were about utility and feasibility. Bad ones were about the balance of trade and need for govt. support of trade.(IV.i.6– 9) #WealthOfTweets #SmithTweets

Good or bad, the arguments worked. Everyone knew that foreign trade makes nations rich. They might not have understood how it worked (esp. says Smith, if they were politicians) but they knew it worked.(IV.i.10) #WealthOfTweets #SmithTweets

So instead of keeping people from exporting money, the government turned its attention to maintaining the “balance of trade.” (IV.i.10) #WealthOfTweets #SmithTweets

Hey, #AdamSmith, tell us what you think about the #BalanceOfTrade? Oh, it’s “more intricate, much more embarrassing, and just equally fruitless” as preventing exportation of money? #SmithSnark (IV.i.10) #WealthOfTweets #SmithTweets

The new focus on #BalanceOfTrade led to a silly obsession with foreign imports (because they're paid for with gold) and not enough to trade within the country (even though it creates the most wealth). (IV.i.10) #WealthOfTweets #SmithTweets

This is silly, says Smith, because we can “trust with perfect security” that free trade will always provide us with enough wine and enough gold and silver. The government can and should stay the heck out of it. (IV.i.11) #WealthOfTweets #SmithTweets

[This is great and all, but we, the SmithTweeters, would like to know what Smith considers to be “enough” wine. Also, does this apply to tea? We have concerns.] (IV.i.11) #WealthOfTweets #SmithTweets

Oh! It’s okay! Smith’s observation applies to every commodity! Their supply is regulated by effectual demand! [A newer oeconomics book would have a graph for this somewhere.] (IV.i.12) #WealthOfTweets #SmithTweets

Gold and silver regulate themselves most efficiently because they are small in size and high in value. Like #SmithTweets! (IV.i.12) #WealthOfTweets

Also, small, valuable things like precious metals are easy and profitable to smuggle. It’s a waste of time to try to keep them in one place. (IV.i.13) #WealthOfTweets #SmithTweets

News About Tea! British tea was more expensive than competitors’. The Boston Tea Party wasn’t about a new tax on tea. It was about forcing the colonists to buy expensive British tea! (IV.i.13)#WealthOfTweets #SmithTweets


[Canadian SmithTweeters remain nonplussed by American Revolutionary Fervor.] (And it's fervour, darnit.) #WealthOfTweets #SmithTweets

We're going to call it there for today before we accidentally trigger an 1812 do-over. We'll be back with the rest of Chapter 1 tomorrow! #WealthOfTweets #SmithTweets

7 Feb • 24 tweets • adamsmithworks/status/1358425069349928962

Sorry to leave you hanging there yesterday, Smithsters. There's just a lot going on in this chapter! So we return to #AdamSmith's many grievances with the very idea of the mercantile system. (IV.i.14–45) #WealthOfTweets #SmithTweets

People worry too much about the supply of cash money. It’s easy to import more and you can always use barter instead, if things get really tight. Also, paper money is a thing! (IV.i.14–15) #WealthOfTweets #SmithTweets

But everyone complains about a scarcity of money. That’s usually because they can’t get credit, or are big spenders. Or it can be caused by overtrading. It’s not about how many coins are around, but the ease of getting them. (IV.i.16) #WealthOfTweets #SmithTweets

Okay, now, wait just a minute. “It would be too ridiculous to go about seriously to prove” that wealth is about purchasing power, not about physical money. WHAT DID WE TWEET BOOK 2, CH. 2 FOR, THEN? (IV.i.17) #Ahem #WealthOfTweets#SmithTweet

It’s easier to buy money with goods than goods with money, but that’s because money is more flexible, not because it’s “more wealth. ”BUT! goods can be used for things other than buying money. And money can only be used for buying goods. (IV.i.18) #WealthOfTweets #SmithTweets

We act like it’s bad to trade durable money for perishable goods. But we never worry about trading non perishables (like pots and pans) for perishables (like wine). It would be silly. We’d end up with too many pots and pans and no wine. (IV.i.19) #WealthOfTweets #SmithTweets

[Please take a moment to appreciate the 210 word sentence in paragraph 19. This is why it was necessary to hire a crack team of professional SmithTweeters rather than allow #AdamSmith to tweet this himself.] (IV.i.19) #WealthOfTweets #SmithTweets

We also act like we have to accumulate gold and silver to pay for wars. This is only sort of true. Militaries need tons of consumables, too. (IV.i.20–21) #WealthOfTweets #SmithTweets

Time for another subdivision: A nation’s accumulated gold and silver can be divided into:
1. circulating money
2. "plate" owned by private families

You can’t pay for war with circulating money. Melting down plate doesn’t pay the bills, makes enemies, and means everything's less pretty.Countries once paid for wars from the royal treasury.But now, they can do it by exporting goods! (IV.i.23–27) #WealthOfTweets #SmithTweets

Commercial countries exchange gold and silver bullion. We should think of bullion as the money of the "mercantile republic" (the money of international trade), or just an international version of national currencies. (IV.i.28) #WealthOfTweets #SmithTweets

More valuable manufactured goods, which (like gold and silver) transport a lot of value in a little space, can take the place of gold and silver when paying for wars. (IV.i.29) #WealthOfTweets #SmithTweets

If valuable manufactured goods get used to pay for war, eventually the structure of the economy will shift to help support paying for war.That's bad.It can create a commercial interest in carrying on wars. (IV.i.29) #WealthOfTweets #SmithTweets

Also: You can’t win wars with vegetables. (IV.i.30)

#MilitaryStrategyWithAdamSmith #WealthOfTweets #SmithTweets

Back to foreign trade: It's also useful because you export stuff you have but don’t want in exchange for stuff you want but don’t have. It's JUST like the butcher, brewer, and baker from way back in Book 1. But with international borders. (IV.i.31) #WealthOfTweets #SmithTweets

Smith will say it as many times as it takes: The discovery of America didn’t create wealth with gold and silver mines.It goes: Hey look, America!➡expanded markets➡increased division of labor➡improvements in manufacture➡wealth!(IV.i.32) #WealthOfTweets #SmithTweets

I mean, it’s a good thing that Smith explained that he’s not going to bother arguing that gold and silver aren’t wealth. Otherwise, we might think that’s what he’s doing. (IV.i.32) #WealthOfTweets #SmithTweets

America was a new market for European goods. First contact with Americans could have been hugely beneficial. But the "savage injustice of the Europeans" made it "ruinous and destructive" instead. That's a use of "savage" we can get behind. (IV.i.32) #WealthOfTweets #SmithTweets

(But we are STILL side eyeing the use of “savages and barbarians” in paragraph 33, Dr. Smith.) (IV.i.33)#WealthOfTweets #SmithTweets

Trade with America still generates a lot of wealth! But not👏from👏gold👏. It's because fewer trade restrictions gives the colonies access to a large market! (IV.i.33) #WealthOfTweets #SmithTweets

The East India Company? Smith hates it. (IV.i.33) #WealthOfTweets #SmithTweets

WAIT A MINUTE! First Smith explains money isn’t wealth (II.ii). Then says it would be dumb to explain it (IV.i.17). Then he explains it. Tediously. (IV.i.33) Now he tells us why he explained it, and explains it again? We. Need. Tea. (IV.i.34) #WealthOfTweets #SmithTweets

We get why he’s irritated, though. When people don't get it, they make national policy based on keeping money in the country. That doesn’t work. It makes us worse off. It's bad. And he's about to explain all that next chapter. (IV.i.35–45) #WealthOfTweets #SmithTweets

(Unless, you know, Smith decides it would be silly to explain it. In which case he’ll explain it three times, while saying that he isn’t going to. We, the Smithtweeters, cannot wait to see what happens! See you tomorrow!) (IV.i.) #WealthOfTweets #SmithTweets

See also the AdamSmithWorks Reading Guide for this chapter.