SILLO, HANNA BARBARA S.

BS MANAGEMENT IV

Now You See Me: Uncovering the Invisble Hand

Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, or simply
The Wealth Nations, was first published in 1776 with the rationale of explaining the emerging
economic order brought about by the onset of the Industrial Revolution. Smith is considered as
the apostle of capitalism but the book is as economic as it is philosophic, examining the concept
of wealth. After the age of exploration and colonization and the decline of mercantilism, a new
system emerged primarily in Europe, and it was Smith who provided an explanation to the
prevailing observable phenomenon. In this respect, he is properly credited not as the inventor,
but rather the one who systematized capitalism. Smith founded his book on the premise that
they are purely individualistic. Human beings, Smith said, are independent beings who are more
likely to succeed when interacting in a society of economic freedom. When Smith published his
book, it was not as an attempt to propagate capitalism in the negative light. In the book, Smith
puts more sympathy tot house deprived or improperly compensated by capitalism, while
simultaneously attacking the Scottish lords who own vast tracks of lands. By examining the
different factors affecting the society using historical data, Smith’s goal was singular: he was
trying to explain the phenomenon of trade.

In his thousand-page book, Smith had to establish a number of fundamental

assumptions and theories in order to “sell” capitalism as a system, but the most central one is
the redefinition of the concept of wealth. In the former mercantilist world, people viewed
wealth only in terms of gold and silver bullions because it is easily exchangeable for good and
services, especially during the times of war. Nations went in conflict with each other and
focused on having the greatest amount of gold in their treasury. According to Adam Smith—
however—gold, silver, and money is not the real measure of wealth. The real measure of the
exchangeable value of commodities is the labor put into their production. To wit, “The real
wealth we obtain from exchanging with others is their labor, not their money.”

In relation to this, Smith then encouraged the division of labor—the concept of dividing
the different processes in creating a certain commodity or service in order to increase
productivity. Citing the pin-making and cotton industry as examples, Smith points out the
efficiency of dividing work, a then novel concept that became the norm after the dawn of
machines and computers.

The last but no less important idea from Smith’s philosophy is trade liberalization. Smith
opposed any form of trade restrictions and advocated laissez faire—an economy with minimal
government intervention—but he did not entirely oppose the government as an institution.
Smith suggested that the government should not disappear but be limited to three functions:
national defense, administration of impartial justice, and construction of public infrastructure
to benefit the society.

In Smith’s overall philosophy we do not see the invisible hand that moves the economy,
not because it is concealed, but because it is untraceable and inseparable from the population

MGT 197 Book Report

Page 1 of 2
SILLO, HANNA BARBARA S.
BS MANAGEMENT IV

as a whole, making the Smith’s invisible hand a more economic leviathan and Thomas Hobbes’
leviathan a more political, visible hand.

Most of the concepts discussed by Smith would seem too obvious for a 21st century
reader as myself, so the book did not contain new learnings as much as it provided a history of
the present economy and further explained existing theories. The learning here is more
retrospective in nature, meaning it is the evaluation of how much of today’s economy is
institutionalized by Smith’s philosophy. As a business student, the survival of this profession
relies heavily on the economy being a capitalist. Prior to the book, I have always viewed
capitalism as an oppressive system. But reading the Wealth of Nations introduced me to
Smith’s version of the idea—an economy that creates opportunities and levels out the playing
field for all members of society, a concept that should be the guiding principle for me both as a
student and a future entrepreneur.

There is admittedly a difficulty in reading the book in its entirety and I personally only
read selected sections of it. I (and most economists themselves) do not recommend reading the
book in its entirety for two reasons: one, because it is written in 18 th century English and two,
because it is simply too long and introspective. The Wealth of Nations is analogous to the holy
scriptures of religions in the sense that the majority of the population knows about its
importance and lives by its commands, but not everybody has read it in its entire martyr glory.

MGT 197 Book Report

Page 2 of 2