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principles of finance a la shmoop Adam Smith the wealth of nations this is

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Adam Smith but this is the Adam Smith we're gonna tell you about ok ok so it's [painting of Adam Smith]

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a common name why should you care about this guy well in the world of political

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economic theory he's basically the Godfather - the cat in the speech

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impediment his most notable contribution was the Newberry and Caldecott medal

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winning book everybody poops but he also wrote an inquiry into the nature and [books he wrote on table]

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causes of the wealth of nations or for those of us with places to be simply the

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wealth of nations before Smith's book good economic policy more or less

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consisted of well not throwing all of your shillings into a fountain for good [coins dropping into well]

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luck Smith outlined all the do's and don'ts

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as he saw and set the stage for a truly free market system [Smith writing on paper]

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it was Smith who first posited that a nation's wealth should be determined by

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national income not by the piles of gold sitting in a back room somewhere like it

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was about income production not about assets he advocated for income based on

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labor that is if you work hard or harder than the average bear then you should be [bear moving stones in forest]

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paid more than the average bear and that was a shocking concept in the day this

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structure is the foundation of merit-based rewards in society which

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flew directly opposite from the Royal system in England where financial and/or

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social rewards were based primarily on birthright and lineage that is you are

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either born into wealth and a privileged life or born into laboring for the

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wealthy and no amount of hard work could really meaningfully move your station in

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life but according to Smith with regard to the laborers who were in fact willing

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to work 80 hours a week saving their nickels and farthings or whatever they

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were it should be a ok for those hardworking individuals to get even

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wealthier as they accrued capital earned by their own sweat and then invested

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that capital in whatever legal form you know into the capital markets you know

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making their proportionate share of profits from businesses created by other

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hard-working laborers like they're buying stock in them or lending

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and money and taking interest that's a-ok there Capitol made them one form or

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another of financial royalty in the new world when they did all this right so [old paintings of new world]

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yeah if individuals were to consider themselves truly successful well they

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couldn't just rest on their laurels or lineage instead they should strive to

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accumulate more and more laurels until they had so many laurels lying around [man lying on couch]

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while they could pretty much open up Laurel Emporium well Smith stated that

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the division of labor and capital is important for resource optimization and

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specialization and that future income is a result of smart capital accumulation

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right so the owners get wealthier and you should strive really hard to be an

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owner rather than you know just an hourly for hire laborer who doesn't

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really want to work that hard he did believe that there was a role for

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government to play in all of this but it was a minimal role yeah things had to be

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legal fair he wouldn't have had a soft spot for math and coke dealers but pot

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growers in California that's legal totally fine go make money for the most

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part the Gov should well keep its filthy hands to itself and let the people [hand swipes government's hand away from money]

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determine how much money they might make and keep based on their own hard work

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and effort and initiative well that said Smith recognized that corporate greed [Golum popping out of pile of money]

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was in fact a thing and might interfere with a healthy economy which is why he

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was majorly Pro competition and just as majorly anti-monopoly another of the

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vital concepts expressed in Wealth of Nations was that the value of something

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should be determined by its natural or market price ie anything is worth what

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someone else is willing to pay for it you may personally think that a bunch of

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paint splattered across a white canvas is more deserving of being placed [woman painting]

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lovingly inside of a dumpster than hung on a gallery wall but if someone raises

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his paddle and agrees to pay two point seven million dollars for it well then

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that splattered mess has achieved a value of yes two point seven milk or

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sital probably go to his wife after she divorces him for spending that two point

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seven million dollars on a painting but hey as long as someone appreciates it

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it's okay with Adam Smith II [woman on ship with Adam Smith]

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