Wealth of Nations Summary

The Wealth of Nations

Chapter I: Of the Division of Labour

The division of labor always increases the productivity of workers:

• It creates specialized knowledge of a particular task
• Saves the worker time by focusing on one task and not switching from one task to another.
• Spending time on one task leads to innovation that makes this task easier and quicker.

Division of labor leads to increased productivity, which leads to the increase of the wealth of a society.

Chapter II: Of the Principle which gives occasion to the Division of Labour

Talent is what decided what each member of society would do. The division of labor would allow the members to trade the fruits of his labor for other necessities. Instead of each person trying to produce every thing they needed, they would produce one thing and trade it with others. People would create a surplus of their products in order to trade it.

Division of labor came about by human nature: people are assured by the notion of being able to create one product and trade that with another product they needed.

It isn’t talent that determines what members of society do. It is habit, custom, and education. People are employed in a way because they came to develop specialized knowledge of their role. If the notion of trade did not exist, people would have to acquire a large array of skills in order to survive. This notion of trade is what separates humans from animals.

Chapter III: That the Division of Labour is limited by the Extent of the Market

The larger the market, the greater the extent to which labor can be effectively divided. A market needs to consume the products it creates. The smaller the market, the more limited the division of labor needs to be.

Improvements are made when there is a guarantee that the market will be large enough to absorb the products that will be made. This usually happens when a market grows or when there is easy access to other markets.

Money facilitates trade as well because otherwise people would have to seek out someone who has what they need specifically and in turn would want what they produced.

Thoughts:

It’s not enough to know one task very well but be oblivious to the other tasks that go into making a certain products.

While it is important to have people who are familiar with certain aspects of a product, it is also necessary to have someone who is overlooking the entire process. By becoming too enthralled within the details, you lose sight of the entire image.

The division of labor still applies today, of course, but in a different way. People in every industry need to know much more in order to be successful.

The idea of trade does not apply as much today since most of the trading is done with money, and not with products.

The way I see the division of labor applying to my work life would be if I were to one day run a business. I would need several different types of employees in order for the business to run smoothly. For example, a salesperson, accountant, manager, etc.

Unto This Last: The Roots of Honour

• Political economists have recently ignored the crucial importance of the relationship between employers and employees to economic life.
• Workers are more productive if their employers treat them decently and don’t try to get the most work out of them that they possibly can.
• Humans are not always self-centered. They are concerned with justice.
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Thoughts:

I agree with the idea that workers are more productive when treated correctly.

It is a difficult balance to weigh the needs of your customers, plus the needs of your employees. This ties in with the idea of making morally ethic business decisions. You must consider the needs of all people involved when making a decision. I would like to believe that once I begin working, that I will be motivated by a need to produce something for others, rather than to be concerned with making money for myself. The motivation has to do with wanting to create something useful, and with being happy in the workplace.

Making an Ethical Decision

Consequences/Utilitarianism

• Ethical behavior is about bringing as much happiness as possible for the greatest number of people.
• The right way to behave in a situation is to choose the alternative that is likely to produce the greatest overall good.

• Cost benefit analysis is common among business decisions

• Compare the harms and benefits of an action for all persons who will be affected by the decision
• Consider the immediate/direct and indirect consequences of the decision
• Difficulty with this belief: there are circumstances where weighing the harms and benefits turns out to not harm anyone yet the decision still seems ethically wrong.

Rights and Duties/ Deontology

• Steadfastness to universal principles (respect for persons and property, fairness, truth telling) no matter what the consequential fallout.
• Understanding that moral action should be guided by certain overriding rights and duties.
• Moral behavior is a matter of holding to certain principles without exceptions.
• Categorical imperatives:

• A person should be willing to have the reason for their action become a universal principle. They should be willing to live in a world where the action they chose to take would be repeated for the same reasons whenever the same situation arose.
• Have respect for the intrinsic value of other people, and don’t just use them as means to achieve your own purposes. Humans are not tools to be manipulated but must be respected as equal beings with the right to make full informed decisions for themselves.

• Difficulty with this belief: there are circumstances where there are competing claims- which claim should be weighed most heavily?

Virtue Ethics

• What human beings are capable of being, how they can cultivate the habits of good character that will naturally lead them to their fullest potential.
• People develop their virtues through training- by being repeatedly exposed to demonstrations of decent behavior within families and communities.
• Ethics is not a matter of teasing out the correct choice given a series of knotty dilemmas. It is a lifelong conditioning process within communities.
• Difficulty: what defines a community? What if the community/family cant effectively support the individuals training process to be morally ethic?

Stakeholder Analysis

• When making business decisions, one must think of shareholders, employees, customers, suppliers, and the local community, the local government, and natural environment in which a business operates.

Thoughts:

It is difficult to be able to define what classifies a decision as morally ethic.

While each of the definitions above have definitely encompassed one part of what goes into a morally ethical decision, you cannot effectively capture all aspects at once. As a business leader, there will always be a stakeholder that will not be happy with the decisions you make. To say the goal is to be able to make as many people happy as you can still brings about problems because what if you, as the business leader, are not happy with the decision being made. This can cause an array of problems down the line which conflicts with the utilitarianism view of morality where one must consider the consequences of the decision down the line.