In this video in the series of chapter summaries for Adam Smith's 'The Wealth Of Nations', we look at chapter one of book two, "Of Money, Considered as a Particular Branch of the General Stock of the Society, or of the Expense of Maintaining the National Capital". Using clear and easy to understand examples we will summarize and analyse one of the key texts for understanding modern economics.
The Wealth Of Nations by Adam Smith was the first modern book of economics, the foundation on which all later economics was built. First published in 1776, its influence is still felt today. If you are interested in the works of later economists or theorists of political economy, they all build off what he started. Although some of the ideas are a bit dated now, it still has much to offer and is standard reading for anyone interested in economics. Much quoted, it is a bible of classical economics and free markets. It is often misunderstood though, and many of its ideas might surprise free market proponents today.
In chapter two of book two, Smith explains that while money is a form of what Smith terms 'circulating stock', in that it's value comes from being given away, it behaves differently from other forms of circulating capital, in that it exists not to be consumed or to end up as fixed capital, but to help circulate resources around a society. Smith also discusses the cost of maintaining fixed capital, and how a society has both a gross and a net revenue.
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