The Wealth of Nations Problem

My presentation at the Stanford workshop will draw on Chapter 7 of my manuscript The Invention of the Economy, which focuses on Adam Smith and his account of commercial society. I argue that we can identify a specific and potentially revealing “problem” in Smith’s work, which I call the “Wealth of Nations problem” (as opposed to the so-called Adam Smith Problem concerning the connection between self-interest and sympathy across Smith’s works which was much discussed in German circles in the later nineteenth century but which I do not believe was a genuine problem). In its broadest formulation, the Wealth of Nations problem concerns the tension, even the incompatibility, between the two guiding metaphors in the Wealth of Nations: the “pin factory” and the “invisible hand.” More precisely, the Wealth of Nations problem centers on the analytic difficulty of incorporating “economies of scale” in production into a theory of general equilibrium in the economy. Naming the problem in these terms is slightly anachronistic in foregrounding the technical apparatus of mid-twentieth century economics, which Smith of course did not utilize. But I hope the anachronism may help shed light on an underlying conflict between Smith’s joint use of the “pin factory” and the “invisible hand” in his justification of commercial society. Identifying the Wealth of Nations problem also provides a useful framework through which to organize and interpret roughly two centuries of economic theory from the moral sciences of Smith’s time through the classical political economy that followed him to mid-twentieth-century neoclassical economics. Locating the problem in Smith’s germinal text helps highlight continuing difficulties in the formal depiction and analysis of the economy following the Wealth of Nations. Among others, it allows us to discern the residue of unresolved eighteenth-century debates over “value” that continue to complicate our thinking about markets and politics today.