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Wealth of Nation Note (Ch.4)

  Barter - Metal - Coins - Money Without the power to exchange, a specialized market could never exist. Since people will not be able to exchange their surplus production into something that they need. Barter Smith started this chapter with the Barter system, where the ancient civilization used a variety of different items to exchange such as oxen in Ancient Greece. However, their system does have tons of disadvantages: People have different needs for items, because of that trade might not take place, even though they both have surplus. It is also hard to exchange the exact value as some items are not divisible and on top of that some items might be hard to carry around too.  Thus for something to serve as a good exchange medium, it needs to satisfy 3 categories: Universally wanted. Divisible. Easy to carry. Metal Slowly most civilizations started using metal as the medium of exchange. Since it is “universally wanted” (because of what it represents exchange value now.) Beside...
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Wealth Of Nation (Ch.3)

 

Condition for a Specialized Market

In the beginning of this chapter, Adam Smith talked about how for a specialized market to exist, you need to have a large market. 


Why do we need a large market for specialization to exist? Because without a large market, people who specialize might not be able to trade their surplus into what they want. Thus in this situation they are encouraged to be jack of all trades. But as mentioned in chapter one we lose a lot of production through doing that.

Transportation and the Advantage of Water Transport

A specialized market needs a huge market. Thus trading helps immensely in that regard, as it expands the reach of your market. But even among trade, water transport yields supreme. For they could carry a large quantity of goods with a cheaper cost compared to land transport. Therefore a country with access to sea and river yields a lot more advantages compared to those without access to sea routes, for the sea route opens up their access to the world market.

Personal thoughts about Chapter 3

Through this chapter I finally understood why China yields such an advantage compared to all other countries. Why a more specialized market could only be achieved in China. At the same time, it also helped me to make sense of the rapid growth of Japan’s economy during the 60’s. As they were an island with access to sea all around them.
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