Today we're gonna talk about profits. They come from stock! #AdamSmith reminds us that stock is any resource paid for in advance when doing business. In general, profits and wages don't move together. (I.ix.1–2) #WealthOfTweets #SmithTweets
As stock goes up, there's more of it to employ more workers (by paying them or providing machines for them to work or both). This raises wages! But new stock competes with existing stock, which tends to lower profit. (I.ix.2) #WealthOfTweets #SmithTweets
If you thought figuring out the average wages of labor was complicated, don't even think about trying to figure out the average profit of stock. Basically impossible. Luckily, the rate of interest tends to vary with the profits of stock. (I.ix.3–4) #WealthOfTweets #SmithTweets
Lots of laws have tried to control interest rates and stop usury. They've all failed to do either. (I.ix.5–9) #WealthOfTweets #SmithTweets
Profits and wages rising together is unusual, but it happens. In particular, in new colonies. (I.ix.11) #WealthOfTweets #SmithTweets
Investing advice from Smith: It's easier to make money if you've got some. The trick is to get some. (I.ix.11) #ThanksWeGuess #WealthOfTweets #SmithTweets
Some things that keep wealth low: neglecting/despising foreign commerce (restricts the extent of the market) and neglecting the protection of the rights of the poor and small business owners (gives the rich monopoly powers). (I.ix.15) #WealthOfTweets #SmithTweets
For example, the "barbarous nations" that overran the western Roman empire (yes, he means the Germans) left the enforcement of contracts to the parties subject to them, contributing to the stagnant economy. (I.ix.16) #WealthOfTweets #SmithTweets
The ordinary rate of profit must compensate for the risk that the investment fails in the same way that the ordinary rate of interest has to compensate for the risk of default by borrowers. (I.ix.18–19) #WealthOfTweets #SmithTweets
Only the amount paid in excess of what compensates for risk is "neat or clear" profit. Gross profit is the whole shebang. (I.ix.18) #WealthOfTweets #SmithTweets
When a country gets so rich that it has employed the full quantity of stock that can be used, it will become fashionable to be in business as it is to dress according to the fashion of the times. (I.ix.20) #WealthOfTweets #SmithTweets…
That awkward feeling when you spell awkward aukward. (I.ix.20) #WealthOfTweets #SmithTweets #YesWeKnowItWasADifferentTime
Employers and merchants blame increasing prices on high wages, but Smith says high profits are much more to blame. Wages increase prices arithmetically, but increasing profits work like compound interest. (I.ix.24) #WealthOfTweets #SmithTweets
You'd never know it from listening to the merchants and masters, though—"They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people." (I.ix.24) #SurplusOfShade #WealthOfTweets #SmithTweets
Tune in tomorrow as we, the Smithtweeters, try to get some love from @MikeRoweWorks as #AdamSmith explores seasonal work, #DirtyJobs, and side gigs.

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More from @adamsmithworks

14 Jan
Yesterday #AdamSmith said things work pretty well when people have perfect liberty to choose a trade and where to practice it? In this half of the chapter he specifies the ways people aren’t at perfect liberty, and whose fault it is. (I.x.c.1) #WealthOfTweets #SmithTweets
And (spoiler) it's government policy’s fault! They restrain competition in some places, increase it in others, and obstruct free movement of labor. (I.x.c.2) #WealthOfTweets #SmithTweets
Many government restraints on competition are “as foolish as can well be imagined.” Like how coachmakers can’t make the wheels for coaches, but wheelmakers can make coaches. (I.x.c.9) #WealthOfTweets #SmithTweets
Read 18 tweets
13 Jan
So, sometimes #AdamSmith's #WealthOfNations can feel a bit abstract. Not today! Today we're talking jobs! #WealthOfTweets #SmithTweets
If a society has perfect liberty and if workers are perfectly free to choose, they will naturally move to the most advantageous forms of employment. Those are some big ifs, but we can be 𝗯𝗲𝘁𝘁𝗲𝗿 at this, if not perfect. (I.x.a.1) #WealthOfTweets #SmithTweets
There are 5 main factors that affect wages for a given job. (I.x.b.1) #WealthOfTweets #SmithTweets

Is it pleasant to do?
Is it quick and cheap to learn?
Are there lots of jobs?
How much respect/trust does it need?
How likely is success?
Read 25 tweets
11 Jan
Good morning, Smithketeers! Time for Book One, Chapter 8 of #AdamSmith's #WealthOfNations. Today, we're talking wages. Not that they're a topic with any contemporary relevance, or anything. #WealthOfTweets #SmithTweets
The things we make by working are the natural wage of our labor. Which is great if SmithTweeters want to get paid in SmithTweets. (I.viii.1) #WeDont #TweetsWontBuyHousesByTheSea #WealthOfTweets #SmithTweets
It’s a state of nature story, like Locke or Hobbes or Rousseau, but Smith’s state of nature is defined by the product of each person’s labor belonging to that person. Sounds great, but again, we don’t want to get paid in SmithTweets. (I.viii.2) #WealthOfTweets #SmithTweets
Read 23 tweets
10 Jan
We know what you're thinking: Yay! All done with #AdamSmith's theory of prices! Labor and gold, that's where it's at. Right? Ha ha! WRONG! All prices have three components: wages, profit, and rent. Let's tweet about them! ( #WealthOfTweets #SmithTweets
(Don't panic. Smith still says the real VALUE of all the parts of a price comes down to how much labor they can purchase or command. But today we're only talking about price.) ( #WealthOfTweets #SmithTweets
So if all we're just hunting/gathering/trading, then all we have to worry about paying for labor (wages). That's where all exchangeable value comes from. But in advanced market societies, there's more going on. ( #WealthOfTweets #SmithTweets
Read 13 tweets
9 Jan
Wages, profits, and rents have “natural rates” regulated by the general conditions of the society in which they exist. (I.vii.1) #WealthOfTweets #SmithTweets
When the price of any commodity = price of rent + profit + labor + price of getting it to market, the commodity is sold at its “natural price.” (I.vii.4–5) #WealthOfTweets #SmithTweets
And that all means the commodity has been sold for what it is worth—what it really costs. (I.vii.5) #WealthOfTweets #SmithTweets
Read 18 tweets
8 Jan
OK! Who's ready to talk at great length and in great detail about prices? #AdamSmith, that's who! (I.v) #BuckleUp because this is the first of three chapters Smith prepped us for yesterday. (I.v) #WealthOfTweets #SmithTweets
We're about get into some #LaborTheoryOfValue. (I.v.1–18) We, the SmithTweeters, are firmly on board with the #MarginalRevolution (and we are fans of @MarginalRevolt). But Smith's theory is more complex than is often recognized. #WealthOfTweets #SmithTweets #ValueHowDoesItWork
The caricature version of the #LaborTheoryOfValue is that the longer you work on a thing, the more it must be worth. This is obviously wrong, and Smith (and Marx, btw) would agree that it's wrong. (I.v.1–18) #WealthOfTweets #SmithTweets
Read 43 tweets

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