Thread by @adamsmithworks

We're back with more #WealthOfNations Book I, Chapter 11! Oh boy! #WealthOfTweets #SmithTweets

If you're a keener, you might have observed yesterday that people need more than just food. Like, say, clothing and shelter. #AdamSmith is ON IT. (I.xi.c.2) #WealthOfTweets #SmithTweets

Before land was improved, there was lots of material for clothing and housing, but not enough food for all the people. Once the land is improved to grow food, clothing and shelter become scarce (and valuable). (I.xi.c.3) #WealthOfTweets #SmithTweets

Uh. OK. Jeez. Smith is not exactly going to shine here. Please remember our thoughts on Smith when he talks about developing nations. threadreaderapp.com/thread/1346098…
#WealthOfTweets #SmithTweets

Hunters and gatherers must have had so much extra material for clothing and shelter that some of it was thrown away. But once they were given access to an expanded market, they could trade their surplus and it became valuable. (I.xi.c.4) #WealthOfTweets #SmithTweets

The fact that produce has value, so long as it can make it to market, might encourage the first enclosure and private ownership of land, which introduces rents. (I.xi.c.4–5) #RoadsRiversAndCanalsStillMatter #WealthOfTweets #SmithTweets

Food is really the binding constraint, Smith reminds us. But once you've got it sorted, clothing and housing tends to follow. (I.xi.c.6) #WealthOfTweets #SmithTweets

Wait. Adam Smith thinks you can build a house in a day? #WeWouldLikeToHireYourContractingService (I.xi.c.6) #WealthOfTweets #SmithTweets

Once you start improving the land, less labor is needed to feed the same number of people, and so they can turn their resources to fulfilling other wants and fancies. It's that special sauce: The Division of Labor at work. (I.xi.c.7) #WealthOfTweets #SmithTweets

(This applies, by the way, to rich and poor people more or less equally. How much someone eats isn't affected by how rich they are, say Smith. So it's not like rich people can eat all the food and leave nothing for the rest.) (I.xi.c.7) #WealthOfTweets #SmithTweets

The rich consume other things at a higher rate than the poor. By producing frivolous trinkets for the rich, even the poor can earn enough to make sure they're fed, clothed, and sheltered. It's not perfect, but it gets the job done. (I.xi.c.7) #WealthOfTweets #SmithTweets

All this matters because it explains why food isn't just the original source of rent, but the thing that makes rent from every other sort of production possible. (I.xi.c.8) #WealthOfTweets #SmithTweets

Coal mines were not always a great investment, sometimes not even producing enough income to pay rent. Plus their produce tends to be for local markets. On the other hand, metal mines produce for the world market and tend to pay rent. (I.xi.c.10–23) #WealthOfTweets #SmithTweets

Because they're operating in a world market, metal mines' revenue was a result of their richness. Less rich mines could be outcompeted by the discovery of more rich mines, for example Peruvian silver mines. (I.xi.c.23–25) #WealthOfTweets #SmithTweets

Taxes on mines work a lot like rent, except when revenues won't cover rent the landlord can work the mine, whereas when revenues won't cover tax the mine won't be worked at all (or the metal will be smuggled to avoid the tax.) (I.xi.c.25–28) #WealthOfTweets #SmithTweets

The lowest price for precious metals depends on covering the cost of stock and labor. But the highest price? That's all about scarcity! At least, if you're Smith. The demand, he says, comes from their beauty. (I.xi.c.29–31) #WealthOfTweets #SmithTweets

Precious stones are like precious metals: They're pretty. 💎💎 (I.xi.c.32) #YouHeardItHereFirst #WealthOfTweets #SmithTweets

Finding lots of precious metals or precious stones won't make the world much richer: They're only so valuable because they're scarce. If we get more, they'll just become cheaper. #ButWaitDoesntThatMakeUsWealthier (I.xi.c.34) #WealthOfTweets #SmithTweets

(This, Smith says, is why the less developed gold- and silver-rich countries discovered by Spain were so ill-prepared for Spanish lust for gold and silver. Pretty gold pebbles on the ground were worth less than food. #DiamondWaterParadox (I.xi.c.36)) #WealthOfTweets #SmithTweets

Above ground production, though, makes us richer. The more land is improved, the more valuable other land becomes. More food➡more people➡more wants and fancies➡production even on land that won't yield food. (I.xi.c.35–36) #WealthOfTweets #SmithTweets

And if you can make enough money from your production, what can you get from that land? Rent! (I.xi.c.35–36) #WealthOfTweets #SmithTweets

Tune in tomorrow for...more stuff about rent!! #WealthOfTweets #SmithTweets