Abstract

In its most fundamental, constructive parts devoted to descriptive theory, The Wealth of Nations is first and foremost an account of the causes of economic growth and development. Smith’s theory of economic development gives primary place, at least as the proximate determinants of development, to labour productivity growth and capital accumulation. This chapter examines successively, under six heads, the key dimensions of Smith’s treatment of labour and capital, and the relations between the two, both in The Wealth of Nations and other writings: division of labour, the concept of capital, capital accumulation and economic development, productive versus unproductive labour, the theory of real wages and of profit rates, and economic policy in relation to labour and capital. There are some concluding reflections on Smith’s legacy in relation to these matters.