Wealth and Poverty

Wealth results from producing things that consumers value most by sacrificing the least valuable combinations of labor and resources. The best place to begin a discussion of wealth is with the division of labor (or specialization), which Adam Smith discusses in the first chapter of Wealth of Nations. Understanding the conditions that create wealth also provides useful insight into those conditions that result in poverty.

Dividing workers' tasks into narrow productive specialties increases the amount that can be produced by increasing one's skills in that activity, reducing the time spent shifting from one activity to another, and increasing the amount of capital that one can effectively employ. If most workers had to make more than a small contribution to the production of the goods they were ...