We’re excited to collaborate with our colleagues at Liberty Matters to commemorate the 250th anniversary of the publication of An Inquiry into the Nature and Causes of the Wealth of Nations through a series of six insightful essays.
In the second installment, Maria Pia Paganelli delves into Book II of Wealth of Nations, which she argues focuses on how nations sustain the capital necessary for the specialization of labor. Excerpts from her article highlight these themes:
According to Perpere (2024), Smith revives a medieval distinction, asserting that money can serve dual roles as pecunia (a medium of exchange) and capitale (investment capital). Precious metals like gold and silver can function as mediums of exchange (pecunia), but they can also be deployed as capital (capitale). When these metals fulfill the role of currency, they become unavailable for investment purposes. Smith likens the emergence of bank money to a ‘highway in the sky.’ If a road is laid on the ground, it occupies space that could otherwise be utilized for production. However, if the road is elevated, the land underneath is liberated for agricultural use. By adopting an alternate medium of exchange, such as paper currency, gold and silver are relieved from their transactional duties, thus allowing them to be redirected toward investment opportunities.
