Adam Smith's "Tolerable Administration of Justice" and the Wealth of Nations

39 Pages Posted: 3 Nov 2014 Last revised: 10 Nov 2014

See all articles by Douglas A. Irwin

Douglas A. Irwin

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2014

Abstract

In the Wealth of Nations, Adam Smith argues that a country's national income depends on its labor productivity, which in turn hinges on the division of labor. But why are some countries able to take advantage of the division of labor and become rich, while others fail to do so and remain poor? Smith's answer, in an important but neglected theme of his work, is the security of property rights that enable individuals to "secure the fruits of their own labor" and allow the division of labor to occur. Countries that can establish a "tolerable administration of justice" to secure property rights and allow investment and exchange to take place will see economic progress take place. Smith's emphasis on a country's "institutions" in determining its relative income has been supported by recent empirical work on economic development.

Suggested Citation

Irwin, Douglas A., Adam Smith's "Tolerable Administration of Justice" and the Wealth of Nations (October 2014). NBER Working Paper No. w20636. Available at SSRN: https://ssrn.com/abstract=2518726

Douglas A. Irwin (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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