Milanovic_What is a Prosperous Society

The Wealth of Nations was published thirteen years after Philosophie rurale by Mirabeau and Quesnay, presenting a contrasting view of the economy with a focus on industry rather than agriculture.
Smith shifted from a class structure based on legally defined estates in agriculture to a tripartite class structure that includes:
- Workers
- Capitalists
- Landowners
The binary structure of higher capitalism (workers and capitalists) emerged from Marx’s interpretation.

Wesley Mitchell described Smith’s theory of distribution as incidental rather than a core component.
Smith’s analysis focused on the components of a commodity's "natural price": rent, profit, and wages.
This incidental theory reflected a significant development – asserting that a country's opulence is measured by the wealth of its workers, contrasting with mercantilist views that prioritized the wealth of governing classes.

Smith argued that the welfare of the largest class, the workers, is critical for assessing societal prosperity:
- High labor prices demonstrate societal opulence, indicating the ability to pay fair wages.
- A flourishing society must not have a predominantly poor and miserable population.
This notion challenged traditional views and aligned with a modern understanding of societal well-being.

The Theory of Moral Sentiments vs. The Wealth of Nations:
- The Theory of Moral Sentiments: Focuses on moral relationships among individuals.
- The Wealth of Nations: Addresses economic behavior in broader contexts, focusing on self-interest and market dynamics.
Notable distinctions include:
- The Theory of Moral Sentiments emphasizes empathy and moral judgments, presenting a softer view of economics.
- The Wealth of Nations adopts a more pragmatic and self-interest-driven approach.

While The Theory of Moral Sentiments does not challenge the class structure, it offers moral critiques of the behavior of the wealthy.
Smith’s acceptance of class hierarchy suggests a reactionary stance, acknowledging moral deficiencies without questioning the right to wealth.
The idea that the rich, through their consumption, contribute to societal welfare is criticized for its Panglossian view.

Transitioning to The Wealth of Nations, Smith critiques the rich more scrutinously:
- Critiques how wealth is acquired and used.
- Argues for a government's limited role, emphasizing that capitalists' interests often conflict with public welfare and must be monitored.
The interests of landlords, capitalists, and workers diverge significantly in relation to societal advancement and economic policy:
- Workers benefit from high wages.
- Capitalists often experience declining profits in advanced societies, thus distorting interests.

Smith suggests that as societies progress, the distribution of income reflects changing economic relationships:
- Wages and rents are expected to rise, while profits and interest decline.
- Overall inequality might lessen, but polarization could increase, benefiting landlords disproportionately at the top.

Key takeaways include:
1. Workers’ welfare is a key indicator of societal prosperity.
2. Economic advancement correlates with high wages and lower returns on capital.
3. Many high incomes arise from injustices, undermining claims of moral superiority.
4. Conditions for fairness in income complement those for economic prosperity.
5. As societies evolve, income distribution theories illustrate decreasing inequality amid increasing class polarization.
6. Capitalists should not govern as their interests conflict with wider social objectives.
Smith embodies a complex, dual critique of capitalism that challenges both rich and state influence while advocating for a minimalist government.