Below is an excerpt from Chapter 1 of my forthcoming survey of Adam Smith problems with Salim Rashid:

“’Wealth’, in the words of Robert L. Heilbroner, ‘is a fundamental concept in economics—indeed, perhaps the conceptual starting point for the discipline.’ (See Heilbroner’s entry for ‘Wealth’ in The New Palgrave Dictionary of Economics.) But what does the putative father of economics himself, Adam Smith, mean by ‘wealth’ or ‘opulence’ in his second magnum opus, The Wealth of Nations? Smith famously wrote, ‘It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing.’ (WN, IV.i.17)

“A literal reading of Smith’s purchasing-power approach to wealth might favor an objective definition of opulence, but such a reading runs into an immediate difficulty: what yardstick or objective standard does Smith use for measuring wealth, since Smith himself correctly rules out money or precious metals as measures of wealth? In Book I of The Wealth of Nations, for example, Smith tells us that labour is the yardstick by which wealth should be measured: ‘It was not by gold or silver, but by labour that all the wealth of the world was originally purchased; and its value, to those who possess it and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.’ (WN, I.v.2) But at the same time, at various places in Book II of The Wealth of Nations, Smith defines wealth as the annual produce of both ‘land and labour.’ (See, e.g., WN, II.ii.2, our emphasis.) Either way, even if we were to ignore land and limit our objective analysis of wealth to just labour, there are additional ‘troublesome questions’ and difficulties to be surmounted. (Again, see Heilbroner, op. cit.) Chief among these are Smith’s distinction between ‘productive’ and ‘unproductive’ labor towards the end of Book II of The Wealth of Nations. That is, how can labour be a reliable yardstick if labour itself is a heterogeneous entity?

“At the same time, Smith can also be read as adopting a subjective or psychological definition of wealth, for in the very same chapter in which Smith says that ‘[i]t was not by gold or silver, but by labour that all the wealth of the world was originally purchased,’ he also writes: ‘Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life.’ (WN, I.v.1) On this view, wealth is measured not in terms of the objective value of labour used to produce tangible goods (what Smith refers to as ‘productive labour’) but in terms of the subjective enjoyment or utilities generated by those goods. Alas, it was David Ricardo (1951/1821, ch. 20) who first pointed out this inconsistency in Smith’s approach to wealth, since ‘the subjective enjoyments yielded by wealth—its “riches’—were not the same as the expenditure of labour power required for its creation—its “value”.’ Moreover, this internal tension in Smith’s thought—and in economics as discipline more generally—is still unresolved to this day.”