Adam Smith's Theory of Money as Reflected in 『Wealth of Nations』

This short paper discusses Adam Smith's theory of money in the Wealth of Nations, a classic work of economics written by the 18th century British economist Adam Smith.Many scholars criticize the Wealth of Nations for the absence of two central propositions of the classical school of monetary theory: the quantity theory of money and David Hume's price-specie flow mechanism.However, We think these criticisms are weak.The statements in the Wealth of Nations need to be properly evaluated in the context of their purpose and the economic situation they consider.Once that is taken into account, this paper shows that the parts of the narrative that critics rely on to demonstrate the absence of these two key concepts cannot be used as evidence for the absence of localization.Instead, this paper show specifically how these two concepts are reflected in the Wealth of Nations.In other words, this paper confirms that the Wealth of Nations reflects the quantity theory of money, which states that the amount of money in a country determines the price level.This paper also demonstrates that Smith, by focusing on the functioning mechanism of the specie market, incorporates Hume's price-specie flow mechanism into The Wealth of Nations.The significance of this study is that it shows that localized monetary theory, which has been largely underappreciated or misunderstood in the field of monetary theory, is still connected to the tradition of classical monetary theory in the unified context of monetary quantity theory and purification flow mechanism.