Explanation: Adam Smith discussed the four aspects of wealth and these four aspects are production of wealth, consumption of wealth, distribution of wealth and exchange of wealth. Here she word" Wealth" needs explanation wealth means goods and services being transacted with money. Now we explain the four aspects of the wealth.
1. Production of Wealth:- It means the production of goods and services by combining the four factors of production., which are land, labor,capital and organization.
2. Consumption of Wealth:- To consume goods & services in order to satisfy wants is called consumption of wealth.
3. Distribution of Wealth:- To distribute the value of goods and services produced in an economy among the factors of production is called distribution of wealth.
4. Exchange of Wealth: As it is impossible for an individual to produce all goods and services for his consumption, therefore, normally an individual person produces a single commodity or service, He exchanges his product on for other commodities, of his needs.
Criticism:-
over emphasis on wealth in the Adam Smith's definition created confusions about the subject. It was thought to be a Dismal Science with a Philosophy, which teaches selfishness. It was called the "Doctrine of Mammon" by famous British writers like Ruskin & Carlyle. The major points of criticism on Adam Smith's definition are as follows.
1 It moves around wealth only.
2. According to Adam Smith's definition, only the activities related to wealth should be studied, and activities, which may increase human welfare but not related to wealth, are not studied.
3. It does not cover many topics, which we study in economics now a day.
4. Wealth itself is not clearly defined e.g. it does not include service.
Conclusion:-
Smith's definition was too much criticized because he gave a very precise definition & people of that era could not understand the meaning of definition. To clear the doubts or misunderstandings about economics from minds. Dr. Alfred Marshall gave a definition based on welfare.
