Wealth is not created when I pay you $10 for something that you made for $5 -- wealth is created when you use labor to add value to natural resources.
To this end, capitalism is very much a zero-sum game. There are only so many resources to exploit, and once they're gone (or otherwise locked up), that's it for growth.
You can add value to natural resources by using labor. But that isn't what I was talking about. I was talking about the wealth added by trade.
As a simple example, let's say I have a large bag of peanuts - but I'm allergic to peanuts. And you have a copy of Smith's 'The Wealth of Nations' (which you clearly have no interest in reading ;-)). By trading my peanuts for your book, we both come out ahead and no one is worse off - the trade itself creates value.
Every time any trade/purchase takes place, value is created. Both parties are better off than they were before the trade - otherwise they wouldn't have chosen to be involved in the transaction.
I must have missed the part of Wealth of Nations that you're citing. Because when I read it, Smith defined "wealth" only in aggregate, as the "net revenues" of the labor of a society. So ignoring, for the moment, the fact that Adam Smith's definition of "wealth" isn't the only one (and the fact that you're using the terms "wealth" and "value" interchangeably), I think you've misinterpreted what he wrote.
In other words, you're really stretching to use his notion of "wealth" as an argument that trade creates more wealth. Wealth generation does not occur when an item is traded -- it occurs when an item is created, using labor. Smith goes out of his way to say this:
"The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities" (Wealth of Nations, Book 1, chapter V)
The peanuts in your example didn't gain or lose value when they were traded for a paperback. Nor did the paperback gain or lose value. We merely created a market that defined their values as equivalent. Confusing this process for wealth creation is a big reason why we're in the economic mess that we're in today.
You're misinterpreting reality with that quote, because labor that produces inherently more valuable goods is inherently more valuable labor than labor which does not. Part of the wealth that goes into the peanuts and book is the extremely valuable labor of finding out who needs what resources.
No offense, but it's fairly amusing that you're so confident about this statement, when other people in the same thread are equally confidently arguing that Adam Smith isn't saying that at all.
I've got to defer to the guy who said that internet geeks don't know what they're talking about when it comes to economics.
No offense taken. My statement is so non-controversial that I have no problem saying that anyone who disagrees with it truly has no idea what they're talking about.
The "marginal revolution" is one of the major events in the history of economics.
Different labor theories of value prevailed amongst classical economists through to the mid-19th century. It is especially associated with Adam Smith and David Ricardo. Since that time, it is most often associated with Marxian economics; while modern mainstream economics replaces it by the marginal utility approach.
How does intellectual property and knowledge fit into this framework? How much of the value of software is in the natural resources used to package it? If the Industrial revolution was about using steam engines to build steam engines and we use software to write software, is labor really the only differentiating component?
To this end, capitalism is very much a zero-sum game. There are only so many resources to exploit, and once they're gone (or otherwise locked up), that's it for growth.