Adam Smith (baptised 16 June 1723 – 17 July 1790 [OS: 5 June 1723 – 17 July 1790]) was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith is widely cited as the father of modern economics.[1][2]
Smith studied moral philosophy at the University of Glasgow and Oxford University. After graduating, he delivered a successful series of public lectures at Edinburgh, leading him to collaborate with David Hume during the Scottish Enlightenment. Smith obtained a professorship at Glasgow teaching moral philosophy, and during this time he wrote and published The Theory of Moral Sentiments. In his later life, he took a tutoring position that allowed him to travel throughout Europe, where he met other intellectual leaders of his day. Smith returned home and spent the next ten years writing The Wealth of Nations. He published the book in 1776, before his death several years later in 1790.
Smith was born to Margaret Douglas at Kirkcaldy, Fife, Scotland. His father, also named Adam Smith, was a lawyer, civil servant, and widower who married Margaret Douglas in 1720 and died six months before Smith was born.[3] Although the exact date of Smith's birth is unknown, his baptism was recorded on 16 June 1723 at Kirkcaldy.[4] Though few events in Smith's early childhood are known, Scottish journalist and Smith's biographer John Rae recorded that the man was abducted by gypsies at the age of four and eventually released when others went to rescue him.[N 1] Smith was close to his mother, who likely encouraged him to pursue his scholarly ambitions.[6] He attended the Burgh School of Kirkcaldy—characterised by Rae as "one of the best secondary schools of Scotland at that period"—from 1729 to 1737.[5] While there, he studied Latin, mathematics, history, and writing.[6]
Formal education
Smith entered the University of Glasgow when he was fourteen and studied moral philosophy under Francis Hutcheson.[6] Here he developed his passion for liberty, reason, and free speech. In 1740, Smith was awarded the Snell exhibition and left the University of Glasgow to attend Balliol College, Oxford.[7]Smith considered the teaching at Glasgow to be far superior to that at Oxford, and found his experience at the latter to be intellectually stifling.[8] In Book V, Chapter II of The Wealth of Nations, Smith wrote: "In the University of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching." Smith is also reported to have complained to friends that Oxford officials once discovered him reading a copy of David Hume's Treatise on Human Nature, and they subsequently confiscated his book and punished him severely for reading it.[5][9][10] According to William Robert Scott, "The Oxford of [Smith's] time gave little if any help towards what was to be his lifework."[11] Nevertheless, Smith took the opportunity while at Oxford to teach himself several subjects by reading many books from the shelves of the large Oxford library.[12] When Smith was not studying on his own, his time at Oxford was not a happy one, according to his letters.[13] Near the end of his time at Oxford, Smith began suffering from shaking fits, probably the symptoms of a nervous breakdown.[14] He left Oxford University in 1746, before his scholarship ended.[14][15]
In Book V of The Wealth of Nations, Smith comments on the low quality of instruction and the meager intellectual activity at English universities, when compared to their Scottish counterparts. He attributes this both to the rich endowments of the colleges at Oxford and Cambridge, which made the income of professors independent of their ability to attract students, and to the fact that distinguished men of letters could make an even more comfortable living as ministers of the Church of England. Smith had originally intended to study theology and enter the clergy, but his subsequent learning, especially from the skeptical writings of David Hume, persuaded him to take a different route.[10]
Teaching career
Smith began delivering public lectures in 1748 at Edinburgh under the patronage of Lord Kames.[16] His lecture topics included rhetoric and belles-lettres, and later the subject of "the progress of opulence". On this latter topic he first expounded his economic philosophy of "the obvious and simple system of natural liberty". While Smith was not adept at public speaking, his lectures met with success.[17]In 1750, he met the philosopher David Hume, who was his senior by more than a decade. The alignments of opinion that can be found within their writings covering history, politics, philosophy, economics, and religion indicate that they shared a closer intellectual alliance and friendship than with the others who were to play important roles during the emergence of what has come to be known as the Scottish Enlightenment.[18]
In 1751, Smith earned a professorship at Glasgow University teaching logic courses. When the Chair of Moral Philosophy died the next year, Smith took over the position.[17] He would continue academic production for the next thirteen years, which he characterized as "by far the most useful and therefore by far the happiest and most honourable period [of his life]".[19] His lectures covered the fields of ethics, rhetoric, jurisprudence, political economy, and "police and revenue".
Smith published The Theory of Moral Sentiments in 1759, embodying some of his Glasgow lectures. This work was concerned with how human morality depends on sympathy between agent and spectator, or the individual and other members of society. He bases his explanation not on a special "moral sense", as the third Lord Shaftesbury and Hutcheson had done, nor on utility as Hume did, but on sympathy. Smith's popularity greatly increased due to the The Theory of Moral Sentiments, and as a result, many wealthy students left their schools in other countries to enroll at Glasgow to learn under Smith.[20]
After the publication of The Theory of Moral Sentiments, Smith began to give more attention to jurisprudence and economics in his lectures and less to his theories of morals. The development of his ideas on political economy can be observed from the lecture notes taken down by a student in 1763, and from what William Robert Scott described as an early version of part of The Wealth of Nations.[21] For example, Smith lectured that labor—rather than the nation's quantity of gold or silver—is the cause of increase in national wealth.[20]
In 1762, the academic senate of the University of Glasgow conferred on Smith the title of Doctor of Laws (LL.D.). At the end of 1763, he obtained a lucrative offer from Charles Townshend (who had been introduced to Smith by David Hume) to tutor his stepson, Henry Scott, the young Duke of Buccleuch. Smith subsequently resigned from his professorship to take the tutoring position. Because he resigned in the middle of the term, Smith attempted to return the fees he had collected from his students, but they refused.[22]
Tutoring and travels
Smith's tutoring job entailed touring Europe with Henry Scott while teaching him subjects including proper Polish.[22] Smith was paid £300 per year plus expenses along with £300 per year pension, which was roughly twice his former income as a teacher.[22] Smith first traveled as a tutor to Toulouse, France, where he stayed for a year and a half.[22] According to accounts, Smith found Toulouse to be very boring, and he wrote to Hume that he "had begun to write a book in order to pass away the time".[22] After touring the south of France, the group moved to Geneva. While in Geneva, Smith met with the philosopher Voltaire.[23] After staying in Geneva, the party went to Paris.While in Paris, Smith came to know intellectual leaders such as Benjamin Franklin,[24] Turgot, Jean D'Alembert, André Morellet, Helvétius and, in particular, Francois Quesnay, the head of the Physiocratic school, whose academic products he respected greatly.[25] The physiocrats believed that wealth came from production and not from the attainment of precious metals, which was adverse to mercantilist thought. They also believed that agriculture tended to produce wealth and that merchants and manufacturers did not.[24] While Smith did not embrace all of the physiocrats' ideas, he did say that physiocracy was "with all its imperfections [perhaps] the nearest approximation to the truth that has yet been published upon the subject of political economy".[26]
Later years
In 1766, Henry Scott's younger brother died in Paris, and Smith's tour as a tutor ended shortly thereafter.[26] Smith returned home that year to Kirkcaldy, and he devoted much of the next ten years to his magnum opus.[27] There he befriended Henry Moyes, a young blind man who showed precocious aptitude. As well as teaching Moyes himself, Smith secured the patronage of David Hume and Thomas Reid in the young man's education.[28] In May 1773 Smith was elected fellow of the Royal Society of London,[29] and was elected a member of the Literary Club in 1775.[30] The Wealth of Nations was published in 1776 and was an instant success, selling out the first edition in only six months.[31]In 1778 Smith was appointed to a post as commissioner of customs in Scotland and went to live with his mother in Panmure House in Edinburgh's Canongate.[32] Five years later, he became one of the founding members of the Royal Society of Edinburgh,[33] and from 1787 to 1789 he occupied the honorary position of Lord Rector of the University of Glasgow.[34] He died in the northern wing of Panmure House in Edinburgh on 17 July 1790 after a painful illness and was buried in the Canongate Kirkyard.[35] On his death bed, Smith expressed disappointment that he had not achieved more.[36]
Smith's literary executors were two friends from the Scottish academic world: the physicist and chemist Joseph Black, and the pioneering geologist James Hutton.[37] Smith left behind many notes and some unpublished material, but gave instructions to destroy anything that was not fit for publication.[38] He mentioned an early unpublished History of Astronomy as probably suitable, and it duly appeared in 1795, along with other material such as Essays on Philosophical Subjects.[37]
Personality and beliefs
Character
Not much is known about Smith's personal views beyond what can be deduced from his published articles. His personal papers were destroyed after his death, at his own request.[38] He never married[40] and seems to have maintained a close relationship with his mother, with whom he lived after his return from France and who died six years before his own death.[41]
Contemporary accounts describe Smith as an eccentric but benevolent intellectual, comically absent minded, with peculiar habits of speech and gait and a smile of "inexpressible benignity".[42] He was known to talk to himself, and had occasional spells of imaginary illness.[36] Smith is often described as a prototypical absent-minded professor.[43] He is reported to have had books and papers stacked up in his study, with a habit he developed during childhood of speaking to himself and smiling in rapt conversation with invisible companions.[43]
Various anecdotes have discussed his absentminded nature. In one story, Smith took Charles Townshend on a tour of a tanning factory and while discussing free trade, Smith walked into a huge tanning pit from which he had to be removed.[44] Another episode records that he put bread and butter into a teapot, drank the concoction, and declared it to be the worst cup of tea he ever had. In another example, Smith went out walking and daydreaming in his nightgown and ended up 15 miles (24 km) outside town before nearby church bells brought him back to reality.[43][44]
Smith is reported to have been an odd-looking fellow. One author stated that Smith "had a large nose, bulging eyes, a protruding lower lip, a nervous twitch, and a speech impediment".[10] Smith is reported to have acknowledged his looks at one point saying, "I am a beau in nothing but my books."[10] Smith "never" sat for portraits [45], so depictions of him created during his lifetime were drawn from memory, with rare exceptions. The most famous examples were a profile by James Tassie and two etchings by John Kay.[46] The line engravings produced for the covers of 19th century reprints of The Wealth of Nations were based largely on Tassie's medallion.[47]
Religious views
There has been considerable scholarly debate about the nature of Smith's religious views. Smith's father had a strong interest in Christianity and belonged to the moderate wing of the Church of Scotland.[48] In addition to the fact that he received the Snell Exhibition, Smith may have also moved to England with the intention of pursuing a career in the Church of England. At Oxford, Smith rejected Christianity and it is generally believed that he returned to Scotland as a deist.[49]Economist Ronald Coase has challenged the view that Smith was a deist,[50] stating that while Smith may have referred to the "Great Architect of the Universe", other scholars have "very much exaggerated the extent to which Adam Smith was committed to a belief in a personal God".[51] He based this on analysis of a remark in The Wealth of Nations where Smith writes that the curiosity of mankind about the "great phenomena of nature" such as "the generation, the life, growth and dissolution of plants and animals" has led men to "enquire into their causes". Coase notes Smith's observation that "[s]uperstition first attempted to satisfy this curiosity, by referring all those wonderful appearances to the immediate agency of the gods". Smith's distant friend and colleague David Hume, with whom he agreed on most matters, was described by contemporaries as an atheist, although there is some debate about the exact nature of his views among modern philosophers.[52]
In a letter to William Strahan, Smith's account of Hume's courage and tranquility in the face of death aroused violent public controversy,[53] since it contradicted the assumption, widespread among orthodox believers, that an untroubled death was impossible without the consolation of religious belief.[54]
Published works
Smith published a large body of works throughout his life, some of which have shaped the field of economics. Smith's first book, The Theory of Moral Sentiments was written in 1759.[55] It provided the ethical, philosophical, psychological, and methodological underpinnings to Smith's later works, including An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), A Treatise on Public Opulence (1764) (first published in 1937), Essays on Philosophical Subjects (1795), Lectures on Justice, Police, Revenue, and Arms (1763) (first published in 1896), and Lectures on Rhetoric and Belles Lettres.The Theory of Moral Sentiments
Main article: The Theory of Moral Sentiments
In 1759, Smith published his first work, The Theory of Moral Sentiments. He continued to revise the work throughout his life, making extensive revisions to the final (6th) edition shortly before his death in 1790.[N 2] Although The Wealth of Nations is widely regarded as Smith's most influential work, it has been reported that Smith himself "always considered his Theory of Moral Sentiments a much superior work to his Wealth of Nations".[57] P. J. O'Rourke, author of the commentary On The Wealth of Nations (2007), has agreed, calling Theory of Moral Sentiments "the better book".[58] It was in this work that Smith first referred to the "invisible hand" to describe the apparent benefits to society of people behaving in their own interests.[59]In The Theory of Moral Sentiments, Smith critically examined the moral thinking of the time and suggested that conscience arises from social relationships.[60] His aim in the work is to explain the source of mankind's ability to form moral judgements, in spite of man's natural inclinations toward self-interest. Smith proposes a theory of sympathy in which the act of observing others makes people aware of themselves and the morality of their own behavior. Haakonssen writes that in Smith's theory, "Society is ... the mirror in which one catches sight of oneself, morally speaking."[61]
In part because Theory of Moral Sentiments emphasizes sympathy for others while Wealth of Nations famously emphasizes the role of self interest, some scholars have perceived a conflict between these works. As one economic historian observed: "Many writers, including the present author at an early stage of his study of Smith, have found these two works in some measure basically inconsistent."[62] But in recent years most scholars of Smith's work have argued that no contradiction exists. In Theory of Moral Sentiments, Smith develops a theory of psychology in which individuals seek the approval of the "impartial spectator" as a result of a natural desire to have outside observers sympathize with them. Rather than viewing the Wealth of Nations and Theory of Moral Sentiments as presenting incompatible views of human nature, most Smith scholars regard the works as emphasizing different aspects of human nature that vary depending on the situation. The Wealth of Nations draws on situations where man's morality is likely to play a smaller role—such as the laborer involved in pin-making—whereas the Theory of Moral Sentiments focuses on situations where man's morality is likely to play a dominant role among more personal exchanges.
Wealth Of Nations (1776)
Main article: The Wealth of Nations
The site where Smith wrote the Wealth of Nations
The first page of the Wealth of Nations, 1776 London edition
Smith's advocacy of self-interest based economic exchange did not, however, preclude for him issues of fairness and justice. In Asia, Europeans "by different arts of oppression..have reduced the population of several of the Moluccas,"[67] he wrote, while "the savage injustice of the Europeans" arriving in America, "rendered an event, which ought to have been beneficial to all, ruinous and destructive to several of those unfortunate countries."[68] The Native Americans, "far from having ever injured the people of Europe, had received the first adventurers with every mark of kindness and hospitality." However, "superiority of force" was "so great on the side of the Europeans, that they were enabled to commit with impunity every sort of injustice in those remote countries."[69]
Smith also believed that a division of labour would effect a great increase in production. One example he used was the making of pins. One worker could probably make only twenty pins per day. However, if ten people divided up the eighteen steps required to make a pin, they could make a combined amount of 48,000 pins in one day. However, Smith's views on division of labour are not unambiguously positive, and are typically mis-characterized.[70] On labor relations, Smith noted "severity" of laws against worker actions, and contrasted the masters' "clamour" against workers associations, with associations and collusions of the masters which "are never heard by the people" though such actions are "always" and "everywhere" taking place.[71]
[edit] Other works
[edit] Legacy
George Stigler attributes to Smith the central proposition of mainstream economic theory, namely that an individual will invest a resource, for example, land or labour, so as to earn the highest possible return on it. Consequently, all uses of the resource should yield a risk-adjusted equal rate of return; otherwise resource reallocation would result.
On the other hand, Joseph Schumpeter dismissed Smith's contributions as unoriginal, saying "His very limitation made for success. Had he been more brilliant, he would not have been taken so seriously. Had he dug more deeply, had he unearthed more recondite truth, had he used more difficult and ingenious methods, he would not have been understood. But he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter History of Economic Analysis. New York: Oxford University Press, p 185)
Classical economists presented variations on Smith, termed the 'labour theory of value', later Marxian economics descends from classical economics also using Smith's labour theories in part. The first volume of Karl Marx's major work, Capital, was published in German in 1867. In it, Marx focused on the labour theory of value and what he considered to be the exploitation of labour by capital.[73][74] The labour theory of value held that the value of a thing was determined by the labor that went into its production. This contrasts with the modern understanding of mainstream economics, that the value of a thing is determined by what one is willing to give up to obtain the thing. Smith is often cited not only as the conceptual builder of free markets in capitalism but also as a main contributor to communist theory, via his influence on Marx.
The bicentennial anniversary of the publication of The Wealth of Nations was celebrated in 1976, resulting in increased interest for The Theory of Moral Sentiments and his other works throughout academia. After 1976, Smith was more likely to be represented as the author of both The Wealth of Nations and The Theory of Moral Sentiments, and thereby as the founder of a moral philosophy and the science of economics. His homo economicus or "economic man" was also more often represented as a moral person. Additionally, his opposition to slavery, colonialism, and empire was emphasised, as were his statements about high wages for the poor, and his views that a common street porter was not intellectually inferior to a philosopher.[79]
[edit] Portraits, monuments and banknotes
Smith has been commemorated in the UK on banknotes printed by two different banks; his portrait has appeared since 1981 on the £50 notes issued by the Clydesdale Bank in Scotland,[80][81] and in March 2007 Smith's image also appeared on the new series of £20 notes issued by the Bank of England, making him the first Scotsman to feature on an English banknote.[82]A large-scale memorial of Smith was unveiled on 4 July 2008 in Edinburgh. It is a 10 feet (3.0 m)-tall bronze sculpture and it stands above the Royal Mile outside St Giles' Cathedral in Parliament Square, near the Mercat cross.[83] 20th century sculptor Jim Sanborn (best known for creating the Kryptos sculpture at the United States Central Intelligence Agency) has created multiple pieces which feature Smith's work. At Central Connecticut State University is Circulating Capital, a tall cylinder which features an extract from The Wealth of Nations on the lower half, and on the upper half, some of the same text but represented in binary code.[84] At the University of North Carolina at Charlotte, outside the Belk College of Business Administration, is Adam Smith's Spinning Top.[85][86] Another Smith sculpture is at Cleveland State University.[87]
[edit] As a symbol of free market economics
Alan Greenspan argues that, while Smith did not coin the term laissez-faire, "it was left to Adam Smith to identify the more-general set of principles that brought conceptual clarity to the seeming chaos of market transactions". Greenspan continues that The Wealth of Nations was "one of the great achievements in human intellectual history".[91] P. J. O'Rourke describes Smith as the "founder of free market economics".[92]
However, other writers have argued that Smith's support for laissez-faire (which in French means leave alone) has been overstated. Herbert Stein wrote that the people who "wear an Adam Smith necktie" do it to "make a statement of their devotion to the idea of free markets and limited government", and that this misrepresents Smith's ideas. Stein writes that Smith "was not pure or doctrinaire about this idea. He viewed government intervention in the market with great skepticism ... yet he was prepared to accept or propose qualifications to that policy in the specific cases where he judged that their net effect would be beneficial and would not undermine the basically free character of the system. He did not wear the Adam Smith necktie." In Stein's reading, The Wealth of Nations could justify the Food and Drug Administration, the Consumer Product Safety Commission, mandatory employer health benefits, environmentalism, and "discriminatory taxation to deter improper or luxurious behavior".[93]
Similarly, Vivienne Brown stated in The Economic Journal that in the 20th century United States, Reaganomics supporters, The Wall Street Journal, and other similar sources have spread among the general public a partial and misleading vision of Smith, portraying him as an "extreme dogmatic defender of laissez-faire capitalism and supply-side economics".[94] In fact, The Wealth of Nations includes the following statement on the payment of taxes: "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."[95]
Smith even specifically named taxes that he thought should be required by the state among them luxury goods taxes and tax on rent. He believed that tax laws should be as transparent as possible and that each individual should pay a "certain amount, and not arbitrary," in addition to paying this tax at the time "most likely to be convenient for the contributor to pay it".[96]
Additionally, Smith outlined the proper expenses of the government in Wealth of Nations, Book V, Ch. I. Included in his requirements of a government were to enforce contracts and provide justice system, grant patents and copy writes, provide public goods such as infrastructure, provide national defense and regulate banking. It was the role of the government to provide goods "of such a nature that the profit could never repay the expense to any individual" such as roads, bridges, canals, and harbours. He also encouraged invention and new ideas through his patent enforcement and support of infant industry monopolies. he supported public education and religious institutions as providing general benefit to the society. Finally he outlined how the government should support the dignity of the monarch or chief magistrate, such that they are equal or above the public in fashion. He even states that monarchs should be provided for in a greater fashion than magistrates of a republic because "we naturally expect more splendor in the court of a king than in the mansion-house of a doge."[97] In addition, he was in favor of retaliatory tariffs and believed that they would eventually bring down the price of goods. He even stated in Wealth of Nations, "The recovery of a great foreign market will generally more than compensate the transitory inconvenience of paying dearer during a short time for some sorts of goods."[98]
Noam Chomsky has argued[N 3] that several aspects of Smith's thought have been misrepresented and falsified by contemporary ideology, including Smith’s reasons for supporting markets and Smith’s views on corporations. Chomsky argues that Smith supported markets in the belief that they would lead to equality, and that Smith opposed wage labor and corporations.[99] Economic historians such as Jacob Viner regard Smith as a strong advocate of free markets and limited government (what Smith called "natural liberty") but not as a dogmatic supporter of laissez-faire.[100]
Economist Daniel Klein believes using the term "free market economics" or "free market economist" to identify the ideas of Smith is too general and slightly misleading. Klein offers six characteristics central to the identity of Smith's economic thought and argues that a new name is needed to give a more accurate depiction of the "Smithian" identity.[101][102] Economist David Ricardo set straight some of the misunderstandings about Smith’s thoughts on free market. Most people still fall victim to the thinking that Smith was a free market economist without exception, though he was not. Ricardo pointed out that Smith was in support of helping infant industries. Smith believed that the government should subsidise newly formed industry, but he did fear that when the infant industry grew into adulthood it would be unwilling to surrender the government help.[103] Smith also supported tariffs on imported goods to counteract an internal tax on the same good. Smith also fell to pressure in supporting some tariffs in support for national defense.[103]
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