Adam Smith

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He was baptized 16 June [O.S. 5 June] 1723 Died 17 July 1790) was a prominent Scottish economist and philosopher who was a pioneer of political economy and key figure during the Scottish Enlightenment. Also known as “The Father of Economics or “The Father of Capitalism”, he wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter,is often abbreviated as The Wealth of Nations.

Adam Smith is a towering figure in the history of economic thought.  However more is known about Adam Smith’s thoughts than about his life. He was the son by second marriage of Adam Smith, comptroller of customs in Kirkcaldy, and Margaret Douglas, daughter of a substantial local landowner. Of Smith’s childhood very little is known other than that he received his elementary schooling in Kirkcaldy and that at the age of four years he was said to have been carried off by gypsies. Pursuit was mounted, and young Adam was abandoned by his captors. Then at the early age of only 14, in 1737, Smith entered the University of Glasgow, already remarkable as a centre of what was to become known as the Scottish Enlightenment. There he was deeply influenced by Francis Hutcheson, a famous professor of moral philosophy from whose economic and philosophical views he was later to diverge but whose magnetic character seems to have been a main shaping force in Smith’s development. Graduating in 1740, Smith won a scholarship and travelled on horseback to Oxford, where he stayed at Balliol College. However when compared with the very stimulating atmosphere of Glasgow, Oxford Uni was felt to be an educational desert. His years there were spent largely in self-education, from which Smith obtained a firm grasp of both classical and contemporary philosophy. Returning to his home after a long absence of six years, Smith cast about for suitable employment. The connections of his mother’s family, together with the support of the jurist and philosopher Lord Henry Home Kames, resulted in an opportunity to give a series of public lectures in Edinburgh a form of education then very much in vogue in the then prevailing spirit of “improvement.” The lectures, which ranged over a wide variety of subjects from rhetoric to history and economics, made a deep impression on some of Smith’s notable contemporaries. They also had a marked influence on Smith’s own career, for in 1751, at the age of 27, he was appointed professor of logic at Glasgow, from which post he transferred in 1752 to the more remunerative professorship of moral philosophy, a subject that embraced the related fields of natural theology, ethics, jurisprudence, and political economy. Smith then entered upon a period of extraordinary creativity, combined with a social and intellectual life that he afterward described as “by far the happiest and most honourable period of my life.” During the week he lectured daily from 7:30 to 8:30 AM and again thrice weekly from 11 AM to noon, to classes of up to 90 students, aged 14 to 16. Although his lectures were presented in English rather than in Latin, following the precedent of Hutcheson, the level of sophistication for so young an audience strikes one today as extraordinarily demanding Afternoons were occupied with university affairs in which Smith played an active role, being elected dean of faculty in 1758; his evenings were spent in the stimulating company of Glasgow society. Among his wide circle of acquaintances were not only members of the aristocracy, many connected with the government, but also a range of intellectual and scientific figures that included Joseph Black, a pioneer in the field of chemistry; James Watt, later of steam-engine fame; Robert Foulis, a distinguished printer and publisher and subsequent founder of the first British Academy of Design; and, not least, the philosopher David Hume, a lifelong friend whom Smith had met in Edinburgh. Smith was also introduced during these years to the company of the great merchants who were carrying on the enormous colonial trade that had opened to Scotland following its union with England in 1707. One of them, Andrew Cochrane, had been a provost of Glasgow and had founded the famous Political Economy Club. Probably its from Cochrane and his fellow merchants Smith undoubtedly acquired the detailed information concerning trade and business that was to give such a sense of the real world to The Wealth of Nations

Then late in 1759 Smith published his first work, The Theory of Moral Sentiments. It lays the psychological foundation on which The Wealth of Nations was later to be built. In it Smith described the principles of “human nature. One question in particular interested Smith in The Theory of Moral Sentiments. This was a problem that had attracted Smith’s teacher Hutcheson and a number of Scottish philosophers before him. The question was the source of the ability to form moral judgments, including judgments on one’s own behaviour, in the face of the seemingly overriding passions for self-preservation and self-interest. Smith’s answer, at considerable length, is the presence within each person of an “inner man” who plays the role of the “impartial spectator,” approving or condemning one’s own and others’ actions with a voice impossible to disregard.  The thesis of the impartial spectator, however, conceals a more important aspect of the book. Smith saw humans as creatures driven by passions and at the same time self-regulated by their ability to reason and no less important by their capacity for sympathy. This duality serves both to pit individuals against one another and to provide them with the rational and moral faculties to create institutions by which the internecine struggle can be mitigated and even turned to the common good. He wrote in his Moral Sentiments the famous observation that he was to repeat later in The Wealth of Nations: that the self-seeking rich are often “led by an invisible hand…without knowing it, without intending it, [to] advance the interest of the society. It should be noted that scholars have long debated whether Moral Sentiments complemented or was in conflict with The Wealth of Nations. At one level there is a seeming clash between the theme of social morality contained in the first and the largely amoral explication of the economic system in the second. On the other hand, the first book can also be seen as an explanation of the manner in which individuals are socialized to become the market-oriented and class-bound actors that set the economic system into motion. The Theory quickly brought Smith wide esteem and in particular attracted the attention of Charles Townshend, himself something of an amateur economist, a considerable wit, and somewhat less of a statesman, whose fate it was to be the chancellor of the Exchequer responsible for the measures of taxation that ultimately provoked the American Revolution. Townshend had recently married and was searching for a tutor for his stepson and ward, the young duke of Buccleuch. Influenced by the strong recommendations of Hume and his own admiration for The Theory of Moral Sentiments, he approached Smith to take the charge. His terms of employment were lucrative an annual salary of £300 plus traveling expenses and a pension of £300 thereafter, considerably more than Smith had earned as a professor. Accordingly, Smith resigned his Glasgow post in 1763 and set off for France the next year as the tutor of the young duke. They stayed mainly in Toulouse, where Smith began working on a book (eventually to be The Wealth of Nations) as an antidote to the excruciating boredom of the provinces. After 18 months of this he was rewarded with a two-month sojourn in Geneva, where he met Voltaire, for whom he had the profoundest respect, thence to Paris, where Hume, then secretary to the British embassy, introduced Smith to the great literary salons of the French Enlightenment. There he met a group of social reformers and theorists headed by François Quesnay, who called themselves les economists but are known in history as the physiocrats. There is some controversy as to the precise degree of influence that they exerted on Smith, but it is known that he thought sufficiently well of Quesnay to have considered dedicating The Wealth of Nations to him, had not the French economist died before publication. The stay in Paris was cut short by a shocking event. The younger brother of the duke of Buccleuch, who had joined them in Toulouse, took ill and perished despite Smith’s frantic ministrations. Smith and his charge immediately returned to London. Smith worked in London until the spring of 1767 with Lord Townshend, a period during which he was elected a fellow of the Royal Society and broadened still further his intellectual circle which now included Edmund Burke, Samuel Johnson, Edward Gibbon, and perhaps Benjamin Franklin. Late that year he returned to Kirkcaldy, where the next six years were spent dictating and reworking The Wealth of Nations, followed by another stay of three years in London, where the work was finally completed and published in 1776. Despite its worldwide renown as the first great work in political economy, The Wealth of Nations is in fact a continuation of the philosophical theme begun in The Theory of Moral Sentiments. The ultimate problem to which Smith addresses himself is how the inner struggle between the passions and the “impartial spectator” described in Moral Sentiments in terms of the single individual works its effects in the larger arena of history itself, both in the long run evolution of society and in the terms of the immediate characteristics of the stage of history typical of Smith’s own day. Smith’s analysis of the market as a self-correcting mechanism was impressive. But his purpose was more ambitious than to demonstrate the self-adjusting properties of the system. Rather, it was to show that, under the impetus of the acquisitive drive, the annual flow of national wealth could be seen to grow steadily. Smith’s explanation of economic growth, although not neatly assembled in one part of The Wealth of Nations, is quite clear. The core of it lies in his emphasis on the division of labour (itself an outgrowth of the “natural” propensity to trade) as the source of society’s capacity to increase its productivity. The Wealth of Nations opens with a famous passage describing a pin factory in which 10 persons, by specializing in various tasks, turn out 48,000 pins a day, compared with the few pins, perhaps only 1, that each could have produced alone. But this all-important division of labour does not take place unaided. It can occur only after the prior accumulation of capital or stock, as Smith calls it, which is used to pay the additional workers and to buy tools and machines. The drive for accumulation, however, brings problems. The manufacturer who accumulates stock needs far more labourers (since labour-saving technology has no place in Smith’s scheme), and, in attempting to hire them, he bids up their wages above their “natural” price. Consequently, his profits begin to fall, and the process of accumulation is in danger of ceasing. But now there enters an ingenious mechanism for continuing the advance: in bidding up the price of labour, the manufacturer inadvertently sets into motion a process that increases the supply of labour, for “the demand for men, like that for any other commodity, necessarily regulates the production of men.” Specifically, Smith had in mind the effect of higher wages in lessening child mortality. Under the influence of a larger labour supply, the wage rise is moderated and profits are maintained; the new supply of labourers offers a continuing opportunity for the manufacturer to introduce a further division of labour and thereby add to the system’s growth. The Wealth of Nations is therefore far from the ideological tract it is often assumed to be. Although Smith preached his laissez-faire (with important exceptions), his argument was directed as much against monopoly as against government; and although he extolled the social results of the acquisitive process, he almost invariably treated the manners and manoeuvres of businessmen with contempt. Nor did he see the commercial system itself as wholly admirable. He wrote with discernment about the intellectual degradation of the worker in a society in which the division of labour has proceeded very far; by comparison with the alert intelligence of the husbandman, the specialized worker “generally becomes as stupid and ignorant as it is possible for a human being to become.” In all of this, it is notable that Smith was writing at this time in an age of preindustrial capitalism. He seems to have had no real idea of the gathering Industrial Revolution, harbingers of which were visible in the great ironworks only a few miles from Edinburgh. He had nothing to say about large-scale industrial enterprise, and the few remarks in The Wealth of Nations concerning the future of joint-stock companies (corporations) are disparaging. Finally, one should bear in mind that, if growth is the great theme of The Wealth of Nations, it is not unending growth. Here and there there  are glimpses of a secularly declining rate of profit; and Smith mentions as well the prospect that when the system eventually accumulates its “full complement of riches”—all the pin factories, so to speak, whose output could be absorbed—economic decline would begin, ending in an impoverished stagnation. The Wealth of Nations was received with admiration by Smith’s wide circle of friends and admirers, although it was by no means an immediate popular success. The work finished, Smith went into semiretirement. In the year following its publication he was appointed commissioner both of customs and of all salt duties for Scotland, posts that brought him £600 a year. He thereupon informed his former charge that he no longer required his pension, to which Buccleuch replied that his sense of honour would never allow him to stop paying it. Smith was therefore quite well off in the final years of his life, which were spent mainly in Edinburgh with occasional trips to London or Glasgow (which appointed him a rector of the university). The years passed quietly, with several revisions of both major books but with no further publications. He died at the age of 67, full of honours and recognition, and was buried in the churchyard at Canongate with a simple monument stating that Adam Smith, author of The Wealth of Nations, lay there.

Beyond the few facts of his life, very little is known about the man. Smith never married, and almost nothing is known of his personal side. Moreover, it was the custom of his time to destroy rather than to preserve the private files of illustrious men, with the unhappy result that much of Smith’s unfinished work, as well as his personal papers, were destroyed (some as late as 1942).

Only one portrait of Smith survives, a profile medallion by James Tassie; it gives a glimpse of the older man with his somewhat heavy-lidded eyes, aquiline nose, and a hint of a protrusive lower lip. “I am a beau in nothing but my books,” Smith once told a friend to whom he was showing his library of some 3,000 volumes. From various accounts, he was also a man of many peculiarities, which included a stumbling manner of speech (until he had warmed to his subject), a gait described as “vermicular,” and above all an extraordinary and even comic absence of mind. Smith was described by several of his contemporaries and biographers as comically absent-minded, with peculiar habits of speech and gait, and a smile of “inexpressible benignity He was known to talk to himself, a habit that began during his childhood when he would smile in rapt conversation with invisible companions. He also had occasional spells of imaginary illness, and he is reported to have had books and papers placed in tall stacks in his study. According to 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 needed help to escape. He is also said to have put bread and butter into a teapot, drunk the concoction, and declared it to be the worst cup of tea he ever had. According to another account, Smith distractedly went out walking in his nightgown and ended up 15 miles outside of town, before nearby church bells brought him back to reality.  Considerable scholarly debate has occurred about the nature of Smith’s religious views. Smith’s father had shown a strong interest in Christianity and belonged to the moderate wing of the Church of Scotland The fact that Adam Smith received the Snell Exhibition suggests that he may have gone to Oxford with the intention of pursuing a career in the Church of England Certainly, he enjoyed a high measure of contemporary fame; even in his early days at Glasgow his reputation attracted students from nations as distant as Russia, and his later years were crowned not only with expressions of admiration from many European thinkers but by a growing recognition among British governing circles that his work provided a rationale of inestimable importance for practical economic policy Over the years, Smith’s lustre as a social philosopher has escaped much of the weathering that has affected the reputations of other first-rate political economists.  Although he was writing for his generation, the breadth of his knowledge, the cutting edge of his generalizations, and the boldness of his vision have never ceased to attract the admiration of all social scientists, economists in particular. 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, 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 ever to feature on an English banknote. A large-scale memorial of Smith by Alexander Stoddart was unveiled on the   4 July 2008 in Edinburgh. It is a 10-foot (3.0 m)-tall bronze sculpture and it stands above the Royal Mile outside St Giles’ Cathedral in Parliament Square, near the Mercat cross  20th-century sculptor Jim Sanborn (best known for the Kryptos sculpture at the United States Central Intelligence Agency) has created multiple pieces which feature Smith’s work. Also in the US 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. At the University of North Carolina at Charlotte, outside the Belk College of Business Administration, is Adam Smith’s Spinning Top  Another Smith sculpture is at Cleveland State University. And a   bust of Smith is also in the Hall of Heroes of the National Wallace Monument in Stirling. However Smith laid the foundations of classical free market economic theory. The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, he developed the concept of division of labour and expounded upon how rational self-interest and competition can lead to economic prosperity. Smith was controversial in his own day and his general approach and writing style were often satirised by writers.

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