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Significant Scots
Adam Smith

SMITH, ADAM, LL.D. and F.R.S. both of London and Edinburgh, one of the brightest ornaments of the literature of Scotland, was born on the 5th of June, 1723, at the town of Kirkaldy, in the county of Fife. He was the only child of Adam Smith, comptroller of the customs at Kirkaldy, and Margaret Douglas, daughter of Mr Douglas of Strathenry. His father having died some months before his birth, the duty of superintending his early education devolved entirely upon his mother.

The Real Adam Smith: Ideas That Changed The World

An Inquiry into the Nature and Causes of the Wealth of Nations, (generally referred to by its shortened title The Wealth of Nations), is the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published in 1776, the book offers one of the world's first collected descriptions of what builds nations' wealth and is today a fundamental work in classical economics. Through reflection over the economics at the beginning of the Industrial Revolution the book touches upon broad topics as the division of labour, productivity and free markets.

George Stigler attributes to Smith "the most important substantive proposition in all of economics" and foundation of resource-allocation theory. It is that, under competition, owners of resources (labor, land, and capital) will use them most profitably, resulting in an equal rate of return in equilibrium for all uses (adjusted for apparent differences arising from such factors as training, trust, hardship, and unemployment).[61] He also describes Smith's theorem that "the division of labour is limited by the extent of the market" as the "core of a theory of the functions of firm and industry" and a "fundamental principle of economic organisation."

Paul Samuelson finds in Smith's pluralist use of supply and demand — as applied to wages, rents, and profit -- a valid and valuable anticipation of the general equilibrium modelling of Walras a century later. Moreover, Smith's allowance for wage increases in the short and intermediate term from capital accumulation and invention added a realism missed later by Malthus, Ricardo, and Marx in their propounding a rigid subsistence-wage theory of labour supply.

In noting the last words of the Wealth of Nations,

If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should free herself from the expence of defending those provinces in time of war, and of supporting any part of their civil or military establishments in time of peace, and endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.

Ronald Coase suggests that if Smith's earlier proposal of granting colonies representation in the British parliament proportional to their contributions to public revenues had been followed, "there would have been no 1776, ... America would now be ruling England, and we [in America] would be today celebrating Adam Smith not simply as the author of the Wealth of Nations, but hailing him as a founding father."

Mark Blaug argues that it was Smith's achievement to shift the burden of proof against those maintaining that the pursuit of self-interest does not achieve social good. But he notes Smith's relevant attention to definite institutional arrangements and process as disciplining self-interest to widen the scope of the market, accumulate capital, and grow income.

Libertarian theorist Murray Rothbard, however, disagrees:

It is not just that Smith's Wealth of Nations has had a terribly overblown reputation from his day to ours. The problem is that the Wealth of Nations was somehow able to blind all men, economists and laymen alike, to the very knowledge that other economists, let alone better ones, had existed and written before 1776. The Wealth of Nations exerted such a colossal impact on the world that all knowledge of previous economists was blotted out, hence Smith's reputation as Founding Father. The historical problem is this: how could this phenomenon have taken place with a book so derivative, so deeply flawed, so much less worthy than its predecessors? The answer is surely not any lucidity or clarity of style or thought. For the much-revered Wealth of Nations is a huge, sprawling, inchoate, confused tome, rife with vagueness, ambiguity and deep inner contradictions. There is of course an advantage, in the history of social thought, to a work being huge, sprawling, ambivalent and confused. There is sociological advantage to vagueness and obscurity. The bemused German Smithian, Christian J. Kraus, once referred to the Wealth of Nations as the 'Bible' of political economy. In a sense, Professor Kraus spoke wiser than he knew. For, in one way, the Wealth of Nations is like the Bible; it is possible to derive varying and contradictory interpretations from various -- or even the same -- parts of the book.

A singular accident happened to him when he was about three years of age. As he was amusing himself one day at the door of his uncle, Mr Douglas’s house in Strathenry, he was carried off by a party of gypsies. The vagrants, however, being pursued by Mr Douglas, were overtaken in Leslie-wood, and his uncle, as Mr Stewart remarks, was thus the happy instrument of preserving to the world a genius which was destined not only to extend the boundaries of science, but to enlighten and reform the commercial policy of Europe.

The constitution of Dr Smith, during infancy, was infirm and sickly, and required all the delicate attentions of his surviving parent. Though she treated him with the utmost indulgence, this did not produce any unfavourable effect either on his dispositions or temper, and he repaid her affectionate solicitude by every attention that filial gratitude could dictate during the long period of sixty years.

He received the first rudiments of his education at the grammar school of Kirkaldy, which was then taught by Mr David Miller, a teacher, in his day, of considerable reputation. He soon attracted notice by his passion for books, and the extraordinary powers of his memory. Even at this early period, too, he seems to have contracted those habits of speaking to himself, and of absence in company, for which, through life, he was so remarkable. The weakness of Dr Smith’s constitution prevented him from engaging in the sports and pastimes of his school companions, yet he was much beloved by them on account of his friendly and generous dispositions.

Having remained at Kirkaldy till he had completed his fourteenth year, he was sent, in 1737, to the university of Glasgow, where he prosecuted his studies during three years. Mr Stewart mentions on the authority of one of Mr Smith’s fellow students, Dr Maclaine of the Hague, that his favourite pursuits while attending that university were mathematics and natural philosophy. He attended, however, during his residence in Glasgow, the lectures of the celebrated Dr Hutcheson on moral philosophy; and it is probable that they had a considerable effect in afterwards directing his attention to those branches of science in which he was to become so distinguished.

Dr Smith’s friends having directed his views towards the English church, he went, in 1740, to Balliol college, Oxford, as an exhibitioner on Snell’s foundation, where he remained seven years. At this celebrated seat of classical learning he cultivated with the greatest assiduity and success the study both of the ancient and modern languages, and became intimately acquainted with the works of the Roman, Greek, French, and Italian poets, as well as with those of his own country. With the view of improving his style, he used frequently to employ himself in the practice of translation, particularly from the French, as he was of opinion that such exercises were extremely useful to those who wished to cultivate the art of composition. But Dr Smith’s obligations to the university of Oxford seem to be confined to his proficiency in classical learning, and a critical acquaintance with the niceties and delicacies of the English tongue. Very little could be learned from the public lectures on philosophy: the logic of Aristotle still maintaining its influence in both the English universities. A circumstance, however, which, upon good authority, is related to have occurred during his residence at Oxford, shows, that in his private studies Dr Smith did not confine his reading in philosophy to the works of Aristotle and the schoolmen. Something having excited the suspicion of his superiors with regard to the nature of his studies in private, the heads of his college entered his apartment one day without any previous notice, and unluckily found the young philosopher engaged in reading Hume’s Treatise of Human Nature. The offender was of course severely reprimanded, and the objectionable work seized and carried off.

Dr Smith, having found that the ecclesiastical profession was not suitable to his taste, resolved at last to renounce every prospect of rising to eminence by church preferment. He accordingly returned, in 1747, against the wishes of his friends, to Kirkaldy, and without having determined on any fixed plan of life, resided there nearly two years with his mother. In the end of the year 1748, Dr Smith fixed his residence in Edinburgh, and, under the patronage of lord Kames, delivered lectures during three years on Rhetoric and Belles Lettres. These lectures were never published, but it appears that the substance of them was communicated to Dr Blair, who began his celebrated course on the same subject in 1755, and that that gentleman had a high opinion of their merits. In a note to his eighteenth lecture, Dr Blair thus notices them: "On this head, of the general character of style, particularly the plain and the simple, and the characters of those English authors who are classed under them in this and the following lecture, several ideas have been taken from a manuscript treatise on Rhetoric, part of which was shown to me many years ago, by the learned and ingenious author, Dr Adam Smith; and which, it is hoped, will be given by him to the public."

It appears to have been during the residence of Mr Smith at this time in Edinburgh that his acquaintance with Mr David Hume commenced, which lasted without the slightest interruption till the death of the latter in 1776. It was a friendship, Mr Stewart remarks, on both sides founded on the admiration of genius, and the love of simplicity; and which forms an interesting circumstance in the history of each of these eminent men from the ambition which both have shown to record it to posterity.

The literary reputation of Dr Smith being now well established, he was elected, in 1751, professor of logic in the university of Glasgow, and in the year following he was removed to the chair of moral philosophy in the same university, vacant by the death of Mr Thomas Craigie, who was the immediate successor of Dr Hutcheson. In this situation he remained during thirteen years, a period which he used to consider as the happiest of his life, the studies and inquiries in which his academical duties led him to engage being those which were most agreeable to his taste. It is highly probable that his appointment to the professorship of moral philosophy was the means of inducing him to mature his speculations in ethics and political economy, and to undertake those great works which have immortalized his name in the literature of Scotland.

No part of the lectures which Dr Smith delivered either as professor of logic or of moral philosophy, has been preserved, except what has been published in the "Theory of Moral Sentiments," and the "Wealth of Nations." The following account of them, however, has been given by Mr Miller, the celebrated author of the Historical View of the English Government, and professor of law in the university of Glasgow, who had the advantage of being one of Mr Smith’s pupils.

"In the professorship of logic, to which Mr Smith was appointed on his first introduction into this university, he soon saw the necessity of departing widely from the plan that had been followed by his predecessors, and of directing the attention of his pupils to studies of a more interesting and useful nature than the logic and metaphysics of the schools. Accordingly, after exhibiting a general view of the powers of the mind, and explaining as much of the ancient logic as was requisite to gratify curiosity with respect to an artificial method of reasoning, which had once occupied the universal attention of the learned, he dedicated all the rest of his time to the delivering of a system of rhetoric and belles lettres. The best method of explaining and illustrating the various powers of the human mind, the most useful part of metaphysics, arises from an examination of the several ways of communicating our thoughts by speech, and from an attention to the principles of those literary compositions which contribute to persuasion or entertainment. By these arts everything that we perceive or feel, every operation of our minds, is expressed and delineated in such a manner, that it may be clearly distinguished and remembered. There is at the same time no branch of literature more suited to youth at their first entrance upon philosophy than this, which lays hold of their taste and their feelings.

" It is much to be regretted that the manuscript, containing Mr Smith’s lectures on this subject, was destroyed before his death. The first part, in point of composition, was highly finished; and the whole discovered strong marks of taste and original genius. From the permission given to students of taking notes, many observations and opinions contained in these lectures have either been detailed in separate dissertations, or engrossed in general collections, which have since been given to the public. But these, as might be expected, have lost the air of originality, and the distinctive character which they received from their first author, and are often obscured by that multiplicity of common-place matter in which they are sunk and involved.

" About a year after his appointment to the professorship of logic, Mr Smith was elected to the chair of moral philosophy. His course of lectures on this subject was divided into four parts. The first contained natural theology; in which he considered the proofs of the being and attributes of God, and those principles of the human mind upon which religion is founded. The second comprehended ethics, strictly so called, and consisted chiefly of the doctrines which he afterwards published in his ‘Theory of Moral Sentiments.’ In the third part, he treated at more length of that branch of morality which relates to justice, and which being susceptible of precise and accurate rules, is for that reason capable of a full and particular explanation.

"Upon this subject he followed the plan that seems to be suggested by Montesquieu; endeavouring to trace the gradual progress of jurisprudence, both public and private, from the rudest to the most refined ages, and to point out the effects of those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent improvements, or alterations in law and government. This important branch of his labours he also intended to give to the public; but this intention, which is mentioned in the conclusion of the ‘Theory of Moral Sentiments,’ he did not live to fulfill.

In the last part of his lectures he examined those political regulations which are founded, not upon the principle of justice, but that of expediency, and which are calculated to increase the riches, the power, and the prosperity of a state. Under this view, he considered the political institutions relating to commerce, to finances, to ecclesiastical and military establishments. What he delivered on these subjects, contained the substance of the work he afterwards published under the title of ‘An Inquiry into the Nature and Sources of the Wealth of Nations.’

"There was no situation in which the abilities of Mr Smith appeared to greater advantage than as a professor. In delivering his lectures, he trusted almost entirely to extemporary elocution. His manner, though not graceful, was plain and unaffected; and, as he seemed to be always interested in the subject, he never failed to interest his hearers. Each discourse consisted commonly of several distinct propositions, which he successively endeavoured to prove and illustrate. These propositions, when announced in general terms, had, from their extent, not unfrequently something of the air of a paradox. In his attempts to explain them, he often appeared at first not to be sufficiently possessed of the subject, and spoke with some hesitation. As he advanced, however, the matter seemed to crowd upon him, his manner became warm and animated, and his expression easy and fluent. In points susceptible of controversy, you could easily discern, that he secretly conceived an opposition to his opinions, and that he was led upon this account to support them with greater energy and vehemence By the fulness and variety of his illustrations, the subject gradually swelled in his hands, and acquired a dimension which, without a tedious repetition of the same views, was calculated to seize the attention of his audience and to afford them pleasute as well as instruction, in following the same subject through all the diversity of shades and aspects in which it was presented, and afterwards in tracing it backwards to that original proposition, or general truth, from which this beautiful train of speculation had proceeded.

"His reputation as a professor was accordingly raised very high; and a multitude of students from a great distance resorted to the university merely upon his account. Those branches of science which he taught became fashionable at this place, and his opinions were the chief topics of discussion in clubs and literary societies. Even the small peculiarities in his pronunciation or manner of speaking became frequently the objects of imitation."

The first publications of Mr Smith, it is understood, were two articles which he contributed anonymously to a work called the "Edinburgh Review," begun in 1755, by some literary gentlemen, but of which only two numbers ever appeared.. The first of these articles was a Review of Dr Johnson’s Dictionary of the English Language, which displays considerable acuteness, and the other contained some general observations on the state of literature in the different counties of Europe.

In 1759, his great ethical work, entitled, "Theory of Moral Sentiments, or an Essay towards an analysis of the Principles by which men naturally judge concerning the Conduct and Character, first of their Neighbour, and afterwards of Themselves," made its appearance. This work contributed greatly to extend the fame and reputation of the author; and is unquestionably entitled to a place in the very first rank in the science of morals. Dr Brown, in his eighteenth lecture, thus speaks of it: "Profound in thought, it exhibits, even when it is most profound, an example of the graces with which a sage imagination knows how to adorn the simple and majestic form of science; that it is severe and cold only to those who are Themselves cold and severe, as in these very graces it exhibits in like manner an example of the reciprocal embellishment which imagination receives from the sober dignity of truth. In its minor details and illustrations, indeed, it may be considered as presenting a model of philosophic beauty of which all must acknowledge the power, who are not disqualified by their very nature for the admiration and enjoyment of intellectual excellence; so dull of understanding as to shrink with a painful consciousness of incapacity at the very appearance of refined analysis, or so dull and cold of heart, as to feel no charm in the delightful varieties of an eloquence, that, in the illustration and embellishment of the noblest truths, seems itself to live and harmonize with those noble sentiments which it adorns." But it is chiefly in its minor analyses that the work of Dr Smith possesses such excellence. Its leading doctrine has been often shown to be erroneous, and by none with more acuteness than by Dr Brown. We shall very shortly explain the nature of that leading doctrine, and endeavour to show how it has been refuted.

It is impossible for us to contemplate certain actions performed by others, or to perform such actions ourselves, without an emotion of moral approbation or disapprobation arising in our minds; without being immediately impressed with a vivid feeling, that the agent is virtuous or vicious, worthy or unworthy, of esteem. An inquiry regarding such moral emotions, must form the most interesting department of the philosophy of the mind, as it comprehends the whole of our duty to God, our fellow creatures, and ourselves. This department of science is termed Ethics, and is sometimes, though not very correctly, divided into two parts; the one comprehending the theory of morals, and the other its practical doctrines. The most important question to be considered in the theoretical part of ethics, is the following:—What is essential to virtue and vice—that is to say—what is common, and invariably to be found in all those actions of which we morally approve, and what is in the same way peculiar to those which we morally condemn? Philosophers have formed various opinions upon this subject. Hobbes and his followers contended that all merit and demerit depends upon political regulations: that the only thing essential to a virtuous or vicious action, is its being sanctioned or discountenanced by the association of men, among whom it is performed. Mr Hume and others have supported the more plausible theory, that what is utility to the human race, unavoidably makes itself the measure of virtue: that actions are virtuous or vicious, according as they are generally acknowledged to be, in their final effects, beneficial or injurious to society in general. These, and many other theories of morals, have been often shown to be erroneous; and it would be out of place here, to enter into any discussion regarding them. We pass on to notice the theory of Dr Smith.

According to him, all moral feelings arise from sympathy. It is a mistake to suppose that we approve or disapprove of an action immediately on becoming acquainted with the intention of the agent, and the consequences of what he has done. Before any moral emotion can arise in the mind, we must imagine ourselves to be placed in the situation of the person who has acted, and of those to whom his action related. If, on considering all the circumstances in which the agent is placed, we feel a complete sympathy with the feelings that occupied his mind, and with the gratitude of the person who was the object of the action, we then approve of the action as right, and feel the merit of the person who performed it, our sense of the propriety of the action depending on our sympathy with the agent; our sense of the merit of the agent on our sympathy with the object of the action. If our sympathies be of an opposite kind, we disapprove of the action, and ascribe demerit to the agent.

In estimating the propriety or merit of our own actions, on the other hand, we, in some measure, reverse this process, and consider how our conduct would appear to an impartial spectator. We approve or disapprove of it, according as we feel from the experience of our own former emotions, when we imagined ourselves to be placed in similar circumstances, estimating the actions of others, that it would excite his approval or disapprobation. Our moral judgments, with respect to our own conduct are, in short, only applications to ourselves of decisions, which we have already passed on the conduct of others.

But in this theory of Dr Smith, the previous existence of those moral feelings, which he supposes to flow from sympathy, is in reality assumed; for the most exact accordance of sentiment between two individuals, is not sufficient to give rise to any moral sentiment. In the very striking emotions of taste, for example, Dr Brown remarks, we may feel, on the perusal of the same poem, the performance of the same musical air, the sight of the same picture or statue, a rapture or disgust, accordant with the rapture or disgust expressed by another reader, or listener, or spectator; a sympathy far more complete than takes place in our consideration of the circumstances in which he way have had to regulate his conduct in any of the common affairs of life. If mere accordance of emotion, then, imply the feeling of moral excellence of any sort, we should certainly feel a moral regard for all whose taste coincide with ours; yet, however gratifying the sympathy in such a case may be, we do not feel, in consequence of this sympathy, any morality in the taste that is most exactly accordant with our own. There is an agreement of emotions, but nothing more; and if we had not a principle of moral approbation, by which, independently of sympathy, and previously to it, we regard actions as right, the most exact sympathy of passion would, in like manner, have been a proof to us of an agreement of feelings, but of nothing more. It proves to us more; because the emotions which we compare with our own, are recognized by us as moral feelings, independently of the agreement.

But though the leading doctrine of Dr Smith’s theory be considered by many, apparently on just grounds, as erroneous, his work is still unquestionably one of the most interesting which have been produced on moral science. It abounds in faithful delineations of characters and manners, and contains the purest and most elevated maxims for the practical regulation of human life. The style, though perhaps not sufficiently precise for the subject, is throughout eloquent, and serves, by the richness of its colouring, to relieve the dryness of some of the more abstract discussions.

Dr Smith’s "Dissertation on the Origin of Languages," which is now generally bound up with the "Theory of Moral Sentiments," made its first appearance with the second edition of that work. In this ingenious and beautiful tract, the author gives a theoretical history of the formation of languages, in which he endeavours to ascertain the different steps by which they would gradually arrive at their present so artificial and complicated state.

As the "Theory of Moral Sentiments" contains the most important part of Dr Smith’s ethical doctrines, he was enabled, after the publication of that work, to devote a larger part of his course of lectures, than he had previously done, to the elucidation of the principles of jurisprudence and political economy. From a statement which he drew up in 1755, in order to vindicate his claim to certain political and literary opinions, it appears that, from the time when he obtained a chair in the university of Glasgow, and even while he was delivering private lectures in Edinburgh, he had been in the habit of teaching the same liberal system of policy, with respect to the freedom of trade, which he afterwards published in the "Wealth of Nations." His residence in one of the largest commercial towns in the island, must have been of considerable advantage to him, by enabling him to acquire correct practical information on many points connected with the subject of his favourite studies; and Mr Stewart states, as a circumstance very honourable to the liberality of the merchants of Glasgow, that, notwithstanding the reluctance so common among men of business to listen to the conclusions of mere speculation, and the direct opposition of Dr Smith’s leading principles to all the old maxims of trade, he was able, before leaving the university, to rank some of the most eminent merchants of the city among the number of his proselytes.

The publication of the "Theory of Moral Sentiments," served greatly to increase the reputation of its author. In 1762, the Senatus Academicus of the university of Glasgow unanimously conferred on him the honorary degree of Doctor of Laws, in testimony, as expressed in the minutes of the meeting, of their respect for his universally acknowledged talents, and of the advantage that had resulted to the university, from the ability with which he had, for many years, expounded the principles of jurisprudence.

Towards the end of 1763, an important event occurred in Dr Smith’s life. Having received an invitation from Mr Charles Townsend, husband of the duchess of Buccleuch, to accompany the young duke, her grace’s son, on his travels, he was induced, from the liberal terms in which the proposal was made, and the strong desire he entertained of visiting the continent, to resign his chair at Glasgow, and accept of the offer. "With the connection which he was led to form, in consequence of this change in his situation," Mr Stewart remarks, "he had reason to be satisfied in an uncommon degree; and he always spoke of it with pleasure and gratitude. To the public, it was not, perhaps, a change equally fortunate, as it interrupted that studious leisure for which nature seems to have destined him, and in which alone he could have hoped to accomplish those literary projects which had flattered the ambition of his youthful genius."

Dr Smith having joined the duke of Buccleuch at London, in the early part of the year 1764, they set out for the continent in the month of March. After remaining only ten or twelve days in the capital of France, they proceeded to Toulouse, where they resided during eighteen months. Toulouse was at that time the seat of a parliament; and the intimacy in which he lived with some of its principal members, afforded him an opportunity of acquiring the most correct information in regard to the internal policy of France.

After leaving Toulouse, they proceeded through the southern provinces to Geneva; and having spent two months in that city, returned to Paris about Christmas, 1765, where they remained nearly a year. During their abode in Paris, Dr Smith, through the recommendation of Mr Hume, and his own celebrity, lived on the most intimate terms with the best society in the city. Turgot, (afterwards comptroller-general of finance,) Quesnay, Necker, d’Alembert, Helvetius, Marmontel, the duc de la Rochefoucault, and Madame Riccaboni, were among the number of his acquaintances; and some of them he continued ever afterwards to reckon among his friends. It is highly probable that he derived considerable advantage from his intercourse with Quesnay, the celebrated founder of the sect of Economists. Of this profound and ingenious man, Dr Smith entertained the highest opinion; and he has pronounced his work upon Political Economy, with all its imperfections, to be the nearest approximation to the truth, that had then been published, on the principles of that very important science. Dr Smith intended to have dedicated to Quesnay the "Wealth of Nations," but was prevented by his death.

Although Dr Smith had made some very severe remarks in his "Theory of Moral Sentiments," on the celebrated maxims of the duke of Rochefoucault, this did not prevent him from receiving the utmost kindness and attention from the author’s grandson. A short time before Dr Smith left Paris, he received a flattering letter from the duke of Rochefoucault, with a copy of a new edition of the Maxims of his grandfather; and informing Dr Smith, at the same time, that he had been prevented from finishing a translation of his "Theory of Morals" into French, only by the knowledge of having been anticipated in the design.

Dr Smith returned with his pupil to London, in October, 1766; and soon after took up his residence with his mother at Kirkaldy, where, with the exception of a few occasional visits to London and Edinburgh, he resided constantly during the next ten years, engaged habitually in intense study. Mr Hume, who considered the town as the proper scene for a man of letters, made many ineffectual attempts to prevail upon him to leave his retirenient. During this residence of Dr Smith at Kirkaldy, he was engaged chiefly in maturing his speculations upon Economical Science. At length, in 1776, the "Inquiry into the Nature and Causes of the Wealth of Nations," made its appearance: a work which holds nearly the same rank in political economy, that Locke’s Essay on the Human Understanding does in the philosophy of the mind, or the Principia of Newton in astronomy.

Our limits prevent us from giving anything like a particular analysis of this great work, but we shall endeavour to give some brief account of it. We shall notice very shortly the state of the science at the time when Dr Smith wrote—the different leading principles which the illustrious author endeavours to establish, and the principal merits and defects of the work.

The object of political economy is to point out the means by which the industry of man may be rendered most productive of the necessaries, conveniencies, and luxuries of life; and to ascertain the laws which regulat the distribution of the various products which constitute wealth among the different classes of society. Though these inquiries be in the highest degree interesting and important, the science of political economy is comparatively of recent origin. It was not to be expected that, among the Greeks and Romans who considered it degrading to be engaged in manufactures or commerce, and among whom such employments were left to slaves—where moralists considered the indulgence of luxury to be an evil of the first magnitude; that the science which treats of the best methods of acquiring wealth, should be much attended to. At the revival of letters, these ancient prejudices still maintained a powerful influence, and, combined with other causes, long prevented philosophers from turning their attention to the subject.

The first inquirers in political economy were led away by a prejudice, which is, perhaps, one of the most deeply rooted in the human mind; namely, that wealth consists solely in gold and silver. From this mistake grew up that system of commercial policy, which has been denominated the mercantile system, according to the principles laid down, in which the commerce of Europe was, in a great measure, regulated at the time when Dr Smith’s work appeared. The leading doctrine of the commercial system was, that the policy of a country should be directed solely to the multiplication of the precious metals. Hence the internal commerce of a nation came to be entirely overlooked, or viewed only as subsidiary to the foreign; and the advantage derived from foreign trade was estimated by the excess of the value of the goods exported, above that of those which were imported; it being supposed that the balance must be brought to the country in specie. To the radical mistake upon which the mercantile system was founded, may be traced those restrictions upon the importation, and the encouragement given to the exportation of manufactures, which, till lately, distinguished the commercial policy of all the nations in Europe. It was imagined that, by such regulations, the excess of the value of exports over imports, to be paid in gold, would be increased.

During the seventeenth, and the earlier part of the eighteenth century, various pamphlets had appeared, in which some of the fundamental principles of political economy were distinctly enough laid down, and which had a tendency to show the futility of the mercantile theory. For a particular account of these publications, and their various merits, we must refer to Mr M’Culloch’s able Introductory Discourse to the last edition of the "Wealth of Nations." We shall here only remark, that though several of these treatises contain the germs of some of the truths to be found in the "Wealth of Nations;" yet the principles laid down in them are often stated only in a cursory and incidental manner. Their authors frequently appear not to be aware of the importance of the truths which they have discovered; and in none of them is anything like a connected view of political economy to be found.

The only work that was given to the world before the "Wealth of Nations," in which an attempt was made to expound the principles of political economy in a logical and systematic manner, was the Economical Table of the celebrated Quesnay, a French physician, which was published in 1758: but the theory of this distinguished economist is very erroneous. Having been educated in the country, he was naturally inclined to regard agriculture with partiality; and he had come to the conclusion, that it was the only species of industry which could possibly contribute to increase the wealth of a nation. Everything which ministers to the wants of man, must be originally derived from the earth; and the earth, therefore, Quesnay contended, must be the only source of wealth. As manufacturers and merchants do not realize any surplus in the shape of rent, he conceived that their operations, though highly useful, could not add any greater value to commodities than the value of the capital consumed by them. Into this erroneous theory he seems to have been led, from being unable to explain the nature of rent; and from being unacquainted with that fundamental principle in political economy, that labour is the cause of exchangeable value.

But, though Quesnay conceived agriculture to be the only source of wealth, the principles of his system fortunately did not lead him to solicit for it any exclusive protection. On the contrary, he contended that the interest of all the different classes of society would be best promoted, by the establishment of a system of perfect freedom. It must, he conceived, be advantageous to the cultivators of the soil, that the industry of manufacturers and merchants should not be fettered; for the more liberty they enjoyed, the greater would be their competition, and in consequence the cheaper would their services be rendered to the agriculturists. On the other hand, it was the interest of the manufacturers, that the cultivators of the soil should also have perfect freedom; for the greater liberty they enjoyed, the more would their industry increase that surplus fund, from which, according to his theory, the whole national revenue was ultimately derived.

It was in the work of Dr Smith, that the sources of the wealth and prosperity of nations, were first fully and correctly explored, and, in a systematic manner, distinctly explained; and that the advantages to be derived from commercial freedom, were first satisfactorily established. In opposition to the principles of the commercial system, Dr Smith showed that wealth does not consist in gold and silver, but in the abundance of the various necessaries, conveniences, and luxuries of life; that labour is the only source of wealth; and, in opposition to the French economists, that labour is productive, when employed in manufactures and commerce, as well as in agriculture. He has investigated the various causes by which labour may be rendered most productive; and has shown how immensely its powers are increased, by being divided among different individuals, or nations. He has proved, with great power of reasoning, that all restrictions upon either the internal or external commerce of a country, are in the highest degree absurd and pernicious; and that the progress of real opulence will be most rapidly accelerated, when the industry of every individual and nation is employed in the production of those articles for which, either from natural or artificial causes, they are best adapted, and when the most unlimited freedom of making exchanges is everywhere allowed. "It is the maxim of every prudent master of a family," he remarks, B. iv. c. 2, "never to attempt to make at home, what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker; the shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers; all of them find it for their interest to employ their whole industry, in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, whatever else they have occasion for." "What is prudence in the conduct of any private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." "The natural advantages which one country has over another in producing particular commodities, are sometimes so great, that it is acknowledged by all the world, to be in vain to struggle with them. By means of glasses, hot-beds, and hot-walls, very good grapes can be raised in Scotland, and very good wine can be made of them, at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment thirty times more of the capital and industry of the country, than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted; there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three-hundredth part more of either."

But though Dr Smith contended upon correct principles for unlimited freedom of trade and commerce, and conceived that all the different branches of industry must be advantageous to society, he was of opinion that all were not equally advantageous. Agriculture he conceived to be the most productive employment in which capital could be engaged; the home trade to be more productive than the foreign; and the foreign than the carrying trade. But these distinctions are evidently erroneous. The self-interest of individuals will always prevent them from employing their capital in manufactures, or in commerce, unless they yield as large profits as they would have done, if they had been employed in agriculture: and a state being only a collection of individuals, whatever is most beneficial to them, must also be most advantageous to the society. Dr Smith has made another mistake in regard to the productiveness of labour. He divides all labourers into two classes, the productive and the unproductive; and he limits the class of productive labourers to those whose labour is immediately fixed, and realized in some vendible commodity. But certainly all labour ought to be reckoned productive, which, either directly or indirectly, contributes to augment the wealth of a society. It is impossible to hold that the labour of an Arkwright, or a Watt, was unproductive.

Few chapters in the "Wealth of Nations" are more valuable, than that in which the illustrious author explains the causes of the apparent inequality in the wages and profits derived from different employments. He has shown, in the fullest and most satisfactory manner, that when allowance is made for all the advantages and disadvantages attending the different employments of labour and stock, wages and profits must, in the same neighbourhood, be either perfectly equal, or continually tending to equality. The circumstances which he enumerates, as waking up for a low state of wages in some employments, and counterbalancing a high one in others, are five in number. First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them. Differences in the rate of profit seem to be occasioned, chiefly from the risk to which capital is exposed, being greater in some employments than in others.

One of the most important inquiries in political economy, is the investigation of the laws which regulate the exchangeable value of the different productions of industry; and the disquisitions of Dr Smith on this subject, are extremely valuable. He has shown, in opposition to the opinion commonly before entertained on the subject, that the price of commodities, the quantity of which may be indefinitely increased, does not depend upon their scarcity or abundance, but upon the cost of their production; that although variations in the supply of any article, or in the demand for it, may occasion temporary variations in its exchangeable value, the market price is permanently regulated by the natural price, and on an average corresponds with it. In estimating the elements, however, which form the necessary price of commodities, he has fallen into some very important errors, particularly with regard to rent, which, from being unacquainted with the causes that produce it, he considered to be one of the component parts of price. It was subsequently suggested by Dr Anderson, and more specifically laid down by Ricardo and others, that rent is the difference between the product of the fruitful soil of a country, (in comparison with the amount of labour and capital expended on it,) and the product of such less fruitful soil, as the pressure of population renders it necessary to bring into cultivation; and that rent being the difference between returns from an equal amount of capital applied to superior soils, and to that which is the most unproductive, is the effect, and not the cause, of the dearness of agricultural products; and cannot, therefore, form an element in their natural price.

The error which Dr Smith has fallen into, with regard to rent, is certainly the most important mistake in the "Wealth of Nations," and has vitiated a considerable part of the work. [Dr Smith’s theory of rent, however, is not without its defenders. See, in particular, the Westminster Review.] Among other mistakes, it has led him into error, in regard to the ultimate incidence of different taxes, and the circumstances which determine the rate of wages and profits. Had the illustrious author, too, been acquainted with the true theory of rent, he would not have contended that corn, upon an average, was the most invariable of all commodities in its value.

Many other important subjects, besides those we have so briefly noticed, are discussed by Dr Smith; but we cannot farther extend our remarks. With all its defects, the "Wealth of Nations" will ever remain a great standard work in the science of political economy, and an illustrious monument of the genius and talents of its author. The publication raised him to the highest rank in the literary world; and he enjoyed, during fifteen years, the fame which he had so justly acquired. His work soon after being published, was translated into all the languages of Europe; his opinions were referred to in the house of commons, and he himself consulted by the minister. Before his death, too, he had the satisfaction of seeing that the principles of commercial freedom, which he had so ably advocated, were beginning to influence the councils of Great Britain, and other European states.

A few months after the publication of the "Wealth of Nations," Dr Smith lost his highly esteemed friend, Mr Hume, who died upon the 25th of August, 1776. Dr Smith was most assiduous in his attentions during the last illness of this illustrious man; and gives an interesting account, in a letter to Mr Straban of London, of the circumstances attending his death, and a eulogium upon his character. To those who are acquainted with Mr Hume’s religious opinions, some parts of this eulogium must certainly appear too high; and the author was, accordingly, attacked on the subject by Dr Horne, bishop of Norwich, who rashly ascribed to him, without any evidence, the same sceptical opinions which had been entertained by his illustrious friend.

Dr Smith resided chiefly in London for about two years after his great work had been given to the public, during which time his society was courted by the most distinguished persons in the metropolis. In 1778, he was appointed one of the commissioners of customs in Scotland, through the unsolicited application of his friend and former pupil, the duke of Buccleuch. Upon obtaining this appointment, he removed to Edinburgh, where he spent the remaining years of his life, enjoying comparative affluence, and the society of his earliest and most esteemed friends. His mother, who was then in extreme old age, accompanied him to town; and his cousin, Miss Jane Douglas, who had formerly been a member of his family in Glasgow, undertook the superintendence of his domestic arrangements.

The accession to his income which he had now obtained, enabled him to gratify, to a much greater extent than formerly, the natural generosity of his disposition. "The state of his funds at the time of his death," Mr Stewart remarks, "compared with his very moderate establishment, confirmed, beyond a doubt, what his intimate acquaintances had often suspected, that a large proportion of his savings was allotted to offices of secret charity."

In 1787, Dr Smith was elected lord rector of the university of Glasgow. A letter addressed to the principal of the university on the occasion, shows the high sense he felt of this honour. "No preferment," he writes, "could have given me so much real satisfaction. No man can owe greater obligations to a society, than I do to the university of Glasgow. They educated me: they sent me to Oxford. Soon after my return to Scotland, they elected me one of their own members; and afterwards preferred me to another office, to which the abilities and virtues of the never to be forgotten Dr Hutcheson, had given a superior degree of illustration. The period of thirteen years, which I spent as a member of that society, I remember as by far the most useful, and therefore as by far the happiest and most honourable period of my life: and now, after three and twenty years’ absence, to be remembered in so very agreeable a manner by my old friends and protectors, gives me a heartfelt joy, which I cannot easily express to you."

During the last residence of Dr Smith in Edinburgh, his studies appear to have been almost entirely suspended. The petty routine duties of his office, though requiring little exertion of thought, were sufficient to occupy a considerable portion of his time and attention; and it is deeply to be regretted, that, in all probability, these duties alone prevented him from giving that "Account of the general principles of Law and Government, and of the different Revolutions they have undergone in the different ages and periods of society," which he had stated in the concluding paragraph of the "Theory of Moral Sentiments," it was his intention to do.

In 1784, Dr Smith lost his mother, to whom he had been most tenderly attached; and her death was followed, four years afterwards, by that of Miss Douglas. These domestic afflictions contributed to hasten the decline of his health. His constitution had never been robust, and began early to give way. His last illness, which arose from a chronic obstruction of the bowels, was lingering and painful. He had the consolation, however, of receiving the tenderest sympathy of his friends; and he bore his affliction with the most perfect resignation. His death took place in July, 1790.

A few days before his death, when Dr Smith found his end rapidly approaching, he caused all his manuscripts to be destroyed excepting a few essays, which he entrusted to the care of his executors, Dr Black and Dr Hutton. The intention of destroying all those of his manuscripts which he did not think worthy of publication, he had long entertained, and seems to have proceeded from a laudable anxiety in regard to his literary reputation. It is not exactly known what were the contents of the manuscripts which were destroyed, but there is every reason to believe that they consisted in part of the lectures on rhetoric and belles lettres which he had delivered at Edinburgh in 1748, and of the lectures on natural religion and jurisprudence, which formed an important part of the course he had delivered at Glasgow. Of the essays which were left to the care of his friends six were published a few years after his death by his illustrious executors. Three of them are fragments of a great work which he at one time intended to write on the principles which lead and direct philosophical inquiries, but which he had long abandoned as far too extensive. The first contains the history of astronomy, which seems to be the most complete of the three; the second contains the history of ancient physics; and the third gives the history of the ancient logics and metaphysics. To these essays, which are all written upon the plan of his Essay on the formation of the Languages, are subjoined other three, which treat, 1st. Of the nature of that imitation which takes place in what are called the Imitative Arts. 2nd. Of the affinity between certain English and Italian Verses; and 3rd. Of the External Senses. As to the merits of these essays the distinguished editors express their hopes "that the reader would find in them that happy connexion, that full and accurate expression, and that clear illustration which are conspicuous in the rest of the author’s works, and that though it is difficult to add much to the great fame he so justly acquired by his other writings, these would be read with satisfaction and pleasure." The library which Dr Smith had collected during his life though small was va1uable. The books were well selected, and he was particularly careful that the bijous which he admitted into his collection should be in excellent order. Mr Smellie, in his life of Dr Smith, says, "The first time I happened to be in his library, observing me looking at the books with some degree of curiosity and perhaps surprise, for most of the volumes were elegantly, and some of them superbly bound,—‘You must have remarked,’ said he, ‘that I am a beau in nothing but my books.’" This valuable library, together with the rest of his property, Dr Smith bequeathed to Mr David Douglas, advocate, his cousin.

We shall close this sketch of Dr Smith’s life with a few observations on his habits and private character, extracted from the valuable Account of his Life and Writings given by Mr Stewart.

"To his private worth, the most certain of all testimonies may be found in that confidence, respect, and attachment which followed him through all the various relations of life; the serenity and gayety he enjoyed under the pressure of his growing infirmities, and the warm interest he felt to the last in everything connected with the welfare of his friends, will be long remembered by a small circle, with whom, as long as his strength permitted, he regularly spent an evening in the week; and to whom the recollection of his worth still forms a pleasing, though melancholy bond of union.

"The more delicate and characteristical features of his mind, it is perhaps impossible to trace. That there were many peculiarities both in his manners and in his intellectual habits was manifest to the most superficial observer; but although, to those who knew him, these peculiarities detracted nothing from the respect which his abilities commanded; and, although to his intimate friends they added an inexpressible charm to his conversation, while they displayed in the most interesting light the artless simplicity of his heart; yet it would require a very skilful pencil to present them to the public eye. He was certainly not fitted for the general commerce of the world, or for the business of active life. The comprehensive speculations with which he had been occupied from his youth, and the variety of materials which his own invention continually supplied to his thoughts, rendered him habitually inattentive to familiar objects, and to comnion occurrences; and he frequently exhibited instances of absence which have scarcely been surpassed by the fancy of La Bruyere. Even in company he was apt to be engrossed with his studies; and appeared, at times, by the motion of his lips, as well as by his looks and gestures, to be in the fervour of composition. I have often, however, been struck, at the distance of years, with his accurate memory of the most trifling particulars, and am inclined to believe, from this and some other circumstances, that he possessed a power, not perhaps uncommon among absent men, of recollecting, in consequence of subsequent efforts of reflection, many occurrences which at the time when they happened did not seem to have sensibly attracted his notice.

" To the defect now mentioned, it was probably owing that he did not fall in easily with the common dialogue of conversation, and that he was somewhat apt to convey his own ideas in the form of a lecture. When he did so, however, it never proceeded from a wish to engross the discourse, or to gratify his vanity. His own inclination disposed him so strongly to enjoy in silence the gayety of those around him, that his friends were often led to concert little schemes in order to engage him in the discussions most likely to interest him. Nor do I think I shall be accused of going too far when I say, that he was scarcely ever known to start a new topic himself, or to appear unprepared upon those topics that were introduced by others. Indeed, his conversation was never more amusing than when be gave a loose to his genius upon the very few branches of knowledge of which he only possessed the outlines.

The opinions he formed of men upon a slight acquaintance were frequently erroneous; but the tendency of his nature inclined him much more to blind partiality, than to ill-founded prejudices. The enlarged views of human affairs on which his mind habitually dwelt, left him neither time nor inclination to study in detail the uninteresting peculiarities of ordinary characters, and accordingly, though intimately acquainted with the capacities of the intellect and the workings of the heart, and accustomed in his theories to mark with the most delicate hand the nicest shades both of genius and of the passions; yet in judging of individuals it sometimes happened that his estimates were in a surprising degree wide of the truth.

" The opinions to which in the thoughtlessness and confidence of his social hours, he was accustomed to hazard on books and on questions of speculation, were not uniformly such as might have been expected from the superiority of his understanding, and the singular consistency of his philosophical principles. They were liable to be influenced by accidental circumstances, and by the humour of the moment: and when retailed by those who only saw him occasionally, suggested false and contradictory ideas of his real sentiments. On these, however, as on most other occasions, there was always much truth, as well as ingenuity in his remarks; and if the different opinions which at different times he pronounced upon the same subject had been all combined together, so as to modify and limit each other, they would probably have afforded materials for a decision equally comprehensive and just. But, in the society of his friends, he had no disposition to form those qualified conclusions that we admire in his writings; and he generally contented himself with a bold and masterly sketch of the object from the first point of view in which his temper or his fancy presented it. Something of the same kind might be remarked when he attempted in the flow of his spirits to delineate those characters which from long intimacy he might have been disposed to understand thoroughly. The picture was always lively and expressive, and commonly bore a strong and amusing resemblance to the original, when viewed under one particular aspect; but seldom, perhaps, conveyed a just and complete conception of it in all its dimensions and proportions. In a word, it was the fault of his unpremeditated judgments to be systematical, and too much in extremes.

"But in whatever way these trifling peculiarities in his manners may be explained, there can be no doubt that they were intimately connected with the genuine artlessness of his mind. In this amiable quality he often recalled to his friends the accounts that are given of good La Fontaine; a quality which in him derived a peculiar grace from the singularity of its combination with those powers of reason and of eloquence which in his political and moral writings have long engaged the admiration of Europe.

"In his external form and appearance there was nothing uncommon. When perfectly at ease, and when warmed with conversation, his gestures were animated, and not ungraceful; and in the society of those he loved, his features were often brightened with a smile of inexpressible benignity. In the company of strangers his tendency to absence, and perhaps, still more, his consciousness of this tendency, rendered his manner somewhat embarrassed,—an effect which was probably not a little heightened by those speculative ideas of propriety, which his recluse habits tended at once to perfect in his conception, and to diminish his power of realizing. He never sat for his picture; but the medallion of Tassie conveys an exact idea of his profile, and of the general expression of his countenance."

His book "Inquiry into the Nature and Causes of the Wealth of Nations" was the corner-stone of the concept of political economy.

Published: June 30, 2018
The genius of Adam Smith, who knew there could be no such thing as value-free economics
By Andrew Gimson

Adam Smith: What He Thought, and Why it Matters by Jesse Norman

In the days before economics had been identified as the dismal science, there lived a genius called Adam Smith (1723-90), a philosopher who treated economics as part of a much wider inquiry into human nature.

He is the most famous and influential economist who ever lived, but his work is often distorted by politicians and economists who use it for polemical or narrowly economic purposes.

From such narrowness, Jesse Norman sets out to rescue him. In these pages Smith becomes once more a philosopher, an adornment of the Scottish Enlightenment and a close friend of David Hume, who was 12 years older than him. We find ourselves breathing lucid, 18th-century air, in which disconcertingly novel ideas are expressed in temperate, rational and amusing language.

Norman is an excellent tutor for an intellectual journey of this kind. One topic leads gracefully into the next, nothing goes on for too long and even the modern economists become comprehensible.

But an unintended consequence of his work is that it made me want to read, or reread, Hume, even more than I want to read Smith. Having written an admirable account of Edmund Burke, reviewed here in 2013, and edited the Everyman collection of Burke’s works, could he now provide us with a collected Hume?

In 1759, when Smith’s first great work, The Theory of Moral Sentiments, was published, Hume wrote him a teasing letter, in which he pretended repeatedly to be interrupted by visitors, whose news he felt constrained to report at length, before going on:

“But what is all this to my book? say you. My dear Mr Smith, have patience: compose yourself to tranquillity: show yourself a philosopher in practice as well as profession. Think on the emptiness, and rashness, and futility of the common judgments of men…

“Supposing, therefore, that you have duly prepared yourself for the worst by all these reflections, I proceed to tell you the melancholy news, that your book has been very unfortunate; for the public seem disposed to applaud it extremely.”

One of the delights of Smith’s work, especially if one comes to it after the fervid denunciations which characterise so many arguments (or non-arguments) about Brexit, is the good faith with which it is permeated. In The Theory of Moral Sentiments, Smith writes:

“To judge of ourselves as we judge of others…is the greatest exertion of candour and impartiality. In order to do this, we must look at ourselves with the same eyes with which we look at others: we must imagine ourselves not the actors, but the spectators of our own character and conduct…”

Smith is always trying to see how people actually behave, not just telling them how they should behave. He is one of the great empiricists, who contends that moral sentiments proceed from our sympathy with other people, and our inclination to adopt their moral standards.

He makes us wonder how in fact we do learn to distinguish right from wrong. And his idea that we imitate the people around us is in many ways far more persuasive than the notion that we obey a set of commandments, whether Christian or secular.

On arriving at a new school it may be interesting, and even prudent, to read the school rules. But we actually learn how to behave – what is acceptable and unacceptable, good and bad in the eyes of that society – from the other students.

That example is not, so far as I know, used by Smith. But a part of his genius was to illustrate his insights from everyday life, so everyone could see what he meant. In the second chapter of his most celebrated work, The Wealth of Nations, first published in 1776 and much revised thereafter, can be found the famous passage:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

Who can deny this is true? Nations become rich by allowing people to enrich themselves by trading for mutual benefit with other people. Smith points out that even the beggar who exchanges the old clothes he has been given “for other old clothes which suit him better” is a trader.

But from his understanding of business people’s “regard to their own interest” springs Smith’s warning that if they can, these people will form cartels and monopolies, and rip us off. High profits are generally a sign that something has gone wrong.

So Smith is not some mindless apostle of capitalism, who imagines that for a society to prosper, it should simply do what the lobbyists on behalf of commercial interests demand. He saw the defects of crony capitalism, exemplified at that time in the East India Company.

Nor is Smith an apologist for the rich, who “ruin themselves by laying out money on trinkets of frivolous utility”:

“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”

Norman remarks that any summary of Smith’s work is inadequate. So is any attempt to draw lessons from isolated parts of it. But Smith’s example, the way he went about things, is instructive. As Norman points out,

“to look at Smith in parts is to miss the power and coherence of the whole. For Smith, ‘The state of property must always vary with the form of government,’ and since both property and government rely on norms and patterns of social consent as they have evolved, both have a grounding in humans’ moral sentiments. It is, therefore, ultimately impossible to separate politics and economics from each other, or either from moral evaluation. There can be no such thing as a value-free economics…”

That last phrase does not trip so readily from the tongue as “There’s no such thing as a free lunch”. But it is still a vital insight into the study of economics, today so often presented, at least by implication, as a discipline which is sufficient unto itself, requiring technical insight uncontaminated by moral or political considerations.

Norman is a practising politician, since 2010 the MP for Hereford and South Herefordshire, and since 2016 a junior minister. But the wonder of this book is that setting aside the vanity of authors, it is disinterested. It proceeds, as Smith himself proceeded, from an insatiable intellectual curiosity.

In a democracy, the politician is placed under a continuous temptation, one might almost say a professional obligation, to promise short cuts to happiness, while knowing perfectly well – as do a large proportion of the voters – that no such short cuts exist.

Meanwhile the economist is supposed not merely to explain the past but to forecast the future, while knowing perfectly well (one hopes) that the explanations are inadequate and the forecasts useless.

And the moralist is left mouthing vacuous platitudes on Thought for the Day, or in the leader columns of our more solemn newspapers, while knowing perfectly well (one hopes) that no one will pay a blind bit of attention, although friends of the moralist who move in the same circles and say the same things may for those reasons nod respectfully.

The politician, the economist and the moralist who promise more than they can perform, and who expect the rest of us to nod respectfully, threaten to drag us into a morass of humbug, where nothing can any longer be studied for its own sake.

After those hucksters (as plentiful in his day as in ours), Smith comes as a refreshment of the spirit. This philosopher has no designs on us, for he recognises (in a passage warning against “the man of system”) that “in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it”.

So read Smith, enjoy his “system of natural liberty”, and if you want to place Smith in the context of his times and of ours, read Norman too.

Lectures on Justice, Police, Revenue, and Arms
delivered in the University of Glasgow by Adam Smith, Reported by a Student in 1763, and Edited, with Introduction and Notes, by Edwin Cannan. Oxford: at the Clarendon Press. 1896.(pdf)

Adam Smith's The Theory of Moral Sentiments (1759) presents an original idea of a general system of morals, and is a text of central importance in the history of moral and political thought. It presents a theory of the imagination which Smith derived from David Hume but which encompasses an idea of sympathy that in some ways is more sophisticated than anything in Hume's philosophy. By means of sympathy and the mental construct of an impartial spectator, Smith formulated highly original theories of conscience, moral judgement and the virtues. The enduring legacy of his work is its reconstruction of the Enlightenment idea of a moral, or social, science encompassing both political economy and the theory of law and government. This volume offers a new edition of the text with clear and helpful notes for the student reader, together with a substantial introduction that sets the work in its philosophical and historical context.

The Real Adam Smith: Ideas That Changed The World

From CapX on 30th June 2023

This month marks the 300th birthday of one of Scotland’s most renowned sons and founding fathers, Adam Smith. Today, he evokes widespread respect from economic theorists and moral philosophers alike, and with good reason.

His 1776 magnum opus, The Wealth of Nations produced or developed many of the concepts we use today from gross domestic product (GDP), the mutual benefit of trade, specialisation and productivity. Smith first and foremost was and is, through his works, a champion of the importance of free trade and its benefits. It is no accident that a thinktank named in his honour, the Adam Smith Institute, continues to further that mission 233 years after his death.

Smith’s life began in Kirkcaldy, a small trading port on Scotland’s east coast, where he led a largely uneventful childhood, besides an alleged brief kidnapping by vagrants (thankfully for economists worldwide, he was rescued by his uncle). Smith followed his intellectual intrigue to Glasgow where, aged 14, he entered the University, learning from leading intellectuals who would be the shaping force in Smith’s development. After graduating, Smith won a scholarship to Balliol College, Oxford. Far from the centre of ‘Scottish Enlightenment,’ he complained that the professors had ‘given up even the pretence of teaching’. The fact they were paid irrespective of the effort they put in provided the future economist an early lesson in incentives.

At Oxford, a frustrated Smith resolved to teach himself and subsequently obtained a strong grasp of both classical and contemporary philosophy. After a brief stint giving well-received lectures in Edinburgh, Smith returned to Glasgow to take up a teaching post. Here, it was his philosophical knowledge that drove him to write and publish his first work, The Theory of Moral Sentiments (1759). The Scotland of Smith’s time was particularly famous for its clubs and societies that met in pubs for debates and discussion. These taverns of ‘Enlightenment’ and free inquiry were prolific of genius, housing communities of thinkers that have historically changed the way of the world.

Both The Wealth of Nations and The Theory of Moral Sentiments may have been published in the mid-18th century, but they are no dusty tomes. They systematised an economics wholly applicable to today’s globalised economy. Central to this is the notion of the ‘invisible hand’ first touted in Moral Sentiments. Following self-interest simultaneously benefits society as a whole, as self-betterment necessitates the efficient allocation of resources and prices, in achieving economic prosperity.

Smith challenged protectionist policies, advocating for the concept of ‘gross national product’ as a better measure of wealth than silver or gold – a claim that was bold for the time, but proved to be entirely accurate. He also emphasised the benefits of specialisation and voluntary exchange, arguing that free trade and commerce naturally allocate resources to where they are most needed. He warned against interventionist politicians, as their actions such as price caps and subsidies disrupt the market and diminish its advantages. He recognised the importance of the division of labour and capital accumulation for economic progress, highlighting the positive feedback cycle of investment and efficiency – something Jeremy Hunt emphasised recently.

However, Smith also cautioned against excessive government size, burdensome taxation, and mounting debts, which hinder the market economy and redirect capital from future production. His ideas remain as relevant as ever, particularly in the context of escalating national debt and the potential consequences of high interest rates used to combat inflation.

Interventionist politicians should take note of Smith’s point that free trade and commerce automatically guide resources to where they are most needed, benefiting the entire economy. The ‘invisible hand’ operates so effectively that politicians cannot outsmart it; their interventions like price caps, taxes, regulations, and subsidies distort the market and diminish its benefits.

Above all, Smith believed in a market system of free competition and exchange. Too big a government requires burdensome taxation that distorts the market economy, and excessive debts divert capital away from future production. Today Smith’s ideas are under threat from the monopolies that extract tax preferences, controls, and other privileges from governments to dampen competition. Smith’s argument that free markets and open competition benefit the poor most should be given a new hearing.

Ultimately, the contemporary relevance of Smith’s work is a testament to its ingenuity. But this can be taken further. The Tercentenary of his birth should be an opportunity to reimagine his work for the 21st century.

Writing on the cusp of the Industrial Revolution, Smith could hardly have foreseen the world we live in today. Now, with the rise of artificial intelligence, we may once again be on the brink of a technological transformation whose consequences we can’t predict. AI could certainly boost global productivity growth that has been slowing for more than a decade. By automating certain cognitive tasks, humans will have more time to carry out high-productivity roles that focus on innovation. Goldman Sachs forecast that AI could increase global output by $7tn (about 7% of global GDP) over a ten-year period.

He may not have envisaged the kind of technology that shapes today’s world, but Smith’s work can still provide effective solutions to the most challenging of economic, social, and even existential issues. So let’s wish him a Happy Birthday – and be grateful that even after 300 years, he continues to speak to us today.

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