SMITH, ADAM

Adam Smith (1723–1790), a philosopher and lecturer at the University of Glasgow, taught Natural Theology—the search for design and order in the confusion of the cosmos—in eighteenth century Scotland. Smith became intrigued with economic theory, seeing economics as a largely ignored subject of philosophy. In 1776 he published an enormous book, a "living picture" of the economic circumstances of England, known as The Wealth of Nations, without promoting any social class, or advocating any ideology. The book had been called the "bible of capitalism," but that was misleading. The Wealth of Nations was a profound effort to describe a "system of perfect liberty," which was the way Smith referred to the small-business commercial capitalism of his era. His book, involving issues of personal self-interest, and competition, has become a classic economics text, and Smith was regarded as the seminal organizer of thoughts and ideas about the economics of capitalism.

Adam Smith was born in June 1723, in Kirkcaldy, Scotland. His father died prior to his birth, and Smith was raised by his mother, in comfortable circumstances in a home near Edinburgh. Smith's close relationship with his mother was life-long. She died at age 90, when Smith was in his 40s. He lived most of his life quietly in Scotland, reading, writing, and teaching. He was highly regarded as a teacher, and was considered to be a genius who was eccentric and absent-minded in most practical matters. Smith's education included three years at the University of Glasgow, Scotland, and seven years at Balliol College at Oxford University, England.

In 1751, not yet age 28, Smith was offered the Chair of Logic at the University of Glasgow, and shortly thereafter was given the Chair of Moral Philosophy. He gained considerable reputation and prestige in 1759, publishing a book called The Theory of Moral Sentiments, a work examining moral approval and disapproval.

In 1764, Smith went to France for 18 months. To relieve periods of boredom he felt there, Smith began work on a treatise of political economy, which formed the beginnings of his book, The Wealth of Nations. It was in France, working on his treatise, that he hit on one of his greatest insights: labor, not nature, was the source of what we call "value". He spent much time in his book elaborating this theme: labor as a source for all value. The book was published in 1776, a 900-page outpouring of a whole epoch. Smith had borrowed his ideas from many other philosophers—The Wealth of Nations mentions over 100 names specifically in his treatise. It is a brilliant synthesis of economic and philosophical thinking.

The Wealth of Nations was indeed a revolutionary book. Smith had no particular ideology and apologized for no particular class of people. He was concerned with the flow of goods and services consumed by everyone, constituting the ultimate aim and end of economic life. Smith's primary interest was in laying bare the mechanism by which society hangs together. He constructed a formulation of the laws of the marketplace, discovering what he called in Nature "the invisible hand," whereby private interests and the passions of men are led in the direction most agreeable to the whole society.

Smith's laws of the market were simple. The drive of individual self-interest in a community of similarly motivated people results in competition. If left untampered by any deceitful means, competition among people will result in the provision of goods that society wants, in the amount society desires, at the price society is willing to pay.

Smith's explanation of free-market commerce was an excellent explanation for its era prior to the Industrial Revolution. Large problems arose when restraints of any kind came into play to eliminate Nature's "invisible hand" in matters of the economy. Adam Smith did not anticipate the intervention of governments with their regulations of commerce. In fact, he viewed such intervention as harmful to a free market economy. He did not, as well, anticipate huge industrial monopolies that owned entire areas of the economy, artificially rigged prices, and lowered worker wages. Since the eighteenth century, when Smith woke the world with his great explanation of general economics, the marketplace has changed vastly. Self-interest still plays the major hand, but it is more difficult to compete, since a variety of interests block much competition.

Despite the idea that Smith wrote largely as an apologist for capitalists and businessmen, nothing could be further from the truth. Smith wrote: "No society can surely be flourishing and happy if which by far the greater part of the numbers are poor and miserable," hardly the words of a corporate apologist. Yet, a capitalist class rising in the nineteenth century during the Industrial Revolution ignored much of Smith's work, and focused on his one remark—"let the market alone." Smith's bias, if he had one, was neither anti-labor nor anti-capital. Instead, he described a sensible economic analysis that, at bottom, favored the consumer. He said: "Consumption is the sole end and purpose of all production."

Adam Smith was a scholar and analyst of pre-industrial capitalism. The Wealth of Nations became a masterwork of political economy. More so, it was a rational classic guide to understanding the forces of competition and self-interest as the major conception of the human adventure in the Western world. Adam Smith died in 1790, but his economic theories have endured throughout the twentieth century.

SMITH, ADAM

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