Adam Smith
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Adam Smith
(1723-1790)
Smith was one of those 18th century Scottish moral philosophers whose impulses led to our modern day theories; his work marks the breakthrough of an evolutionary approach which has progressively displaced the stationary Aristotelian view
Invisible Hand:-
Ч “Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”(The Wealth of Nations).
Government:-
Ч “All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men. The sovereign [politician] is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient: the duty of superintending the industry of private people.” (The Wealth of Nations, vol. II, bk. IV, ch. 9.)
Monopoly:-
Ч “A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate.” (vol. I, bk. I, ch. 7.)
Ч “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice.” (vol. I, bk. I, ch. 10.)
Nature of Man:-
Ч “The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals.”
Politicians:-
Ч “It is the highest impertinence and presumption, therefore, in kings and ministers [read politicians] to pretend to watch over the economy of private people, and to restrain their expense. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs.” (vol. I, bk. II, ch. 3.)
Science:-
Ч “Science is the great antidote to the poison of enthusiasm and superstition.” (The Wealth of Nations.)
Ч “A system of natural philosophy [this is how they described science in those days] may appear very plausible, and be for a long time very generally received in the world, and yet have no foundation in nature, nor any sort of resemblance to the truth.” (Theory of Moral Sentiments.)
Introduction:-
Malthus, in his less famous work, Definitions in Political Economy, set down four rules for formulating definitions. Lawyers will readily recognize these as authorless rules which they and the courts have used in statutory interpretation. The first is that when people use words we should expect others to interpret them in their ordinary sense, or dictionary meaning. The second rule — given that some distinction is required — is to adopt the meaning as used by the “most celebrated writers.”
“In adverting to the terms and definitions of Adam Smith, in his Wealth of Nations, I think it will be found that he has less frequently and less strikingly deviated from the rules above laid down, and that he has more constantly and uniformly kept in view the paramount object of explaining in the most intelligible manner the causes of the wealth of nations, according to the ordinary acceptation of the expression, than any of the subsequent writers in the science, who have essentially differed from him.”1
If one is interested in the study of economics — and one should certainly be if they are at all interested in governmental policy, then one should begin with a good dictionary and a copy of Adam Smiths Wealth of Nations . This is likely all that one needs to do; and this is indeed fortunate. For, to go beyond Adam Smith, it is to go beyond into the writings of the thousands of economists that have written since; and, thus, to go into a thicket full of obscure, and for the most part, meaningless terms.
Adam Smiths Life:-
On the Firth of Forth just across and to the north of Edinburgh, in County Fife, will be found a town, Kirkcaldy; it is here, in the year 1723, Adam Smith was born. Adam Smith was to become the first political economist the world had ever known. He was to take his place at the head of the first school of economics, one that continues and is known as the “classical school.”
Adams father, who had died before Adams birth, was a “comptroller of customs.” In 1740, at the age of seventeen, Smith was sent off to Oxford on scholarship. It is here that he learned Greek and began a “sound accumulation of Greek learning.” It is here, too, that he read Humes A Treatise of Human Nature, a work written during the years 1734-5. (David Hume, from Edinburgh, born twelve years before Smith, was another of those Scottish “lights” which were so prominent in this age.) At any rate Smiths interest in Humes work brought him into conflict with the authorities at Oxford.2 On coming back home, Adam Smith joined in on “the brilliant circle in Edinburgh which included David Hume, John Home, Hugh Blair, Lord Hailes and Principal Robertson.”3
In 1751, at age twenty-eight, Adam Smith became a professor of Logic at Glasgow, and then, the