Adam Smith - (baptized June 5, 1723, Kirkcaldy, Scotland—

died July 17, 1790, Edinburgh), Scottish social philosopher and

political economist.
 • Who is the Adam Smith and his contributions:
• Adam Smith is a towering figure in the history of economic
thought. Known primarily for a single work—An Inquiry into
the Nature and Causes of the Wealth of Nations (1776), the
first comprehensive system of political economy—he is
more properly regarded as a social philosopher whose
economic writings constitute only the capstone to an
overarching view of political and social evolution. If his
masterwork is viewed in relation to his earlier lectures on 
moral philosophy and government, as well as to allusions
 in The Theory of Moral Sentiments (1759) to a work he hoped
to write on “the general principles of law and government, and
of the different revolutions they have undergone in the
different ages and periods of society,” then The Wealth of
Nations may be seen not merely as a treatise
 on economics but also as a partial exposition of a much
larger scheme of historical evolution.
 • Early Life
• Much more is known about Adam Smith’s thought than about his life. He was the son by second marriage
of Adam Smith, comptroller of customs at Kirkcaldy, a small (population 1,500) but thriving fishing
village near Edinburgh, and Margaret Douglas, daughter of a substantial landowner. Of Smith’s
childhood nothing is known other than that he received his elementary schooling in Scottish.
• At the age of 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 (the Snell Exhibition) and traveled
on horseback to Oxford, where he stayed at Balliol College. Compared with the stimulating atmosphere
of Glasgow, Oxford was 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 an 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 much in vogue in the 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.
 • Glasgow – (city in Scottland)
• 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 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. 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.
 • The Theory of Moral Sentiments of Adam Smith
• In 1759 Smith published his first work, The Theory of Moral Sentiments. Didactic, exhortative, and analytic
 by turns, 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,” which, together with Hume and the other leading philosophers
of his time, he took as a universal and unchanging datum from which social institutions, as well as social
behaviour, could be deduced.
• 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 theory may sound less
naive if the question is reformulated to ask how instinctual drives are socialized through the superego.)
• 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.
•
 • Travels on the Continent
• 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.
• The terms of employment were lucrative (an annual salary of £300 plus traveling expenses and a pension of £300
a year 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 ennui 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
économistes but are known in history as the physiocrats. There is some controversy as to the precise degree of
influence the physiocrats 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 to include Edmund Burke, Samuel Johnson, EdwardGibbon,
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.
•
 • The Wealth of Nations 1 part
• Despite its 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”—explicated 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 terms of the immediate characteristics of the stage
of history typical of Smith’s own day.
• The answer to this problem enters in Book V, in which Smith outlines the four
main stages of organization through which society is impelled, unless blocked
by wars, deficiencies of resources, or bad policies of government: the original
“rude” state of hunters; a second stage of nomadic agriculture; a third stage of
feudal, or manorial, “farming”; and a fourth and final stage of commercial
interdependence.

•
 • The Wealth of Nations –2 part
• It should be noted that each of these stages is accompanied by institutions suited to its needs. For
example, in the age of hunters, “there is scarce any property…; so there is seldom any established
magistrate or any regular administration of justice.” With the advent of flocks there emerges a more
complex form of social organization, comprising not only “formidable” armies but the central
institution of private property with its indispensable buttress of law and order as well. It is the very
essence of Smith’s thought that he recognized this institution, whose social usefulness he never
doubted, as an instrument for the protection of privilege, rather than one to be justified in terms of
natural law: “Civil government,” he wrote, “so far as it is instituted for the security of property, is in
reality instituted for the defence of the rich against the poor, or of those who have some property
against those who have none at all.” Finally, Smith describes the evolution through feudalism into a
stage of society requiring new institutions, such as market-determined rather than guild-determined 
wages and free rather than government-constrained enterprise. This later became known as 
laissez-faire capitalism; Smith called it the system of perfect liberty.
• There is an obvious resemblance between this succession of changes in the material basis of
production, each bringing its requisite alterations in the superstructure of laws and civil
institutions, and the Marxian conception of history. Though the resemblance is indeed
remarkable, there is also a crucial difference: in the Marxian scheme the engine of
evolution is ultimately the struggle between contending classes, whereas in Smith’s
philosophical history the primal moving agency is “human nature” driven by the desire for
self-betterment and guided (or misguided) by the faculties of reason.
•
 • Economic growth -1 part
•
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 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.
 • Economic growth –2 part
• Here then was a “machine” for growth—a machine that operated with all the reliability of the
Newtonian system with which Smith was quite familiar. Unlike the Newtonian system,
however, Smith’s growth machine did not depend for its operation on the laws of nature
alone. Human nature drove it, and human nature was a complex rather than a simple force.
Thus, the wealth of nations would grow only if individuals, through their governments, did
not inhibit this growth by catering to the pleas for special privilege that would prevent the
competitive system from exerting its benign effect. Consequently, much of The Wealth of
Nations, especially Book IV, is a polemic against the restrictive measures of the “mercantile
system” that favoured monopolies at home and abroad. Smith’s system of “natural liberty,”
he is careful to point out, accords with the best interests of all but will not be put into
practice if government is entrusted to, or heeds, “the mean rapacity, the monopolizing spirit
of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind.”
•
• The Wealth of Nations is therefore far from the ideological tract it is often assumed to be.
Although Smith preached 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
maneuvers 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.
•
•
 • Economic growth -3 part
• In all of this, it is notable that Smith was writing in an age of preindustrial capitalism. He
seems to have had no real presentiment 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 in the treatise are glimpses of a
secularly declining rate of profit; and Smith mentions as well as 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. The year following its publication he was appointed
commissioner both of customs and of 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 the 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.
•
 • It was general information about autobiography of Adam Smith and his
big contributions to the economy
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