Adam Smith

1723–1790. Scottish moral philosopher and political economist. Known today mainly for his treatise on the economy, The Wealth of Nations (1776), which promoted economic liberalism (leaving everything to the "invisible hand" and not interfering by means of laws).

Biography

Adam Smith was born/baptised in Kirkcaldy, Scotland on 16 June 1723. He matriculated to study at the University of Glasgow in 1737 at the early (for that time not unusual) age of fourteen. He studied logic, metaphysics, maths as well as Newtonian physics and moral philosophy under some of the leading scholars of his time. In 1740 Smith was awarded a scholarship to study at Balliol College, Oxford. Between 1748 and 1751 he lectured at Edinburgh University (rhetoric, writing and 'progress of opulence'). Smith returned to Glasgow University as Professor of Logic in 1751 and a year later as Professor of Moral Philosophy, a post he held until he left academia in 1764. Smith left academia in order to accompany the young Henry Scott, 3rd Duke of Buccleuch and stepson to Charles Townshend, as a tutor on his Grand Tour through Europe (1764-1766). This was not only a post that would secure Smith an annual pension of 300 Pounds Sterling but in addition to that Smith would meet many personalities that would influence his works profoundly such as national economist Anne Robert Jacques Turgot, François Quesnay, Voltaire and David Hume. Smith's most famous works are the Theory of Moral Sentiments, which appeared in 1759 and drew on his lectures, and The Wealth of Nations, which was published in 1776. He moved to Edinburgh when he was appointed commissioner of customs in Scotland in 1778. From 1787 to 1789 he occupied the honorary position of Lord Rector of the University of Glasgow. Adam Smith died in Edinburgh on 17 July 1790 due to a painful illness and was buried in the Canongate Kirkyard. On his death bed he expressed personal disappointment that he had not achieved more.

Key Arguments and Theories

Generally it should be noted that Adam Smith is one of the key figures of the Scottish Enlightenment (as well as for example Robert Burns (1759-1796) poet, David Hume (1711-1776) philosopher and historian and James Watt (1736-1819) "inventor", or rather improver, of the steam engine) and that he is widely cited as the father of modern economics and capitalism.

Theory of Moral Sentiments (1759)

The Wealth of Nations is generally regarded as Smith's main and most influential work, Smith himself however is said to have considered The Theory of Moral Sentiments a superior and more important work. In this theory he critically examines the moral thinking of his times and he argues that conscience or moral sentiment arises from social relationships. Thus the source of mankind's ability to form moral judgements, in spite of a natural inclination towards self-interest and self-protection, is the human relationships within a society. It is a theory of human sympathy, in which the act of observing others causes empathy and makes people aware of themselves, of others in their environment and hence of the morality of their own behavior with regard to others.

Some scholars argue that there is a conflict between the Theory of Moral Sentiments and The Wealth of Nations, because the former focuses on the concept of sympathy for others, while the latter focuses on the concept of self-interest. However, most recent scholars of Smith's works argue that there is no such paradox with regard to Smith's overall philosophy. Simply the Theory of Moral Sentiments is a theory of psychology and sociology, in which individuals seek the approval and empathy of the people around them, whereas The Wealth of Nations is emphasizing a different aspect (namely modern economics) from a different point of view.

Smith explains the natural human sociability by linking society to a mirror. The response of others, their approval or their disapproval, causes pleasure or pain to the individual. Smith claims furthermore, that this is the reason, why the rich show off their wealth and the poor hide their poverty. The rich value their wealth for the esteem it brings and the desire for esteem or so to say the better status is what drives people to better their condition or so to say their "self-interest". This is one of the connections between the Theory of Moral Sentiments and The Wealth of Nations. In many ways the moral interactions Smith describes in the former form the groundwork for the practices that characterise the economic society in the later. The complexity of that society in part derives from the fact that the bulk of inter-social relations were with strangers.

The Wealth of Nations (1776)

This "society of strangers" is the commercial society that Smith focuses on in The Wealth of Nations. In this work Smith basically claims that when an individual pursues his self-interest, he indirectly promotes the good of the whole society. Self-interest and competition in the free market, he argues, benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services. Note that it is also to be understood that the "wealth" Smith talks about does also mean the well-being of the people and thus it not only means their material prosperity but also their moral welfare. Accordingly he puts forward, that to be in poverty also means to be in a miserable condition and commerce means an improvement of human life.

The Invisible Hand

Adam Smith uses the metaphor of the "invisible hand" in Book IV, chapter II, paragraph IX of The Wealth of Nations. Here Smith more or less argues that a preference of "domestic" industry over "foreign" industry in order to gain individual profit constitutes an "invisible" hand, which supports the interests of the nation at large and at the same time it enriches the individual. The individual may have a self-interested motive for using domestic industry (it is cheaper etc.) but nevertheless, the use of domestic industry and labor promotes the interests of the nation.

The Division of Labour

Division of labour is the specialization in specific, circumscribed tasks. The production process is broken down into a sequence of stages and workers are assigned to particular stages. Thus a certain process of alienation, as Karl Marx puts it, is associated with the division of labour. The breaking down of a pruduction process of a product leads to the fact that the individual worker only gets to participate in one stage of the entire process. Thus he never gets to really accomplish a final goal and he never gets to appreciate a final product. Therefore the worker becomes alienated with the product and gets depressed or unstisfied due to endless repetition of one and the same stage without ever enjoying the result of his work.

In addition to Marx's alienation, the division of labour makes trade necessary and is the source of economic interdependence. It is also closely associated with the growth of total output, the rise of capitalism and the complexity of industrialization processes.

Sources

Haakonssen, Knud. The Cambridge Companion to Adam Smith. Cambridge:CUP, 2006.

http://www.universitystory.gla.ac.uk/biography/?id=WH0016&type=P

http://www.gla.ac.uk/about/history/fame/adamsmith/

http://en.wikipedia.org/wiki/Adam_Smith

http://www.biografiasyvidas.com/monografia/smith/