Adam Smith (1723-1790)

PROF. MANAS CHAKRABORTHY

Born5 June 1723  OSKIRKCADY, FIFE, Scotland

Died 17 July 1790 (aged 67)EDINBURGH, Scotland

Nationality Scottish

Notable work(s) The Wealth of Nations

Region Western philosophy

School Classical economics

Main interestsPOLITICAL PHILOSOPHY, ETHICS, ECONOMICS

Notable ideas

Classical economicsmodern free market, division of labour,the "invisible hand"

• Smith entered the University of Glasgow when he was fourteen and studied moral philosophy under Francis Hutcheson.

• Here, Smith developed his passion for liberty, reason, and free speech.

• In 1740 Smith was the graduate scholar

presented to undertake postgraduate studies at Balliol College, Oxford, under the Snell Exhibition.

Formal education

Teaching career• Smith began delivering public lectures in 1748

in University of Edinburgh, sponsored by the Philosophical Society of Edinburgh under the patronage of Lord Kames. 

• His lecture topics included rhetoric and belles-lettres, and later the subject of "the progress of opulence".

• On this latter topic he first expounded his economic philosophy of "the obvious and simple system of natural liberty".

• In 1751, Smith earned a professorship at Glasgow University teaching logic courses, and in 1752 Smith was elected a member of the Philosophical Society of Edinburgh, having been introduced to the society by Lord Kames.

Conti….

• Following the publication of The Theory of Moral Sentiments, Smith became so popular that many wealthy students left their schools in other countries to enroll at Glasgow to learn under Smith. 

• After the publication of The Theory of Moral Sentiments, Smith began to give more attention to jurisprudence and economics in his lectures and less to his theories of morals.

•  For example, Smith lectured that the cause of increase in national wealth is labor, rather than the nation's quantity of gold or silver

In 1762, the University of Glasgow conferred on Smith the title of Doctor of Laws (LL.D.).

• He was member in the first political economy club

• In 1759 he published his 1st book “The Theory of Moral Sentiments”

• In 1776 he published his 2nd book “An Inquiry into the Nature and Causes of the Wealth of Nations”

Adam Smith’s major ideas:Division of Labor rises the productivity because:

• Each worker gains more dexterity by repeating the same moves again and again

• There is not any lost time in the transition from one move to another

• The breaking down of labor in basic moves helps in the invention of time saving tools

Adam Smith’s major ideas

There are two kinds of values:• value of use • value of exchange

Adam Smith’s major ideasSociety is divided into three classes• Capitalists• Landlords• Workers

Adam Smith’s Major Ideas

Income is divided into three categories.

• Profits• Annuity Land Charge• Wages

Divison of labour:• The division of labour is the specialisation of co-

operating individuals who perform specific tasks and roles.

• Also, having workers perform single or limited tasks eliminated the long training period required to train craftsmen, who were replaced with lesser paid but more productive unskilled workers.

• Historically, an increasingly complex division of labour is associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialised processes.

The wealth of nations

• The Wealth Of Nations the magnum opus of a Scottish economist and moral philospher Adam Smith.

• It was published on 9th March, 1776 during Scottish Enlightenment and Scottish Agricultural Revolution.

• It is the first book which describes what builds the nation’s wealth and now it is a classical economics.

• It touches the broad topics of economics as productivity, division of labour and free markets.

Introduction of book I

• Causes of Improvement in the productive powers of labour .

• Gives information regarding division of labour, real and nominal price of commodities, wages and commodities of labour and market.

• The division of labour has been arised from human’s propensity to barter.

Introduction of book II, III, IV, V

• The BOOK II introduces the nature, accumulation and employment of stock.

• The BOOK III introduces different progress of Opulance in different Nations.

• The BOOK IV introduces the systems of political economy.

• The BOOK V introduces about the revenue of the Sovereign or Commonwealth.

ADAM SMITH

• As a Symbol of Free Market Economics Smith has been celebrated by advocates of free market policies as the founder of free market economics, a view reflected in the naming of bodies such as the Adam smith institute in London, the adam smith society and the Australian Adam Smith club and in term such as the Adam smith necktie.

• Alen greenspan agues that, while Smith did not coin the term laissez-faire, it was left to Adam Smith to identify the more – general set of principles that bought conceptual clarity to the seeming chaos of market transactions.

• Greenspan continues that the wealth of nations was “one of the great achievements in human intellectual history “P.J.O’rourke describes smith as the “founder of free market economics”

CONTINUE…

• The wealth of nations could justify the food and drug administration, the consumer product safety commission mandatory and “discriminatory taxation to deter improper or luxurious behaviour.

• Economist David Ricardo set straight some of the misunderstandings about smith’s thoughts on free market.

• Ricardo pointed out that smith was in support of helping infant industries.

• Smith belived that the government should subsidise newly formed industry, but he did fear that when the infant industry grew into Adulhood it would be unwilling to surrender the government help.

Legacy: In economics and moral philosophy

• The Wealth of Nations was a precursor to the modern academic discipline of economics.

• In this and other works, Smith expounded how rational self –interest and competition can lead to economic prosperity.

• Smith was controversial in his own day and his general approach and writing were often satirized by Tory writers in the moralising tradition of Hogarth and Swift.

• During the industrial revolution in the late 18th century, Britain embraced free trade and Smith’s economic theory were used to spread a broadly liberal economic model around the world, characterized by open markets, and relatively barrier free domestic and international trade.

ADAM SMITH AS OF NOW

• ADAM SMITH made two epoch making event i.e he made two notable works one is THE THEORY OF MORAL SENTIMENTS in 1759 and THE WEALTH OF NATIONS in 1776.

• Smith did not inaugurate a new chapter in social philosophy and did not sow on land hitherto left uncultivated. His books were rather the consummation, summarization, and perfection of lines of thought developed by eminent authors—mostly British—over a period of more than a hundred years.

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