1Adam Smith

Carlos da Maia, PhD

Business School

UNIVERSITY OF ST. THOMAS OF MOZAMBIQUE

3L5ECONS

History of Economic Thought, September 2014

2Outline

1

Background Information

2

Smith's Masterpiece

3Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

4Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

5Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

6Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

7Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

8Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not

famous man;

David Hume (one of the most important gures in the history of Western

Philosophy) was intimate with him and Voltaire (famous for his wit, his

attacks on the established Catholic Church, and his advocacy of freedom

of religion) heard of him;

Students had travelled all the way from Russia to hear his discourse;

Of remarkable personality, absentminded; But this did not interfere with

his intelectual abilities;

Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once

described himself, proudly showing o his treasured library to a friend.

9Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship

(old Oxford, before becoming a citadel of learning);

There instruction was the exception rather than the rule;

Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading

David Hume's A Treatise of Human Nature;

In 1752 (at almost 28 years of age) he was oered the Chair of

Logic at Glasgow University and then the Chair of Moral

Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

10

Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship

(old Oxford, before becoming a citadel of learning);

There instruction was the exception rather than the rule;

Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading

David Hume's A Treatise of Human Nature;

In 1752 (at almost 28 years of age) he was oered the Chair of

Logic at Glasgow University and then the Chair of Moral

Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

11

Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship

(old Oxford, before becoming a citadel of learning);

There instruction was the exception rather than the rule;

Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading

David Hume's A Treatise of Human Nature;

In 1752 (at almost 28 years of age) he was oered the Chair of

Logic at Glasgow University and then the Chair of Moral

Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

12

Adam Smith was a famous man

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;

He was accused of:

1

sometimes smilling during religious services;

2

being friends with "that" outrageous David Hume;

3

not holding Sunday classes on Christian evidences;

4

petitioning the Senatus Academicus for permission to dispense

with prayers on the opening of class; and

5

delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

13

Adam Smith was a famous man

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;

He was accused of:

1

sometimes smilling during religious services;

2

being friends with "that" outrageous David Hume;

3

not holding Sunday classes on Christian evidences;

4

petitioning the Senatus Academicus for permission to dispense

with prayers on the opening of class; and

5

delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

14

Adam Smith was a famous man

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;

He was accused of:

1

sometimes smilling during religious services;

2

being friends with "that" outrageous David Hume;

3

not holding Sunday classes on Christian evidences;

4

petitioning the Senatus Academicus for permission to dispense

with prayers on the opening of class; and

5

delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

15

Adam Smith was a prestigious man

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;

He was beloved by his students; noted as a lecturer; he was

even immitated in the manner of speech;

Little busts of him even appeared in booksellers' windows;

His prestige came not only from his personality, but also from

publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and

dispproval)

16

Adam Smith was a prestigious man

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;

He was beloved by his students; noted as a lecturer; he was

even immitated in the manner of speech;

Little busts of him even appeared in booksellers' windows;

His prestige came not only from his personality, but also from

publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and

dispproval)

17

Adam Smith was a prestigious man

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;

He was beloved by his students; noted as a lecturer; he was

even immitated in the manner of speech;

Little busts of him even appeared in booksellers' windows;

His prestige came not only from his personality, but also from

publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and

dispproval)

18

Adam Smith gets an oer he could not refuse

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as

Chancellor of the Exchequer, who helped to precipitate the American

Revolution, rst by refusing the colonists the right to elect their own

judges and then by imposing a heavy duty on American tea);

Townsend was a sincere student of philosophy and politics, and as such a

devotee of Adam Smith;

In 1754 Townsed made a brilliand and lucrative marriage to the Countess

of Dalkeith, the widow of the Duke of Buccleuch;

Needing a tutor for the wife's soon, he invited Adam Smith (500 a year

plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from thefees that professors collected directly from their students.

In 1764 Smith left to France (his students did not accept a refund; they

said that they had already been more than recompensed)

19

Adam Smith gets an oer he could not refuse

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as

Chancellor of the Exchequer, who helped to precipitate the American

Revolution, rst by refusing the colonists the right to elect their own

judges and then by imposing a heavy duty on American tea);

Townsend was a sincere student of philosophy and politics, and as such a

devotee of Adam Smith;

In 1754 Townsed made a brilliand and lucrative marriage to the Countess

of Dalkeith, the widow of the Duke of Buccleuch;

Needing a tutor for the wife's soon, he invited Adam Smith (500 a year

plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from thefees that professors collected directly from their students.

In 1764 Smith left to France (his students did not accept a refund; they

said that they had already been more than recompensed)

20

Adam Smith gets an oer he could not refuse

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as

Chancellor of the Exchequer, who helped to precipitate the American

Revolution, rst by refusing the colonists the right to elect their own

judges and then by imposing a heavy duty on American tea);

Townsend was a sincere student of philosophy and politics, and as such a

devotee of Adam Smith;

In 1754 Townsed made a brilliand and lucrative marriage to the Countess

of Dalkeith, the widow of the Duke of Buccleuch;

Needing a tutor for the wife's soon, he invited Adam Smith (500 a year

plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from thefees that professors collected directly from their students.

In 1764 Smith left to France (his students did not accept a refund; they

said that they had already been more than recompensed)

21

Adam Smith gets an oer he could not refuse

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as

Chancellor of the Exchequer, who helped to precipitate the American

Revolution, rst by refusing the colonists the right to elect their own

judges and then by imposing a heavy duty on American tea);

Townsend was a sincere student of philosophy and politics, and as such a

devotee of Adam Smith;

In 1754 Townsed made a brilliand and lucrative marriage to the Countess

of Dalkeith, the widow of the Duke of Buccleuch;

Needing a tutor for the wife's soon, he invited Adam Smith (500 a year

plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from thefees that professors collected directly from their students.

In 1764 Smith left to France (his students did not accept a refund; they

said that they had already been more than recompensed)

22

Adam Smith gets an oer he could not refuse

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as

Chancellor of the Exchequer, who helped to precipitate the American

Revolution, rst by refusing the colonists the right to elect their own

judges and then by imposing a heavy duty on American tea);

Townsend was a sincere student of philosophy and politics, and as such a

devotee of Adam Smith;

In 1754 Townsed made a brilliand and lucrative marriage to the Countess

of Dalkeith, the widow of the Duke of Buccleuch;

Needing a tutor for the wife's soon, he invited Adam Smith (500 a year

plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from thefees that professors collected directly from their students.

In 1764 Smith left to France (his students did not accept a refund; they

said that they had already been more than recompensed)

23

Adam Smith starts working on his masterpiece

To relieve his tedium is starts working on a treatise of political economy, whcih came to

become The Wealth of Nations

During part of his stay in France he lived a boring life in the

provinces;

That pushed him to start work on a new book, his masterpiece

(which took 1 years to before it was nished).

24

Adam Smith in France

He then moves to Paris where he meets Franois Quesnay (the foremost economic thinker

in France)

Quesnay had propounded a school of economics known as

Physiocracy;

Quesnay insisted that wealth sprang from production and that

it owed through the nation, from hand to hand;

This was contrary to the ideas of the day: wealth was the solid

stu of gold and silver

Problem with Physiocracy: It insisted that only the agricultural

worker produced true wealth because Nature labored at his

side, whereas the manufacturing worker merely altered its form

in a sterile way.

It failed to see that labor could produce wealth wherever it

performed, not just on the land (seeing this was one of Adam

Smith's greatest insights).

25

Adam Smith in France

Physiocracy was fundamentally uncongenial to Smith's Scottish vision

Smith had profound admiration for Quesnay;

But he did not agree with Quesnay's denition of wealth;

26

The Wealth of Nations

His masterpiece was published in 1776. It was not a wholly original book

The book has been called "the outpouring not only of a great

mind, but of a whole epoch".Yet it is not, in the strict sense of the

word, an original book. There is a long line of observers before

Smith who have approached his understanding of the world: Locke,

Steuart, Mandeville, Petty, Cantillon, Turgot, not to mention

Quesnay and Hume again. Smith took from all of them: there are

over a hundred authors mentioned by name in his treatise. But

where others had shed here and there, Smith spread his net wide;

where others had claried this and that issue, Smith illuminated the

entire landscape. The Wealth of Nations is not a wholly original

book, but it is unquestionably a masterpiece.

27

The Wealth of Nations

Questions for further study

1

The Wealth of Nations is in no sense a textbook. Comment on this.

2

It is an exasperating book. Motivate.

3

For Smith wealth consisted of the goods that all the people of society

consume, although not, of course, in equal amounts. True or false?

4

What are Smith's laws of the market?

5

All this may seem somewhat elementary. But consider what Adam Smith

has done, with his impetus of self-interest and his regulator of

competition. First, he has explained how prices are kept from ranging

arbitrarily away from the actual cost of producing a good. Second, he has

explained how society can induce its producers of commodities to provide

it with what it wants. Third, he has pointed out why high prices are a

self-curing disease, for they cause production in those lines to increase.

And nally, he has accounted for a basic similarity of incomes at each level

of the great producing strata of the nation. In a word, he has found in

the mechanism of the market a self-regulating system for society's orderly

provisioning. Describe how Smith has explained the four points above.

28

The End

Background InformationSmith's Masterpiece