Adam Smith

Adam Smith was a Scottish moral philosopher and a leading figure of the Scottish Enlightenment, best known as the author of An Inquiry into the Nature and Causes of the Wealth of Nations (1776), often regarded as the founding work of modern economics. He argued that the wealth of a nation lies in the productive labour of its people, that the division of labour is the great source of rising productivity, and that markets, by channelling self-interest, usually serve society better than the controls of governments. His earlier Theory of Moral Sentiments (1759) offered an influential account of how sympathy shapes our moral judgements.

Smith was born in Kirkcaldy, a small port in Fife on the east coast of Scotland, and was baptised there on 5 June 1723 in the Old Style calendar; his exact date of birth is unknown. His father, a customs official and lawyer, died about two months before he was born, and he was brought up by his mother, Margaret Douglas, to whom he remained devoted all his life. After attending the burgh school of Kirkcaldy, he went to the University of Glasgow at about fourteen. There he studied under Francis Hutcheson, a moral philosopher who taught that humans possess a natural moral sense and benevolence, and whose lectures left a lasting mark on him.

In 1740 Smith won a scholarship to Balliol College, Oxford, where he spent six years. He thought the teaching there poor, complaining later that most professors had given up even the pretence of teaching, and educated himself in the college library. He returned to Scotland in 1746.

From 1748 Smith gave successful public lectures on rhetoric, literature and jurisprudence in Edinburgh. In 1751 he was appointed professor of logic at Glasgow and in 1752 moved to the chair of moral philosophy, which Hutcheson had held. About this time he became the closest friend of David Hume, whose ideas about sympathy, morals and economics he developed in his own direction.

The Theory of Moral Sentiments (1759) made his reputation. Smith argued that morality grows out of sympathy, our capacity to imagine ourselves in another person's situation and share in their feelings. We approve of others' conduct when we can enter into their motives, and we learn to judge ourselves by imagining how an impartial spectator would see us. Over time this imagined spectator becomes conscience, the "man within the breast". The book stressed that people are not purely selfish: even the most selfish take an interest in the fortunes of others. Smith revised it repeatedly, making substantial additions in its sixth edition shortly before his death.

In 1764 Smith resigned his professorship to become tutor to the young Duke of Buccleuch, a post that paid far better and came with a pension for life. He accompanied the duke to France for more than two years, spending eighteen months in Toulouse, visiting Geneva, where he met Voltaire, and staying in Paris. There he met the Physiocrats, the French economists led by François Quesnay, who held that land was the true source of wealth and called for free trade in grain, as well as the reforming administrator Anne-Robert-Jacques Turgot. Smith admired Quesnay, but rejected the idea that only agriculture produces value.

Back in Kirkcaldy from 1766, Smith spent most of the next decade on his great work, published in London on 9 March 1776. The Wealth of Nations opens with a description of a pin factory, in which ten workers, each performing a few specialised operations, could make tens of thousands of pins a day, while a single untrained worker might struggle to make one. Such division of labour, Smith argued, is the main source of growing productivity, and it is limited by the extent of the market.

Exchange, in his account, rests on self-interest: we expect our dinner not from the benevolence of the butcher, brewer or baker, but from their regard for their own interest. In a competitive market, individuals pursuing their own gain are led, as if by an "invisible hand", to promote the general good, though this was not their intention. The phrase appears only once in the book and was much less central to Smith than it later became to his admirers. Prices tend towards a natural level set by the costs of labour, capital and land.

Much of the book is an attack on what Smith called the mercantile system: the tariffs, monopolies, colonial trade restrictions and bounties by which governments tried to accumulate gold and silver and favour particular merchants and manufacturers. He warned that businessmen rarely meet together without the conversation ending in a conspiracy against the public. Yet Smith was no simple advocate of doing nothing. He believed that the state had important duties: defence, the administration of justice, and public works and institutions, including education for the poor, since he feared that endlessly repetitive factory work would leave labourers ignorant and dulled. He also criticised slavery as both unjust and economically inefficient. Writing as the American Revolution began, he argued that Britain's colonies cost more than they were worth and that the empire should be either reformed or given up.

In 1778 Smith was appointed a commissioner of customs for Scotland, a well-paid post, and moved to Panmure House in Edinburgh, where he lived with his mother until her death in 1784. He was a founding fellow of the Royal Society of Edinburgh in 1783 and was elected rector of the University of Glasgow in 1787. He continued to revise both of his books but did not complete planned works on jurisprudence and the history of the arts and sciences. Shortly before his death on 17 July 1790, he had his friends burn most of his unpublished manuscripts. He is buried in the Canongate Kirkyard in Edinburgh.

The Wealth of Nations became the foundation of classical economics. Thomas Malthus, David Ricardo and John Stuart Mill built on it, and Karl Marx took up and transformed its labour theory of value. British politicians from William Pitt the Younger onwards cited it in support of freer trade, and its arguments helped shape the policies of nineteenth-century Britain in the age of the Industrial Revolution. In the twentieth century Smith became a symbol of free-market economics, sometimes in ways that ignored his concern for the poor and his suspicion of merchants. Philosophers have also returned to the Theory of Moral Sentiments as a major work of ethics in its own right. Smith remains a central figure of the Enlightenment and of the intellectual history of the United Kingdom, and his portrait has appeared on Bank of England banknotes.