– Adam Smith Essay, Research Paper
Often called the founder of modern economics, Adam Smith, born in Kirkcaldy, Scotland, June 5, 1723, was a wide-ranging social philosopher and economist whose masterwork, “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776), is one of the most influential studies of Western civilization.
Smith’s intellectual interests were extensive. He wrote an important philosophical treatise, “The Theory of Moral Sentiments (1759),” and was well versed in science and history. He studied at Glasgow and Oxford universities, lectured at the University of Edinburgh, and in 1751, became a professor at Glasgow University. In 1764, he made a grand tour of the Continent as tutor to the young duke of Buccleuch.
Wealth of Nations Thesis
Smith’s major thesis in the Wealth of Nations was that, except for limited functions (defense, justice, certain public works), the state refrained from interfering with the economic life of a nation. Smith did not view favorably the motives of
merchants and businessmen. “People of the same trade,” he wrote, “seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some
contrivance to raise prices.” He suggested, however, that businessmen seeking their own interest are led “as if by an invisible hand” to promote the well-being of society.
Smith’s Analysis of Economic Systems
This position is supported in the Wealth of Nations by an elaborate analysis of how economic systems function and develop over time. Smith sought to show how competition in the market- place would lead businessmen to supply the goods consumers want, to produce these goods efficiently, and to charge only what they are worth. He saw monopoly, whether private or state-imposed, as the evil to be combated, and competition as promoting the best interests of society. He further argued that economic growth, which depends upon capital accumulation and an increased division of labor, would be promoted best by private rather than public efforts. People would save and invest for the future because of the inherent desire of individuals to better their own condition. Finally, he sharply criticized the mercantilist writers of his day, who advocated state intervention in international trade to achieve an inflow of foreign treasure. Mercantilist thinking was based on the assumption that the volume of trade was limited and that countries could expand their trade only at the expense of others. Smith claimed, perhaps somewhat unfairly, that
mercantilism confused money and wealth, ignoring the fact that the only real purpose of money is to purchase goods. He
maintained that “free trade” increased the wealth of nations while restrictions on trade diminished wealth.
Virtues of Enlightenment
Counter to the popular impression that Smith was a champion of selfishness and greed, Smith hoped to promote the welfare of society as a whole, and that he wrote the Wealth of Nations to warn of the dangers to the common good posed by organized mercantile interests. Contrary to those who believe that the naked pursuit of self-interest always leads to socially beneficial results, Smith maintained that government must intervene to counter act its negative effects. Smith’s analysis went beyond economics to embrace a larger “civilizing project” designed to create a more decent society. The freedom made possible by a commercial society, Smith thought, would only be desirable when coupled with supporting institutions, including the law, family, and religion, which fostered the virtues of self-control and altruism that people need to manage their new liberty. He also explained how human passions could be harnessed to that goal. In doing so, he laid the ground for much of modern social science, as he explored the unanticipated consequences of social action, the social formation of conscience, and the linkages between social, political, and economic institutions. By balancing a healthy respect for self-interest with awareness of the deeper satisfactions that arise from acting fairly and benevolently, Smith forged a middle path between those who regard self-interest as inherently immoral and those who view it as the
ultimate in human motivation. Today, as lawmakers, journalists, scholars, and citizens continue to struggle with questions about the role of the market, the state, and other institutions, Adam Smith remains a timely and indispensable guide to the modern dilemma.
The Myth of Adam Smith
Although Adam Smith is often thought of today as an economist, he was in fact (as his great contemporaries Hume, Burke, Kant, and Hegel recognized) an original and insightful thinker whose work covers an immense territory including moral philosophy, political economy, rhetorical theory, aesthetics, and jurisprudence. He laid the foundation for the capitalist, free market economy, and is one of the founders of modern day economics. Though his theories were formed more than two hundred years ago, they shape much of today’s economic and political debate, especially current arguments regarding free trade.
The Myth of Adam Smith will be of interest to historians of economic thought, philosophers of science, and scholars, and students interested in political economy, economic theory, and economic methodology. To this day, Adam Smith remains one of the most lucid thinkers on capitalism, despite that fact that he is permanently underestimated in the faces of many of his fellow economists.
LIST OF REFERENCES
McConnell, Campbell and Brue, Stanley. Microeconomics. New York: Irwin McGraw-Hill, 1999
Griswold, Charles L. Jr. Adam Smith and the Virtues of Enlightenment. London: Cambridge University Press, 1998
Muller, Jerry Z. Adam Smith in His Time and Ours: Designing the Decent Society. New Jersey: Princeton University Press, 1995
Rashid, Salim. The Myth of Adam Smith. United Kingdom: Edward Elgar Publishers, 1998
Ross, Ian Simpson. The Life of Adam Smith. United Kingdom: Clarendon Press, 1996
Smith, Adam. Wealth of Nations. United Kingdom: Prometheus Books, 1991