Smith, Adam (1723–90)

THE SCOTTISH POLITICAL economist and moral philosopher Adam Smith is unanimously considered the founding father of modern economics. His concepts were influential on such diverse 19th- and 20thcentury thinkers as David Ricardo, Karl Marx, Thomas Malthus, John Maynard Keynes, and Milton Friedman. His major book, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), was widely read at the time of its publication and it was translated into all the major European languages before Smith's death. This commercial success was extremely unusual for a book on economics.

In The Wealth of Nations, Smith championed economic and politic liberalism, which he considered the [Page 981]necessary basis for national economic prosperity. The Scottish economist has proved an influential authority for those policymakers who wish to limit government intervention in economic and social affairs. Such intervention is not required because the individual who tries to promote his own gain is “led by an invisible hand to promote an end which was not part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”

Although businesspeople may act selfishly, the free-market economy still benefits society as a whole. Peo-ple's intentions are therefore irrelevant, as Smith understood economics to work in a mechanical and natural way. For example, when a product shortage occurs, its price rises, increasing its margin of profit and thus encouraging others to enter production, eventually solving the shortage. Economy is a self-regulating system. This laissez-faire attitude, which Smith derived partly from the Enlightenment enthusiasm for natural science, has generated a controversy for its implications to the poor and the exploited that still continues today.

Smith was born at Kirkcaldy, Fife, in Scotland. His father was a customs inspector and died six months before Smith's birth. When he was 15, Smith entered the University of Glasgow to study moral philosophy. In 1740, he started his disappointing period of study at Balliol College, Oxford, where he remained for six years. After his return to Scotland, he started to lecture in Edinburgh, first on literary subjects and then on more economic themes.

These are the years when Smith began to develop the ideas that would later go into The Wealth of Nations. In 1751 he became professor of logic at the University of Glasgow and, the following year, he obtained the chair of moral philosophy. During this period, Smith met the philosopher David Hume and the two of them soon became close friends. In 1759, Smith published The Theory of Moral Sentiments, which, to some Smith scholars, stands in sharp contrast to The Wealth of Nations.

As Geoffrey Gilbert points out, the volume contains little-studied remarks on poverty, which “is treated not as a condition of economic deprivation but as a cause of social isolation and psychic unease.” The book also satirizes those who continuously strive for material goods and wealth. In the 1760s, Smith resigned his professorship to become the tutor to the Duke of Buccleuch, with whom he traveled extensively throughout Europe, particularly in France, where he met the most influential Enlightenment thinkers. After his return to Scotland, he spent almost 10 years writing The Wealth of Nations, which gave him popularity and allowed him to be appointed to the position of commissioner of customs. Smith died in Edinburgh in 1790.

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