Adam Smith - Economist
Adam Smith Biography
Adam Smith, the world's most famous economist, indeed the father of modern economics, was born in 1723 in the small town of Kirkcaldy, just north of Edinburgh, Scotland.
His father died before he was born, and Adam Smith was reared by his mother, retaining a life-long loyalty and devotion to her. He never married and spent most of his life living with and caring for his mother, who lived to be ninety.
At 14, Adam Smith left for Glasgow University on scholarship and later studied at Oxford as well. He came away from Oxford with a contempt for English schools and teachers, and made his career in Glasgow, first as chair of logic and then chair of moral philosophy.
Though shy and retiring, Smith was an excellent lecturer, when enthused by his topic, and beloved by his students. In 1759, he published the first of his only two books, The Theory of Moral Sentiments, dealing with man's benevolence towards man. Smith always believed that man's self-interest with not in conflict with his urge to help others and that this sympathy between fellows was a fundamental part of human nature.
In 1764, Smith left off teaching to accept a position as tutor to a duke's son and spent several years on the continent, particularly France, meeting many of the most well-known French thinkers of the day. Upon his return, he retired to Kirkcaldy and spent 10 years in study and writing.
His most famous work, still the standard work in the classical school of economics, An Inquiry into the Nature and Causes of the Wealth of Nations, was published in 1776, the year of American independence and, indeed, one of the themes of that work was Smith's argument for the economic necessity of Britain to give up her colonies.
In 1778, Smith moved to Edinburgh to take a position as commissioner of customs, a job he held until his death in 1790. He is buried in Canongate churchyard.
This absent-minded, reserved and quiet Scotsman left a legacy that shaped the world, particularly America, leaving an enduring mark on our thought, economy and politics, that remains strong and vital to this day.
Wealth of Nations Brief Summary
Adam Smith is famous for his theory that nations attain wealth and function best where individuals are completely free to use their skills and capital (money, land, etc.) in their own self-interest and at their own discretion.
Smith taught that prices and wages will automatically reach optimal levels (guided by an "invisible hand") when such freedom is allowed. For instance, jobs that require special training will result in fewer people making that investment and, therefore, eventual higher wages. This explains why doctors make more than bus drivers. He also taught that odious or unpleasant jobs would result in higher wages (garbagemen versus retail clerks, for example).
When new products are invented, prices will initially be high until others see the profit potential and enter the field - then prices will go down. We see this today with electronics. Smith was very much opposed to the falsely high pricing produced by monopolies.
Adam Smith spoke for democracy with his idea that self-interest, practiced by all classes of people, works to the benefit of society as a whole. Each person ought to be free to pursue their ambitions, and such freedom will benefit everyone with new markets, better products, and opportunities for greater wealth all around.
Smith felt the role of government should be to protect contracts under the law, grant patents and copyrights as incentives for invention, and provide public works such as roads that would benefit everyone.
He also strongly illustrated (through his analogy of "pin" manufacture) the benefits of division of labor in production, a guiding principle of the industrial revolution.
In short, most of the ideas we hold today about how our economy does or should work stem from Adam Smith's The Wealth of Nations. America was built on these principles and many Americans, both economists and citizens, still believe that Adam Smith's economic theory is the most accurate view of how the world actually works when government interference is disallowed.
Adam Smith Quotes
"Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
"Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men."
"A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate."
"The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals."
"It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs."
For classroom help in understanding Adam Smith's works, you might get the Essential Adam Smith, an abridged version of his work, or On Adam Smith, a book explaining Smith's theories in an easy to understand way.