Adam Smith
RUSSIAN ECONOMIC ACADEMY NAMED AFTER
G V PLEKHANOV
INTERNATIONAL BUSINESS STUDIES
ADAM SMITH
Student: Anton Skobelev
Group: 855
Moscow 1997
After two centuries, Adam Smith remains a towering figure in the history of
economic thought. Known primarily for a single work, An Inquiry into the
nature an causes of the Wealth of Nations (1776), the first comprehensive
system of political economy, Smith is more properly regarded as a social
philosopher whose economic writings constitute only the capstone to an
overarching view of political and social evolution. If his masterwork is
viewed in relation to his earlier lectures on moral philosophy and
government, as well as to allusions in The Theory of Moral Sentiments
(1759) to a work he hoped to write on “the general principles of law and
government, and of the different revolutions they have undergone in the
different ages and periods of society”, then The Wealth of Nations may be
seen not merely as a treatise on economics but as a partial exposition of a
much larger scheme of historical evolution.
Early Life
Unfortunately, much is known about Smith’s thought than about his life.
Though the exact date of his birth is unknown, he was baptised on June 5,
1723, in Kikcaldy, a small (population 1,500) but thriving fishing village
near Edinburgh, the son by second marriage of Adam Smith, comptroller of
customs at Kikcaldy, and Margaret Douglas, daughter of a substantial
landowner. Of Smith’s childhood nothing is known other than that he
received his elementary schooling in Kirkcaldy and that at the age of four
years he was said to have been carried off by gypsies. Pursuits was
mounted, and young Adam was abandoned by his captors. “He would have made,
I fear, a poor gypsy”, commented his principal biographer.
At the age of 14, in 1737, Smith entered the university of Glasgow, already
remarkable as a centre of what was to become known as the Scottish
Enlightenment. There, he was deeply influenced by Francis Hutcheson, a
famous professor of moral philosophy from whose economic and philosophical
views he was later to diverge but whose magnetic character seems to have
been a main shaping force in Smith’s development. Graduating in 1740, Smith
won a scholarship (the Snell Exhibition) and travelled on horseback to
Oxford, where he stayed at Balliol College. Compared to the stimulating
atmosphere of Glasgow, Oxford was an educational desert. His years there
were spent largely in self-education, from which Smith obtained a firm
grasp of both classical and contemporary philosophy.
Returning to his home after an absence of six years, Smith cast about for
suitable employment. The connections of his mother’s family, together with
the support of the jurist and philosopher Lord Henry Kames, resulted in an
opportunity to give a series of public lectures in Edinburgh - a form of
education then much in vogue in the prevailing spirit of “ improvement”.
The lectures, which ranged over a wide variety of subjects from rhetoric
history and economics, made a deep impression on some of Smith’s notable
contemporaries. They also had a marked influence on Smith’s own career, for
in 1751, at the age of 27, he was appointed professor of logic at Glasgow,
from which post he transferred in 1752 to the more remunerative
professorship of moral philosophy, a subject that embraced the related
fields of natural theology, ethics, jurisprudence, and political economy.
Glasgow
Smith then entered upon a period of extraordinary creativity, combined with
a social and intellectual life that he afterward described as “ by far the
happiest, and most honourable period of my life”. During the week he
lectured daily from 7:30 to 8:30 am and again thrice weekly from 11 am to
noon, to classes of up to 90 students, aged 14 and 16. (Although his
lectures were presented in English, following the precedent of Hutcheson,
rather than in Latin, the level of sophistication for so young an audience
today strikes one as extraordinarily demanding.) Afternoons were occupied
with university affairs in which Smith played an active role, being elected
dean of faculty in 1758; his evenings were spent in the stimulating company
of Glasgow society.
Among his circle of acquaintances were not only remembers of the
aristocracy, many connected with the government, but also a range of
intellectual and scientific figures that included Joseph Black, a pioneer
in the field of chemistry, James Watt, later of steam-engine fame, Robert
Foulis, a distinguished printer and publisher and subsequent founder of the
first British Academy of Design, and not least, the philosopher David Hume,
a lifelong friend whom Smith had met in Edinburgh. Smith was also
introduced during these years to the company of the great merchants who
were carrying on the colonial trade that had opened to Scotland following
its union with England in 1707. One of them, Andrew Cochrane, had been a
provost of Glasgow and had founded the famous Political Economy Club. From
Cochrane and his fellow merchants Smith undoubtedly acquired the detailed
information concerning trade and business that was to give such a sense of
the real world to The Wealth of Nations.
The Theory of Moral Sentiments
In 1759 Smith Published his first work, The Theory of Moral Sentiments.
Didactic, exhortative, and analytic by turns, The Theory lays the
psychological foundation on which The Wealth of Nations was later to be
built. In it Smith described the principles of “human nature “, which,
together with Hume and the other leading philosophers of his time, he took
as a universal and unchanging datum from which social institutions, as well
as social behaviour, could be deduced.
One question in particular interested Smith in The Theory of Moral
Sentiments. This was a problem that had attracted Smith’s teacher Hutcheson
and a number of Scottish philosophers before him. The question was the
source of the ability to form moral judgements, including judgements on
one’s own behaviour, in the face of the seemingly overriding passions for
self-preservation and self-interest. Smith’s answer, at considerable
length, is the presence within each of us of an “inner man” who plays the
role of the “impartial spectator”, approving or condemning our own and
others’ actions with a voice impossible to disregard. (The theory may sound
less naive if the question is reformulated to ask how instinctual drives
are socialized through the superego.)
The thesis of the impartial spectator, however, conceals a more important
aspect of the book. Smith saw humans as created by their ability to reason
and - no less important - by their capacity for sympathy. This duality
serves both to pit individuals against one another and to provide them with
the rational and moral faculties to create institutions by which the
internecine struggle can be mitigated and even turned to the common good.
He wrote in his Moral Sentiments the famous observation that he was to
repeat later in The Wealth of Nations: that self-seeking men are often “led
by an invisible hand... without knowing it , without intending it, to
advance the interest of the society.”
It should be noted that scholars have long debated whether Moral Sentiments
complemented or was in conflict with The Wealth of Nations, which followed
it. At one level there is a seeming clash between the theme of social
morality contained in the first and largely amoral explanation of the
manner in which individuals are socialized to become the market-oriented
and class-bound actors that set the economic system into motion.
Travels on the Continent
The Theory quickly brought Smith wide esteem and in particular attracted
the attention of Charles Townshend, himself something of an amateur
economist, a considerable wit, and somewhat less of a statesman, whose fate
it was to be the chancellor of the exchequer responsible for the measures
of taxation that ultimately provoked the American Revolution. Townshend had
recently married and was searching for a tutor for his stepson and ward,
the young Duke of Buccleuch. Influenced by the strong recommendations of
Hume and his own admiration for The Theory of Moral Sentiments, he
Approached Smith to take the Charge.
The terms of employment were lucrative (an annual salary of Ј300 plus
travelling expenses and a pension of Ј300 a year after), considerably more
than Smith had earned as a professor. Accordingly, Smith resigned his
Glasgow post in 1763 and set off for France the next year as the tutor of
the young duke. They stayed mainly in Toulouse, where Smith began working
on a book (eventually to be The Wealth of Nations) as an antidote to the
excruciating boredom of the provinces. After 18 months of ennui he was
rewarded with a two-month sojourn in Geneva, where he met Voltaire, for
whom he had the profoundest respect, thence to Paris where Hume, then
secretary to the British embassy, introduced Smith to the great literary
salons of the French Enlightenment. There he met a group of social
reformers and theorists headed by Francois Quesnay, who are known in
history as the physiocrats. There is some controversy as to the precise
degree of influence the physiocrats exerted on Smith, but it is known that
he thought sufficiently well of Quesnay to have considered dedicating The
Wealth of Nations to him, had not the French economist died before
publication.
The stay in Paris was cut short by a shocking event. The younger brother of
the Duke of Buccleuch , who had joined them in Toulouse, took ill and
perished despite Smith’s frantic ministration. Smith and his charge
immediately returned to London. Smith worked in London until the spring of
1767 with Lord Townshend, a period during which he was elected a fellow of
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