Adam Smith

• 1. Introduction

  ›

  Adam Smith took Charles Townshend on a tour of a tanning factory, and while discussing free trade, he walked straight into a huge tanning pit. Others had to help him climb back out. This was a man who once put bread and butter into a teapot, drank the result, and declared it the worst cup of tea he had ever had. He talked to himself, smiled at invisible companions, and once wandered 15 miles outside town in his nightgown before church bells brought him back to reality. Yet this absent-minded Scotsman would be called the father of economics and the father of capitalism. How does a thinker so lost in his own head produce two works that still shape how nations organise their markets. Why did he believe a butcher who never intends to help you nonetheless puts dinner on your table. And why, on his deathbed in Edinburgh, did he say he was disappointed he had not achieved more.

• 2. A Widow's Son

  ›

  Adam Smith was born in Kirkcaldy, in Fife, Scotland, two months after his father had already died. His father, Adam Smith senior, had been a Writer to the Signet, an advocate and prosecutor, and comptroller of the customs in Kirkcaldy. His mother, born Margaret Douglas, was the daughter of Robert Douglas of Strathendry and had married Smith's father in 1720. The date of his baptism into the Church of Scotland at Kirkcaldy was the 5th of June 1723, often treated as his birthday, though his actual date of birth is unknown. The Scottish journalist John Rae, who wrote a biography of Smith, recorded a strange episode from his early childhood. At the age of three, Smith was abducted by Romani and released only when others went to rescue him. He stayed close to his mother throughout his life, and she probably encouraged his scholarly ambitions. From 1729 to 1737 he attended the Burgh School of Kirkcaldy, which Rae called one of the best secondary schools of Scotland at that period. There he learned Latin, mathematics, history and writing, the groundwork for a life spent reading.

• 3. Oxford's Empty Lectern

  ›

  At the University of Glasgow, which Smith entered at age 14, he studied moral philosophy under Francis Hutcheson and discovered a passion for reason, civilian liberties and freedom of speech. Hutcheson argued that workers deserved compensation enough to sustain themselves and their families, an idea Smith later grew into a theory of natural wage levels. In 1740 Smith was the graduate scholar sent to Balliol College at the University of Oxford under the Snell Exhibition, scholarships established by John Snell. Oxford disappointed him deeply, and he found the place intellectually stifling. He later wrote that in the University of Oxford the greater part of the public professors had given up even the pretence of teaching. Oxford officials once caught Smith reading David Hume's A Treatise of Human Nature, confiscated the book, and punished him severely. He turned instead to the shelves of the large Bodleian Library and taught himself several subjects. Near the end of his time there he began suffering shaking fits, probably symptoms of a nervous breakdown, and he left Oxford in 1746 before his scholarship ended. He later blamed the rich endowments of Oxford and Cambridge colleges, which made professors' incomes independent of whether students showed up at all.

• 4. The Happiest Years

  ›

  In 1748, at the University of Edinburgh, Smith began delivering public lectures sponsored by the Philosophical Society of Edinburgh under the patronage of Lord Kames. He spoke on rhetoric and belles-lettres, and later on the progress of opulence, where he first set out his obvious and simple system of natural liberty. Smith was not adept at public speaking, yet his lectures met with success. In 1750 he met the philosopher David Hume, who was his senior by more than a decade, and the two formed bonds closer than either shared with anyone else in the Scottish Enlightenment. Smith earned a professorship at Glasgow teaching logic in 1751, and the following year took over the chair of Moral Philosophy when it fell vacant. He worked there as an academic for 13 years, a stretch he called by far the most useful and therefore by far the happiest and most honourable period of his life. Following the publication of his moral theory, wealthy students left schools in other countries to enrol at Glasgow and study under him. In 1762 the University of Glasgow conferred on him the title of Doctor of Laws. His teaching shifted toward jurisprudence and economics, and he argued that national wealth grew from labour, not from a nation's stock of gold or silver.

• 5. The Grand Tour

  ›

  At the end of 1763 came an offer Smith could not refuse from Charles Townshend, the chancellor of the exchequer, who had been introduced to him by David Hume. Townshend wanted Smith to tutor his stepson, Henry Scott, the young Duke of Buccleuch, as preparation for international politics. Smith resigned his professorship in 1764 and tried to return the fees he had collected, since he was leaving partway through the term, but his students refused to take the money. The post paid £300 per year plus expenses, along with a £300-per-year pension, roughly twice his former teaching income. Smith first travelled with Scott to Toulouse, France, where he stayed a year and a half and found the place so boring that he wrote to Hume he had begun a book to pass the time. The group toured the south of France, then moved to Geneva, where Smith met the French writer and philosopher Voltaire. In Paris he met the American publisher and diplomat Benjamin Franklin, who would later lead colonial opposition to the four British resolutions known as the Townshend Acts. Smith also encountered the Physiocracy school founded by Francois Quesnay, whose motto was Laissez faire et laissez passer, le monde va de lui meme. He was so impressed by Quesnay that he might have dedicated his great work to him had Quesnay not died first. The tour ended in 1766 when Henry Scott's younger brother died in Paris.

• 6. Sympathy And Self-Interest

  ›

  In 1759 Smith published his first work, The Theory of Moral Sentiments, sold by Andrew Millar of London and Alexander Kincaid of Edinburgh. He kept revising it until his death, and is believed to have considered it superior to his more famous book. The work asks how people form moral judgements when they begin life with no moral sentiments at all. Smith's answer was sympathy, the way observing others and seeing how they judge us makes us aware of ourselves. He defined mutual sympathy as the basis of moral sentiments, a term modern readers would call empathy. Smith built his account not on a special moral sense, as Shaftesbury and Hutcheson had, nor on utility as Hume did, but on this mutual sympathy. Scholars once saw a conflict between the sympathy of his first book and the self-interest of his second, a puzzle called the Adam Smith Problem. Modern scholarship largely sets that contradiction aside and reads the two works as a unified system. In one Smith laid the foundation of his vision of humanity, and in the other he elaborated the virtue of prudence in the private economy. He planned a third book on the virtue of justice. As Robert Ekelund and Hebert put it, in the first work sympathy holds self-interest in check, while in the second competition does the restraining.

• 7. The Invisible Hand

  ›

  An Inquiry into the Nature and Causes of the Wealth of Nations appeared in 1776 and sold out its first edition in only six months. In it Smith refused to explain the distribution of wealth and power by divine will, appealing instead to natural, political, social, economic, legal, environmental and technological factors. He argued against mercantilism, the policy of protecting national markets by reducing imports and increasing exports. His most quoted line holds that it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. The famous phrase the invisible hand appears only once in the book, in Book IV, Chapter II, describing how a person seeking his own gain is led to promote an end that was no part of his intention. Smith was no naive cheerleader for business. He warned again and again of the collusive nature of business interests, which form cabals or monopolies to fix the highest price that can be squeezed out of buyers. Any new law proposed by merchants, he wrote, ought to be examined with the most suspicious attention. His four maxims of taxation were equality, certainty, convenience, and economy in collection, and he held that the rich should contribute something more than in mere proportion to their revenue. Government, he wrote, was duty-bound to provide public education, transportation, national defence, a justice system, and public infrastructure to support commerce.

• 8. The Reluctant Mascot

  ›

  Smith died in the northern wing of Panmure House in Edinburgh on the 17th of July 1790, after a painful illness, and was buried in the Canongate Kirkyard. He had nearly all his manuscripts destroyed before his death, leaving instructions to his literary executors, the chemist Joseph Black and the geologist James Hutton, to burn anything not fit for publication. His unpublished History of Astronomy appeared in 1795 in Essays on Philosophical Subjects. He never married, lived with his mother until her death in 1784, and rarely sat for portraits, so most images of him were drawn from memory. He once said, I am a beau in nothing but my books. In the centuries since, free-market advocates have claimed him as their founder, naming the Adam Smith Institute in London and even the Adam Smith necktie after him. Yet Herbert Stein argued Smith did not wear the Adam Smith necktie, viewing government intervention with skepticism but accepting it where the net effect would be beneficial. Smith opposed empire, rejected the idea that China and India were inferior to Europe, and proposed that the 13 American colonies be given independence or full political rights. He has appeared on banknotes from the Clydesdale Bank since 1981 and on the Bank of England's £20 notes since March 2007, making him the first Scotsman to feature on an English banknote. To mark the 300th anniversary of his birth, five paving stones bearing his words were unveiled in December 2023 on High Street in Glasgow.