Adam Smith

1723–1790

In 1776, Adam Smith, published a book called The Wealth of Nations that fundamentally changed how people thought about money, trade, and government. Although his ideas took several generations to become fully developed, the principles put forth in that book gave rise to the science of economics, and the principles of modern capitalism. The fact that modern society exists today in a "global economy", dominated by the international imperative of "free-trade" is largely the result of the ideas put forth by a Moral Philosopher from Scotland over 200 years ago.

ADAM SMITH

Much of Adam Smith's famous book is not composed of what we now think of as economic theory but is instead filled with reflections about human nature. His previous writings were primarily about charity and ethics, but in The Wealth of Nations he set forth some revolutionary ideas about how to increase the overall wealth and productivity of a nation. One of his ideas was that specialization could dramatically increase productivity. Another was that there was a "law of supply and demand" that determined the prices of things, and that when a government tried to set prices, or tax certain activities, it often had serious unintended consequences. He proposed that if instead of trying to control, or interfere with trade, government just allowed businesses and consumers to each follow their own interests, the best possible use of resources would be achieved.

These are the main ideas behind free trade and capitalism. In Smith's lifetime, virtually all governments, including the United States, tried to increase exports, and but used tariffs to restrict imports and to raise money for government. The tariffs, or taxes on imports, were usually set at a high enough rate to protect local producers from foreign competition. Adam Smith pointed out many problems with the tariff system, some of which were smuggling, corruption, and inefficiency. He thought nations should make treaties between each other that guaranteed low tariffs, and that in this manner the trade between nations would increase, and everyone would become wealthier. This was a completely radical idea at the time, and took several generations to sink in.

By the hey-day of the British Empire, Smith's ideas had fully taken hold, and were embraced by both political parties. They were raised to the level of a religion by financiers, bankers, and political-economists of the day. Like all worthy principles, his ideas were embraced by scoundrels as well as men of sincere conviction, and used to justify some of the worst excesses of the Industrial Revolution.

Key events during the life of Adam Smith:

Year	Event
1723	Adam Smith born in Scotland.
1738	Attended the University of Glasgow; studied Moral philosophy.
1740	Studied at Oxford—returned to Glasgow after 6 years.
1752	Appointed Chair of Moral Philosophy at Glasgow.
1759	Published The Theory of Moral Sentiments.
1776	Published An Inquiry into the Causes of the Wealth of Nations.

Image Links
Adam Smith  in The Hanoverians

Contemporary	Short Biography
David Hume	Philosher friend and associate of Adam Smith. Major figure of Scottish enlightenment.