Adam Smith

Infobox Philosopher
region = Western Economists
era = Classical economics
(Modern economics)
color = #B0C4DE

---

name = Adam Smith
birth = Baptised 16 June 1723
smaller| [OS: 5 June 1723]
Kirkcaldy, Fife, Scotland
death = death date and age|df=yes|1790|7|17|1723|6|16
Edinburgh, Scotland
school_tradition = Classical economics
main_interests = Political philosophy, ethics, economics
influences = Aristotle, Chydenius, Hobbes, Butler, Locke, Mandeville, Hutcheson, Hume, Quesnay
influenced = Chomsky, Comte, Hayek, Engels, Friedman, Malthus, Marx, Mill, Keynes, Montesquieu, Darwin Charles Darwin, Ricardo, US Founding Fathers
notable_ideas = Classical economics,
modern free market,
division of labour,
the "invisible hand"

Adam Smith (baptised 16 June 1723 – 17 July 1790 smaller| [OS: 5 June 1723 – 17 July 1790] ) was a Scottish moral philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of "The Theory of Moral Sentiments" and "An Inquiry into the Nature and Causes of the Wealth of Nations". The latter, usually abbreviated as "The Wealth of Nations", is considered his magnum opus and the first modern work of economics. Adam Smith is widely cited as the father of modern economics.citation | last1 = Hoaas | first1 = David J. | last2 = Madigan | first2 = Lauren J. | author1-link = David J. Hoaas | author2-link = Lauren J. Madigan |title=A citation analysis of economists in principles of economics textbooks |journal=The Social Science Journal |volume=36 | number = 3 |pages=525-532|year=1999] [ harvnb|Rae|1895|p=292.]

Smith studied moral philosophy at the University of Glasgow and Oxford University. After graduating he delivered a successful series of public lectures at Edinburgh, leading him to collaborate with David Hume during the Scottish Enlightenment. Smith obtained a professorship at Glasgow teaching moral philosophy, and during this time wrote and published "The Theory of Moral Sentiments". In his later life he took a tutoring position which allowed him to travel throughout Europe where he met other intellectual leaders of his day. Smith returned home and spent the next ten years writing "The Wealth of Nations" (mainly from his lecture notes) which was published in 1776. He died in 1790.

Biography

Early life

Adam Smith was born to Margaret Douglas at Kirkcaldy, Scotland. His father, also named Adam Smith, was a lawyer, civil servant, and widower who married Margaret Douglas in 1720. His father died six months before Smith's birth. [ harvnb|Bussing-Burks|2003|pp=38–39.] The exact date of Smith's birth is unknown; however, his baptism was recorded on 16 June 1723 at Kirkcaldy. [ harvnb|Buchan|2006|p=12.] Though few events in Smith's early childhood are known, Scottish journalist and biographer of Smith John Rae recorded that Smith was abducted by gypsies at the age of four and eventually released when others went to rescue him.Ref label|a|a|none

Smith was particularly close to his mother, and it was likely she who encouraged him to pursue his scholarly ambitions.harvnb|Bussing-Burks|2003|p=39.] Smith attended the Burgh School of Kirkcaldy from 1729 to 1737, and there studied Latin, mathematics, history, and writing. Rae characterized the Burgh School as "one of the best secondary schools of Scotland at that period".harvnb|Rae|1895|p=5.]

Formal education

Smith entered the University of Glasgow when he was fourteen and studied moral philosophy under Francis Hutcheson. [ harvnb|Bussing-Burks|2003|p=39.] Here he developed his passion for liberty, reason, and free speech. In 1740, Smith was awarded the Snell exhibition and left the University of Glasgow to attend Balliol College, Oxford. [harvnb|Buchan|2006|p=22.]

Smith considered the teaching at Glasgow to be far superior to that at Oxford, and found his Oxford experience intellectually stifling.harvnb|Bussing-Burks|2003|p=41.] In Book V, Chapter II of "The Wealth of Nations", Smith wrote: "In the University of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching."Smith is also reported to have complained to friends that Oxford officials once detected him reading a copy of David Hume's "Treatise on Human Nature", and they subsequently confiscated his book and punished him severely for reading it. harvnb|Rae|1895|p=24.] harvnb|Buchholz|1999|p=12.] According to William Robert Scott, "The Oxford of [Smith's] time gave little if any help towards what was to be his lifework." [cite book |title=Introductory Economics |publisher=New Age Publishers |isbn=8122418309 |page=4.] Nevertheless, Smith took the opportunity while at Oxford to teach himself several subjects by reading many books from the shelves of the large Oxford library. harvnb|Rae|1895|p=22.] When Smith was not studying on his own, his time at Oxford was not a happy one, according to his letters.harvnb|Rae|1895|pp=24–25.] Near the end of his time at Oxford, Smith began suffering from shaking fits, probably the symptoms of a nervous breakdown.harvnb|Bussing-Burks|2003|p=42.] He left Oxford University in 1746, before his scholarship ended. [harvnb|Buchan|2006|p=29.]

In Book V of "The Wealth of Nations", Smith comments on the low quality of instruction and the meager intellectual activity at English universities, when compared to their Scottish counterparts. He attributes this both to the rich endowments of the colleges at Oxford and Cambridge, which made the income of professors independent of their ability to attract students, and to the fact that distinguished men of letters could make an even more comfortable living as ministers of the Church of England. Smith had originally intended to study theology and enter the clergy, but his subsequent learning, especially from the skeptical writings of David Hume, persuaded him to take a different route.

Teaching and early writings

Smith began delivering public lectures in 1748 at Edinburgh under the patronage of Lord Kames. harvnb|Rae|1895|p=30.] His lecture topics included rhetoric and "belles-lettres", and later the subject of "the progress of opulence". On this latter topic he first expounded his economic philosophy of "the obvious and simple system of natural liberty". While Smith was not adept at public speaking, his lectures met with success.harvnb|Bussing-Burks|2003|p=43.]

In 1750, he met the philosopher David Hume, who was his senior by more than a decade. The alignments of opinion that can be found within their writings covering history, politics, philosophy, economics, and religion indicate that they shared a closer intellectual alliance and friendship than with the others who were to play important roles during the emergence of what has come to be known as the Scottish Enlightenment. [cite encyclopedia |title=Smith, Adam (bap. 1723, d. 1790) |encyclopedia=Dictionary of National Biography |publisher=Oxford University Press |month=September |year=2004 |author=Winch, Donald]

In 1751, Smith earned a professorship at Glasgow University teaching logic courses. When the Chair of Moral Philosophy died the next year, Smith took over the position. Smith would continue academic work for the next thirteen years, which Smith characterized as "by far the most useful and therefore by far the happiest and most honourable period [of his life] ". harvnb|Rae|1895|p=42.] His lectures covered the fields of ethics, rhetoric, jurisprudence, political economy, and "police and revenue".

He published "The Theory of Moral Sentiments" in 1759, embodying some of his Glasgow lectures. This work was concerned with how human communication depends on sympathy between agent and spectator, or the individual and other members of society. His analysis of language evolution was somewhat superficial, as shown only fourteen years later by a more rigorous examination of primitive language evolution by Lord Monboddo in his "Of the Origin and Progress of Language". [cite encyclopedia |title=James Burnett, Lord Monboddo |encyclopedia=Dictionary of National Biography |publisher=Oxford University Press |year=1972 |author=Cloyd, E.L. |pages=64–66] Smith showed strong capacity for fluent and persuasive—if rather rhetorical—argument. He bases his explanation not on a special "moral sense", as the third Lord Shaftesbury and Hutcheson had done, nor on utility as Hume did, but on sympathy. Smith's popularity greatly increased due to the "The Theory of Moral Sentiments", and as a result, many wealthy students left their schools in other countries to enroll at Glasgow to learn under Smith. harvnb|Buchholz|1999|p=15.]

After the publication of "The Theory of Moral Sentiments", Smith began to give more attention to jurisprudence and economics in his lectures and less to his theories of morals. The development of his ideas on political economy can be observed from the lecture notes taken down by a student in 1763, and from what William Robert Scott described as an early version of part of "The Wealth of Nations". [harvnb|Buchan|2006|p=67] For example, Smith lectured that division of labor—rather than the nation's quantity of gold or silver—is the cause of increase in national wealth.harvnb|Buchholz|1999|p=13.]

In 1762, the academic senate of the University of Glasgow conferred on Smith the title of Doctor of Laws (LL.D.). At the end of 1763, he obtained a lucrative offer from Charles Townshend (who had been introduced to Smith by David Hume) to tutor his stepson, Henry Scott, the young Duke of Buccleuch. Smith subsequently resigned from his professorship to take the tutoring position. Because he resigned in the middle of the term, Smith attempted to return the fees he had collected from his students, but they refused. harvnb|Buchholz|1999|p=16.]

Tutoring and travels

Smith's tutoring job entailed touring Europe with Henry Scott while teaching him subjects including proper Polish. Smith was paid £300 per year plus expenses along with £300 per year pension, which was roughly twice his former income as a teacher. Smith first traveled as a tutor to Toulouse, France, where he stayed for a year and a half. According to accounts, Smith found Toulouse to be very boring, and he wrote to Hume that he "had begun to write a book in order to pass away the time". After touring the south of France, the group moved to Geneva. While in Geneva, Smith met with the philosopher Voltaire. [harvnb|Buchholz|1999|pp=16–17.] After staying in Geneva, the party went to Paris.

While in Paris, Smith came to know intellectual leaders such as Benjamin Franklin, harvnb|Buchholz|1999|p=17.] Turgot, Jean D'Alembert, André Morellet, Helvétius and, in particular, Francois Quesnay, the head of the Physiocratic school, whose work he respected greatly. [harvnb|Buchan|2006|p=80.] The physiocrats believed that wealth came from production and not from the attainment of precious metals, which was adverse to mercantilist thought. They also believed that agriculture tended to produce wealth and that merchants and manufacturers did not. While Smith did not embrace all of the physiocrats ideas, he did say that physiocracy was "with all its imperfections [perhaps] the nearest approximation to the truth that has yet been published upon the subject of political economy". harvnb|Buchholz|1999|p=18.]

Later years and writings

In 1766, Henry Scott's younger brother died in Paris, and Smith's tour as a tutor ended shortly thereafter. Smith returned home that year to Kirkcaldy, and he devoted much of the next ten years to his magnum opus, "The Wealth of Nations", published in 1776. [harvnb|Buchan|2006|p=90.] The publication of the book was an instant success, selling out the first edition in only six months.harvnb|Buchholz|1999|p=19.]

In May 1773 he was elected fellow of the Royal Society of London, [harvnb|Buchan|2006|p=89.] and was elected a member of the Literary Club in 1775. [cite web |accessdate=2008-05-22 |url=http://econlib.org/library/YPDBooks/Rae/raeLS10.html |title=First Visit to London |publisher=Library of Economics and Liberty] In 1778 Smith was appointed to a post as commissioner of customs in Scotland and went to live with his mother in Edinburgh. [ harvnb|Buchan|2006|p=128.] Five years later, he became one of the founding members of the Royal Society of Edinburgh, [ harvnb|Buchan|2006|p=133.] and from 1787 to 1789 he occupied the honorary position of Lord Rector of the University of Glasgow. [ harvnb|Buchan|2006|p=137.] He died in Edinburgh on 17 July 1790 after a painful illness and was buried in the Canongate Kirkyard. [ harvnb|Buchan|2006|p=145.] On his death bed, Smith expressed disappointment that he had not achieved more. harvnb|Bussing-Burks|2003|p=53.]

Smith's literary executors were two friends from the Scottish academic world: the physicist and chemist Joseph Black, and the pioneering geologist James Hutton. harvnb|Buchan|2006|p=25.] Smith left behind many notes and some unpublished material, but gave instructions to destroy anything that was not fit for publication. harvnb|Buchan|2006|p=88.] He mentioned an early unpublished "History of Astronomy" as probably suitable, and it duly appeared in 1795, along with other material such as "Essays on Philosophical Subjects".

Personality and beliefs

Character

Not much is known about Smith's personal views beyond what can be deduced from his published works. His personal papers were destroyed after his death. He never married [ harvnb|Buchan|2006|p=11.] and seems to have maintained a close relationship with his mother, with whom he lived after his return from France and who died six years before his own death. [ harvnb|Buchan|2006|p=134.]

Contemporary accounts describe Smith as an eccentric but benevolent intellectual, comically absent minded, with peculiar habits of speech and gait and a smile of "inexpressible benignity". [ harvnb|Rae|1895|p=262.] He was known to talk to himself, and had occasional spells of imaginary illness.

Smith is often described as a prototypical absent-minded professor. harvnb|Skousen|2001|p=32.] He is reported to have had books and papers stacked up in his study, with a habit he developed during childhood of speaking to himself and smiling in rapt conversation with invisible companions.

Various anecdotes have discussed his absentminded nature. In one story, Smith reportedly took Charles Townshend on a tour of a tanning factory and while discussing free trade, Smith walked into a huge tanning pit from which he had to be removed.harvnb|Buchholz|1999|p=14.] Another episode records that he put bread and butter into a teapot, drank the concoction, and declared it to be the worst cup of tea he ever had. In another example, Smith went out walking and daydreaming in his nightgown and ended up convert|15|mi|km outside town before nearby church bells brought him back to reality.

Smith is reported to have been an odd-looking fellow. One author stated that Smith "had a large nose, bulging eyes, a protruding lower lip, a nervous twitch, and a speech impediment".harvnb|Buchholz|1999|p=12.] Smith is reported to have acknowledged his looks at one point saying, "I am a beau in nothing but my books." Smith "never" sat for portraits, [cite book|last=Stewart|first=Dugald|title=The Works of Adam Smith: With An Account of His Life and Writings |publisher=Henry G. Bohn|location=London|date=1853|pages=lxix|oclc=3226570|url=http://books.google.com/books?id=FbYCAAAAYAAJ] so depictions of him created during his lifetime were drawn from memory, with rare exceptions. The most famous examples were a profile by James Tassie and two etchings by John Kay. [harvnb|Rae|1895|p=376,377] The line engravings produced for the covers of 19th century reprints of "The Wealth of Nations" were based largely off of Tassie's medallion. [harvnb|Bonar|1895|p=xxi]

Religious views

There has been considerable scholarly debate about the nature of Adam Smith's religious views. Smith's father had a strong interest in Christianity and belonged to the moderate wing of the Church of Scotland. [ harvnb|Ross|1995|p=15.] Smith may have gone to England with the intention of a career in the Church of England: this is controversial and depends on the status of the Snell Exhibition. At Oxford, Smith rejected Christianity and it is generally believed that he returned to Scotland as a Deist. [cite journal |title=Times obituary of Adam Smith |journal=The Times |date=1790-07-24|page=]

Economist Ronald Coase has challenged the view that Smith was a Deist, [ harvnb|Coase|1976|pp=529-546.] stating that while Smith may have referred to the "Great Architect of the Universe", other scholars have "very much exaggerated the extent to which Adam Smith was committed to a belief in a personal God". [ harvnb|Coase|1976|p=538.] He based this on analysis of a remark in "The Wealth of Nations" where Smith writes that the curiosity of mankind about the "great phenomena of nature" such as "the generation, the life, growth and dissolution of plants and animals" has led men to "enquire into their causes". Coase notes Smith's observation that " [s] uperstition first attempted to satisfy this curiosity, by referring all those wonderful appearances to the immediate agency of the gods". Smith's close friend and colleague David Hume, with whom he agreed on most matters, was described by contemporaries as an atheist, although there is some debate about the exact nature of his views among modern philosophers.cite web |url=http://plato.stanford.edu/entries/hume-religion/ |title=Hume on Religion|publisher=Stanford Encyclopedia of Philosophy |accessdate=2008-05-26]

In a letter to William Strahan, Smith's account of Hume's courage and tranquility in the face of death aroused violent public controversy,cite web |url=http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=704&chapter=137475&layout=html&Itemid=27 |publisher=Online Library of Liberty |title=LETTER FROM ADAM SMITH, LL.D. TO WILLIAM STRAHAN, ESQ. - Essays Moral, Political, Literary (LF ed.) |accessdate=2008-05-26] since it contradicted the assumption, widespread among orthodox believers, that an untroubled death was impossible without the consolation of religious belief. [ harvnb|Rae|1895|p=311.]

Published works

Adam Smith published a large body of works throughout his life, some of which have shaped the field of economics. Smith's first book, "The Theory of Moral Sentiments" was written in 1759. [ harvnb|Buchan|2006|p=51.] It provided the ethical, philosophical, psychological and methodological underpinnings to Smith's later works, including "An Inquiry Into the Nature and Causes of the Wealth of Nations" (1776), "A Treatise on Public Opulence" (1764) (first published in 1937), "Essays on Philosophical Subjects" (1795), "Lectures on Justice, Police, Revenue, and Arms" (1763) (first published in 1896), and "Lectures on Rhetoric and Belles Lettres".

"The Theory of Moral Sentiments" (1759)

In 1759, Smith published his first work, "The Theory of Moral Sentiments". He continued to revise the work throughout his life, making extensive revisions to the final (6th) edition shortly before his death in 1790.Ref label|b|b|none Although "The Wealth of Nations" is widely regarded as Smith's most influential work, it has been reported that Smith himself "always considered his "Theory of Moral Sentiments" a much superior work to his "Wealth of Nations". [ harvnb|Rae|1895.] P. J. O'Rourke, author of the commentary "On The Wealth of Nations" (2007), has agreed, calling "Theory of Moral Sentiments" "the better book". [cite web |url=http://www.npr.org/templates/story/story.php?storyId=6743689 |title=P.J. O'Rourke Takes On 'The Wealth of Nations' |last=O'Rourke |first=P. J. |authorlink=P. J. O'Rourke |date=2007-01-08 |format= |work= |publisher=NPR |accessdate=2008-06-10 ] It was in this work that Smith first referred to the "invisible hand" to describe the apparent benefits to society of people behaving in their own interests.

In "The Theory of Moral Sentiments", Smith critically examined the moral thinking of the time and suggested that conscience arises from social relationships. [cite web |url=http://www.liberalhistory.org.uk/item_single.php?item_id=37&item=biography |title=Biography of Smith |accessdate=2008-05-14 |publisher=Liberal Democrat History Group |year=1997 |author=Falkner, Robert] His aim in the work is to explain the source of mankind's ability to form moral judgements, in spite of man's natural inclinations toward self-interest. Smith proposes a theory of sympathy in which the act of observing others makes people aware of themselves and the morality of their own behavior. Haakonssen writes that in Smith's theory, "Society is ... the mirror in which one catches sight of oneself, morally speaking." [ harvnb|Smith and Haakonssen|2002|p=xv.]

In part because "Theory of Moral Sentiments" emphasizes sympathy for others while "Wealth of Nations" famously emphasizes the role of self interest, some scholars have perceived a conflict between these works. As one economic historian observed: "Many writers, including the present author at an early stage of his study of Smith, have found these two works in some measure basically inconsistent." [ harvnb|Viner|1991|p=250.] But in recent years most scholars of Adam Smith's work have argued that no contradiction exists. In "Theory of Moral Sentiments", Smith develops a theory of psychology in which individuals find it in their self-interest to develop sympathy as they seek approval of the "impartial spectator". The self-interest he speaks of is not a narrow selfishness but something that involves sympathy.

Haakonssen adds that "Theory of Moral Sentiments" and "Wealth of Nations" "only contradict each other if Smithian sympathy is misinterpreted as benevolence and self-interest wrongly is narrowed to selfishness and then taken to be the reductive basis for all human motivation". [ harvnb|Smith and Haakonssen|2002|p=xxiv.] Rather than viewing the "Wealth of Nations" and "Theory of Moral Sentiments" as presenting incompatible views of human nature, most Smith scholars regard the works as emphasizing different aspects of human nature that vary depending on the situation. The "Wealth of Nations" draws on situations where man's morality is likely to play a smaller role—such as the laborer involved in pin-making—whereas the "Theory of Moral Sentiments" focuses on situations where man's morality is likely to play a dominant role among more personal exchanges.

"The Wealth of Nations" (1776)

"An Inquiry into the Nature and Causes of the Wealth of Nations" is Smith's magnum opus and most influential work, published on 9 March 1776 during the Scottish Enlightenment. It is a clearly written account of political economy at the dawn of the Industrial Revolution, and is widely considered to be the first modern work in the field of economics. It is often considered one of the most influential books on the subject ever published. "The Wealth of Nations" was written for the average educated individual of the 18th century rather than for specialists and mathematicians. There are three main concepts that Smith expands upon in this work that forms the foundation of free market economics: division of labour, pursuit of self interest, and freedom of trade.

"The Wealth of Nations" expounds that the free market, while appearing chaotic and unrestrained, is actually guided to produce the right amount and variety of goods by a so-called "invisible hand". The image of the invisible hand was previously employed by Smith in "Theory of Moral Sentiments," but it has its original use in his essay, "The History of Astronomy". Smith believed that while human motives were often driven by selfishness and greed, the competition in the free market would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services. Nevertheless, he was wary of businessmen and argued against the formation of monopolies.

Smith believed that a division of labour would effect a great increase in production. One example he used was the making of pins. One worker could probably make only twenty pins per day. However, if ten people divided up the eighteen steps required to make a pin, they could make a combined amount of 48,000 pins in one day.

An often-quoted passage from "The Wealth of Nations" is: [ harvnb|Smith|1776|p=18.]

Value theory was important in classical theory. Smith wrote that the "real price of every thing ... is the toil and trouble of acquiring it" as influenced by its scarcity. Smith maintained that, with rent and profit, other costs besides wages also enter the price of a commodity. [Smith, Adam (1776). [http://www.bartleby.com/10/105.html/ The Wealth of Nations] , Bk. 1, Ch. 5, 6.] Other classical economists presented variations on Smith, termed the 'labour theory of value'. Classical economics focused on the tendency of markets to move to long-run equilibrium.

Other works

Shortly before his death, Smith had nearly all his manuscripts destroyed. In his last years, he seemed to have been planning two major treatises, one on the theory and history of law and one on the sciences and arts. The posthumously published "Essays on Philosophical Subjects", a history of astronomy down to Smith's own era, plus some thoughts on ancient physics and metaphysics, probably contain parts of what would have been the latter treatise. "Lectures on Jurisprudence" were notes taken from Smith's early lectures, plus an early draft of "The Wealth of Nations", published as part of the 1976 Glasgow Edition of the works and correspondence of Adam Smith.

Other works, including some published posthumously, include Lectures on Justice, Police, Revenue, and Arms (1763) (first published in 1896); A Treatise on Public Opulence (1764) (first published in 1937); and Essays on Philosophical Subject (1795).

Legacy

"The Wealth of Nations", one of the earliest attempts to study the rise of industry and commercial development in Europe, was a precursor to the modern academic discipline of economics. In this and other works, Smith expounded how rational self-interest and competition can lead to economic prosperity and well-being. It also provided one of the best-known intellectual rationales for free trade and capitalism, greatly influencing the writings of later economists. Smith was ranked #30 in Michael H. Hart's list of the most influential figures in history, [harvnb|Hart|1989] and he is often cited as the father of modern economics. [cite book |author=Pressman, Steven |title=Fifty Major Economists |year=1999 |publisher=Routledge |isbn=0415134811 |page=20]

George Stigler attributes to Smith the central proposition of mainstream economic theory, namely that an individual should invest a resource, for example, land or labour, so as to earn the highest possible return on it. Consequently, all uses of the resource should yield a risk-adjusted equal rate of return; otherwise resource reallocation would result.

On the other hand, Joseph Schumpeter dismissed Smith's contributions as unoriginal, saying "His very limitation made for success. Had he been more brilliant, he would not have been taken so seriously. Had he dug more deeply, had he unearthed more recondite truth, had he used more difficult and ingenious methods, he would not have been understood. But he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter History of Economic Analysis. New York: Oxford University Press, p 185)

Classical economists presented variations on Smith, termed the 'labour theory of value', later Marxian economics descends from classical economics also using Smith's labor theories in part. The first volume of Marx's major work, "Capital", was published in German in 1867. In it, Marx focused on the labour theory of value and what he considered to be the exploitation of labour by capital. Roemer, J.E. (1987). "Marxian Value Analysis". "", v. 3, 383.] [Mandel, Ernest (1987). "Marx, Karl Heinrich", "The New Palgrave: A Dictionary of Economicsv. 3, pp. 372, 376.] The labour theory of value held that the value of a thing was determined by the labor that went into its production. This contrasts with the modern understanding of mainstream economics, that the value of a thing is determined by what one is willing to give up to obtain the thing. Ironically Smith is often cited for being the conceptual builder of free markets in Capitalism, and also cited as a main contributor to Communist theory, via Marx.

A body of theory later termed 'neoclassical economics' or 'marginalism' formed from about 1870 to 1910. The term 'economics' was popularized by such neoclassical economists as Alfred Marshall as a concise synonym for 'econonic science' and a substitute for the earlier, broader term 'political economy' used by Smith. [ Marshall, Alfred, and Mary Paley Marshall (1879). " [http://books.google.com/books?hl=en&lr=&id=NLcJAAAAIAAJ&oi=fnd&pg=PA1&ots=0JHN3lV_Jn&sig=jpmU_WmYzAzsGjrB7yX6-KKHOFM#PPA2,M1 "The Economics of Industry",] p. 2. ] [W. Stanley Jevons (1879, 2nd ed.) [http://books.google.com/books?id=aYcBAAAAQAAJ&dq=William+Stanley+Jevons++%22The+Theory+of+Political+Economy%22&pg=PR3&ots=IywRC3n9fq&sig=f9H70ZG96NVWVP_J8QrgQXc1QSk&prev=http://www.google.com/search%3Fas_q%3DWilliam%2BStanley%2BJevons%2B%26hl%3Den%26num%3D10%26btnG%3DGoogle%2BSearch%26as_epq%3DThe%2BTheory%2Bof%2BPolitical%2BEconomy%26as_oq%3D%26as_eq%3D%26lr%3D%26as_ft%3Di%26as_filetype%3D%26as_qdr%3Dall%26as_nlo%3D%26as_nhi%3D%26as_occt%3Dany%26as_dt%3Di%26as_sitesearch%3D%26as_rights%3D%26safe%3Dimages&sa=X&oi=print&ct=result&cd=1#PPR3,M1 "The Theory of Political Economy",] p. xiv.] This corresponded to the influence on the subject of mathematical methods used in the natural sciences.Clark, B. (1998). "Political-economy: A comparative approach", 2nd ed., Westport, CT: Preagerp. p. 32..] Neoclassical economics systematized supply and demand as joint determinants of price and quantity in market equilibrium, affecting both the allocation of output and the distribution of income. It dispensed with the labour theory of value of which Smith was most famously identified with in classical economics, in favor of a marginal utility theory of value on the demand side and a more general theory of costs on the supply side.Campos, Antonietta (1987). "Marginalist Economics", "The New Palgrave: A Dictionary of Economics", v. 3, p. 320]

The bicentennial anniversary of the publication of "The Wealth of Nations" was celebrated in 1976, resulting in increased interest for "The Theory of Moral Sentiments" and his other works throughout academia. After 1976 Adam Smith was more likely to be represented as the author of both "The Wealth of Nations" and "The Theory of Moral Sentiments", and thereby as the founder of a moral philosophy and the science of economics. His "homo economicus" or "economic man" was also more often represented as a moral person. Additionally, his opposition to slavery, colonialism, and empire was emphasised, as were his statements about high wages for the poor, and his views that a common street porter was not intellectually inferior to a philosopher. [harvnb|Smith|1977|loc=§Book I, Chapter 2.]

Smith's portrait appeared in the UK on new £20 notes beginning in March 2007. He is the first Scotsman to feature on a currency issued by the Bank of England.cite web |url=http://news.bbc.co.uk/1/hi/business/6096938.stm |title=Smith replaces Elgar on £20 note |accessdate=2008-05-14 |publisher=BBC |year=2006] A large-scale memorial of Smith was unveiled on 4 July 2008 in Edinburgh. It is a convert|10|ft-tall bronze sculpture and it stands above the Royal Mile outside St Giles' Cathedral in Parliament Square, near the Mercat cross. [cite news |title=Adam Smith sculpture to tower over Royal Mile |date=2007-09-26 |work=Edinburgh Evening News |author=Blackley, Michael] 20th century sculptor James Sanborn (best known for creating the "Kryptos" sculpture at the United States Central Intelligence Agency) has created multiple pieces which feature Adam Smith's work. At Central Connecticut State University is "Circulating Capital", a tall cylinder which features an extract from "The Wealth of Nations" on the lower half, and on the upper half, some of the same text but represented in binary code. [cite news |title=CCSU welcomes a new kid on the block |date=2001-03-13 |author=Fillo, Maryellen |work=The Hartford Courant] At the University of North Carolina at Charlotte, outside the Belk College of Business Administration, is "Adam Smith's Spinning Top". [cite news |title=Piece at UNCC is a puzzle for Charlotte, artist says |date=1997-05-20 |author=Kelley, Pam |work=Charlotte Observer] [cite news |title=Artist sheds new light on sculpture |date=1997-06-01 |author=Shaw-Eagle, Joanna |work=The Washington Times] Another Adam Smith sculpture is at Cleveland State University. [cite web|url=http://www.sculpturecenter.org/oosi/sculpture.asp?SID=1055 |title=Adam Smith's Spinning Top |publisher=Ohio Outdoor Sculpture Inventory |accessdate=2008-05-24]

As a symbol of free market economics

Smith has been celebrated by advocates of free market policies as the founder of free market economics, a view reflected in the naming of bodies such as the Adam Smith Institute, Adam Smith Society cite web |url=http://www.adamsmith.it/presentazione.html |title=The Adam Smith Society |accessdate=2008-05-24 |publisher=The Adam Smith Society] and the Australian Adam Smith Club, cite web |url=http://www.economic-justice.org/asmith.htm |title=The Australian Adam Smith Club |accessdate=2008-05-24 |publisher=Economic Justice] and in terms such as the Adam Smith necktie. [cite web|url=http://www.minneapolisfed.org/pubs/region/92-06/int926.cfm|title=Interview with Milton Friedman|last=Levy|first=David|date=June 1992|publisher=Federal Reserve Bank of Minneapolis|accessdate=2008-09-01]

Alan Greenspan argues that, while Smith did not coin the term "laissez-faire", "it was left to Adam Smith to identify the more-general set of principles that brought conceptual clarity to the seeming chaos of market transactions". Greenspan continues that "The Wealth of Nations" was "one of the great achievements in human intellectual history".cite web |url=http://www.federalreserve.gov/boarddocs/speeches/2005/20050206/default.htm |title=FRB: Speech, Greenspan—Adam Smith—6 February 2005 |format= |work= |accessdate=2008-05-31] P. J. O'Rourke describes Adam Smith as the "founder of free market economics".cite web |url=http://www.forbes.com/free_forbes/2007/0507/086.html |title=Adam Smith: Web Junkie - Forbes.com |format= |work= |accessdate=2008-06-10]

However, other writers have argued that Smith's support for laissez-faire has been overstated. Herbert Stein wrote that the people who "wear an Adam Smith necktie" do it to "make a statement of their devotion to the idea of free markets and limited government", and that this misrepresents Smith's ideas. Stein writes that Smith "was not pure or doctrinaire about this idea. He viewed government intervention in the market with great skepticism ... yet he was prepared to accept or propose qualifications to that policy in the specific cases where he judged that their net effect would be beneficial and would not undermine the basically free character of the system. He did not wear the Adam Smith necktie." In Stein's reading, "The Wealth of Nations" could justify the Food and Drug Administration, The Consumer Product Safety Commission, mandatory employer health benefits, environmentalism, and "discriminatory taxation to deter improper or luxurious behavior". [cite journal |author=Stein, Herbert |date=1994-04-06 |title=Board of Contributors: Remembering Adam Smith |journal=The Wall Street Journal Asia |pages=A14]

Similarly, Vivienne Brown stated in "The Economic Journal" that in the 20th century United States, Reaganomics supporters, "The Wall Street Journal", and other similar sources have spread among the general public a partial and misleading vision of Adam Smith, portraying him as an "extreme dogmatic defender of laissez-faire capitalism and supply-side economics". cite journal |author=Brown, Vivienne |month=January |year=1993 |journal=The Economic Journal |volume=103 |issue=416 |pages=230–232 |doi=10.2307/2234351 |title=Untitled review of 'Capitalism as a Moral System: Adam Smith's Critique of the Free Market Economy' and 'Adam Smith and his Legacy for Modern Capitalism'] Noam Chomsky has arguedRef label|c|c|none that several aspects of Smith's thought have been misrepresented and falsified by contemporary ideology, including Smith’s reasons for supporting markets and Smith’s views on corporations. Chomsky argues that Smith supported markets in the belief that they would lead to equality. [ [http://www.understandingpower.com/Chapter6.htm#f34 Chapter 6 ] ] Economic historians such as Jacob Viner regard Smith as a strong advocate of free markets and limited government (what Smith called "natural liberty") but not as a dogmatic supporter of laissez-faire.cite journal|author=Viner, Jacob|month=April |year=1927|journal=The Journal of Political Economy|volume=35|issue=2|pages=198–232|doi=10.2307/2234351|title=Adam Smith and Laissez-faire]

Notes

----a. Note label|a|a|none"In his fourth year, while on a visit to his grandfather's house at Strathendry on the banks of the Leven, [Smith] was stolen by a passing band of gypsies, and for a time could not be found. But presently a gentleman arrived who had met a gypsy woman a few miles down the road carrying a child that was crying piteously. Scouts were immediately dispatched in the direction indicated, and they came upon the woman in Leslie wood. As soon as she saw them she threw her burden down and escaped, and the child was brought back to his mother. [Smith] would have made, I fear, a poor gypsy.", harvnb|Rae|1895|p=5.

b. Note label|b|b|noneThe 6 editions of "Theory of Moral Sentiments" were published in 1759, 1761, 1767, 1774, 1781, and 1790 respectively. See [http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=192&Itemid=27 Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 1 "The Theory of Moral Sentiments" (1759)] .

c. Note label|c|c|noneSee ch. 2,5,6 and 10 of his "Understanding Power", New Press (February 2002), along with his "Year 501: The Conquest Continues", primarily ch. 1, South End Press, 1993.

References

*
*.
*.
*.
*.
*
*.
*.
*.
*.
*.
*.
*
*
*
*
*

Further reading

*
*
*
*
*
*
*

External links

*
* [http://www.econlib.org/library/Smith/smMS.html "The Theory of Moral Sentiments"] at the [http://www.econlib.org/index.html Library of Economics and Liberty]
* [http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=197&Itemid=99999999 "Works and Correspondence of Adam Smith"]
###@@@KEY@@@###

Persondata
NAME=Smith, Adam
ALTERNATIVE NAMES=
SHORT DESCRIPTION=Scottish philosopher and economist
DATE OF BIRTH=birth date|1723|6|5|mf=y O.S. (16 June N.S.)
PLACE OF BIRTH=Kirkcaldy, Fife, Scotland
DATE OF DEATH=death date|1790|7|17|mf=y
PLACE OF DEATH=Edinburgh, Scotland