Adam Smith Case

ADAM SMITH

INTRODUCTION

While Adam Smith died more than two hundred years ago, he has often been touted as the world's first free market capitalist. While this designation may be overstated, Smith's place in history, as the father of modern economics and as a major proponent of laissez-faire economic policies, is quite secure. He is still considered among the most influential thinkers in the field of economics.

BIOGRAPHY

Early Life: Adam Smith was born in Kirkcaldy, a trading center in Scotland. His birthplace gave him great exposure to a number of trades including fishing, mining, and iron-working. Smith's date of birth is undocumented so the recorded life of Adam Smith began on June 5, 1723 at his baptism in Kirkcaldy, Scotland. His father, a lawyer and civil servant, died just after his birth. Smith was raised by his mother, Margaret Douglas, who spoiled him and encouraged him to pursue his scholarly ambitions. Very few details are available about his childhood except that at the age of four, he was kidnapped by a band of Gypsies. He was released shortly after when a group, including his uncle, went to rescue him. Other than this incident there were no other events recorded about his early life.

Education: Smith attended secondary school at the Burgh School of Kirkcaldy from 1729 to 1737, studying Latin, math, history and writing. At the age of fourteen, Smith entered the University of Glasgow where he studied moral philosophy and developed a passion for liberty, reason and free speech. Upon his graduation in 1740, after just three years of study, he was awarded the prestigious Snell Exhibition (a scholarship) and left the university to study at Balliol College, Oxford. He was critical of the teaching philosophies at Oxford as he found them to be stifling. Smith decided to take matters into his own hands and educate himself. He began to read many books from the massive Oxford library. Due to his unhappiness at Oxford, Smith left his studies in 1746 before his scholarship ended.

Career: Smith began his career in 1748, lecturing in English and Philosophy at the University of Edinburgh. While he was not a proficient speaker, his lectures were met with great success. This early success earned him a professorship at Glasgow University in 1751, teaching logic, literature, moral philosophy and public policy. In 1752, Smith was elected a member of the Philosophical Society of Edinburgh. The following year he became head of Moral Philosophy when his predecessor died. Smith continued to work as an academic for more than a decade and he characterized this time in his life as both the happiest and most productive. It was during time, as an academic, that provided the basis for much of his later work. The University of Glasgow conferred upon Adam Smith the title Doctor of Laws (L.L.D) in 1762.

In 1763, he abruptly resigned from his professorship in the middle of the term to take on a private tutoring position. A wealthy statesmen, Charles Townshend, presented him with an offer to tutor his stepson, Henry Scott, the young Duke of Buccleuch. The tutoring position required Smith to

travel Europe extensively. His salary as a private tutor included all travel expenses, a pension for life, and a salary, which was more than double his former income as a professor. Smith was able to capitalize on this time of extensive travel and used this opportunity to reflect on the interactions of culture, commerce, government and economics, examining their policy approaches and effectiveness. However, at times during this period, Smith became bored with his surroundings and began to write a book to pass the time away. A little more than three years after he began educating Scott, his tutoring position ended. Smith returned home to his birthplace, Kirkcaldy, and devoted much of his time to his writing.

THE THEORY OF MORAL SENTIMENTS

Published in 1759, it was Smith's first published work. There were several extensive revisions made to the book, right up until his death, and it was widely believed that Smith considered this to be his superior work.

The Theory of Moral Sentiments was a scientific breakthrough. It shows that our moral ideas and actions are a product of our very nature as social creatures. It argues that this social psychology is a better guide to moral action than reason. It identifies the basic rules of prudence and justice that are needed for society to survive and explains the additional, beneficent actions that enable it to flourish. The goal of the book was to explain man's ability to form moral judgements in spite of man's natural inclination towards self-interest.

Self-interest and Sympathy: Individuals have a natural tendency to look after ourselves, as social creatures, and we have natural sympathy towards each other. When others are feeling sad, lonely, depressed; we feel for them. As we grow and develop throughout our lives, we all learn what is considered acceptable and unacceptable to other people. This morality stems from our social nature, which is built into us. However, while we see people who are happy are sad, we feel that way too. We do not feel emotions as strongly as they do, and therefore we tend to bring our emotions in line those of others.

Justice and Beneficence: Although we are self-interested, we do have to find a way to live with others without doing them any harm. This is necessary for the survival of society. If people go further and do positive good (beneficence), we welcome it but it is not an action that we can demand, such as justice.

Punishment and rewards have an important social function. We approve and reward acts that benefit society and punish acts that we disapprove of that harm society. For our society to survive, there must be rules to prevent individual members from harming each other. Rules form through the process of making judgements on a countless number of actions, gradually overtime formulating rules of conduct. They become part of our make-up. Therefore, we do not have to think out every situation fresh, as we now have standards that guide us.

THE WEALTH OF NATIONS

Considered to Adam Smith's greatest work, it was first published in 1776, to great success. The first edition sold out in less than six months and five editions were published during Smith's lifetime. The Wealth of Nations gives an account of an economic system that was based upon human nature and social dynamics. Major topics covered in the book included wealth and trade, the division of labour/productivity, and the free market/invisible hand.

Wealth