1

Adam Smith
Carlos da Maia, PhD
Business School
UNIVERSITY OF ST. THOMAS OF MOZAMBIQUE
3L5ECONS

History of Economic Thought, September 2014

Outline

Background Information

Smith's Masterpiece

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

Passionate of his books

Born in 1723 in the town of Kircaldy, Scotland;

Based at the University of Glasgow, Dr Smith, a well-known, if not
famous man;
David Hume (one of the most important gures in the history of Western
Philosophy) was intimate with him and Voltaire (famous for his wit, his
attacks on the established Catholic Church, and his advocacy of freedom
of religion) heard of him;
Students had travelled all the way from Russia to hear his discourse;
Of remarkable personality, absentminded; But this did not interfere with
his intelectual abilities;
Adam Smith was among the foremost philosophers of his age.

He lectured Moral Philosophy (which covered Natural Theology), Ethiccs,

Jurisprudence, and Political Economy; From chaos of the universe to

order;

"I am a beau in nothing but my books" was the way Smith once
described himself, proudly showing o his treasured library to a friend.

Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship
(old Oxford, before becoming a citadel of learning);
There instruction was the exception rather than the rule;
Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading
David Hume's A Treatise of Human Nature;
In 1752 (at almost 28 years of age) he was oered the Chair of
Logic at Glasgow University and then the Chair of Moral
Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

10

Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship
(old Oxford, before becoming a citadel of learning);
There instruction was the exception rather than the rule;
Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading
David Hume's A Treatise of Human Nature;
In 1752 (at almost 28 years of age) he was oered the Chair of
Logic at Glasgow University and then the Chair of Moral
Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

11

Adam Smith was a famous man

An apt pupil destined to teach

From the earliet days he was an apt pupil;

Destined to teaching; at 17 he went to Oxford on a scholarship
(old Oxford, before becoming a citadel of learning);
There instruction was the exception rather than the rule;
Smith spent 6 years in Oxford largerly untutored and

untaught, reading as he saw t;

He was once nearly expelled from the university for reading
David Hume's A Treatise of Human Nature;
In 1752 (at almost 28 years of age) he was oered the Chair of
Logic at Glasgow University and then the Chair of Moral
Philosophy;

Glasgow was a serious center of what has come to be called

the Scottish Enlightment

Adam Smith was a famous man

12

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;
He was accused of:
1
2
3
4
5

sometimes smilling during religious services;

being friends with "that" outrageous David Hume;
not holding Sunday classes on Christian evidences;
petitioning the Senatus Academicus for permission to dispense
with prayers on the opening of class; and
delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

Adam Smith was a famous man

13

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;
He was accused of:
1
2
3
4
5

sometimes smilling during religious services;

being friends with "that" outrageous David Hume;
not holding Sunday classes on Christian evidences;
petitioning the Senatus Academicus for permission to dispense
with prayers on the opening of class; and
delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

Adam Smith was a famous man

14

Not liked by his peers because of his views towards church

The prim professorial group did not entirely appreciate Smith's

manner;
He was accused of:
1
2
3
4
5

sometimes smilling during religious services;

being friends with "that" outrageous David Hume;
not holding Sunday classes on Christian evidences;
petitioning the Senatus Academicus for permission to dispense
with prayers on the opening of class; and
delivering prayers that smacked of a certain "natural religon".

The disapproval became more severe when Smith became dean

in 1758.

Adam Smith was a prestigious man

15

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;
He was beloved by his students; noted as a lecturer; he was
even immitated in the manner of speech;
Little busts of him even appeared in booksellers' windows;
His prestige came not only from his personality, but also from
publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and
dispproval)

Adam Smith was a prestigious man

16

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;
He was beloved by his students; noted as a lecturer; he was
even immitated in the manner of speech;
Little busts of him even appeared in booksellers' windows;
His prestige came not only from his personality, but also from
publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and
dispproval)

Adam Smith was a prestigious man

17

Loved by his students

He was very happy at Glasgow;

He lived a quiet life;
He was beloved by his students; noted as a lecturer; he was
even immitated in the manner of speech;
Little busts of him even appeared in booksellers' windows;
His prestige came not only from his personality, but also from
publishing books:

The Theory of Moral Sentiments in 1759 catapulted him

immediately into the forefront of English philosophers; (the

book was an inquiry into the origin of moral approbation and
dispproval)

Adam Smith gets an oer he could not refuse

18

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as
Chancellor of the Exchequer, who helped to precipitate the American
Revolution, rst by refusing the colonists the right to elect their own
judges and then by imposing a heavy duty on American tea);
Townsend was a sincere student of philosophy and politics, and as such a
devotee of Adam Smith;
In 1754 Townsed made a brilliand and lucrative marriage to the Countess
of Dalkeith, the widow of the Duke of Buccleuch;
Needing a tutor for the wife's soon, he invited Adam Smith (500 a year
plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from the
fees that professors collected directly from their students.
In 1764 Smith left to France (his students did not accept a refund; they
said that they had already been more than recompensed)

Adam Smith gets an oer he could not refuse

19

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as
Chancellor of the Exchequer, who helped to precipitate the American
Revolution, rst by refusing the colonists the right to elect their own
judges and then by imposing a heavy duty on American tea);
Townsend was a sincere student of philosophy and politics, and as such a
devotee of Adam Smith;
In 1754 Townsed made a brilliand and lucrative marriage to the Countess
of Dalkeith, the widow of the Duke of Buccleuch;
Needing a tutor for the wife's soon, he invited Adam Smith (500 a year
plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from the
fees that professors collected directly from their students.
In 1764 Smith left to France (his students did not accept a refund; they
said that they had already been more than recompensed)

Adam Smith gets an oer he could not refuse

20

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as
Chancellor of the Exchequer, who helped to precipitate the American
Revolution, rst by refusing the colonists the right to elect their own
judges and then by imposing a heavy duty on American tea);
Townsend was a sincere student of philosophy and politics, and as such a
devotee of Adam Smith;
In 1754 Townsed made a brilliand and lucrative marriage to the Countess
of Dalkeith, the widow of the Duke of Buccleuch;
Needing a tutor for the wife's soon, he invited Adam Smith (500 a year
plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from the
fees that professors collected directly from their students.
In 1764 Smith left to France (his students did not accept a refund; they
said that they had already been more than recompensed)

Adam Smith gets an oer he could not refuse

21

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as
Chancellor of the Exchequer, who helped to precipitate the American
Revolution, rst by refusing the colonists the right to elect their own
judges and then by imposing a heavy duty on American tea);
Townsend was a sincere student of philosophy and politics, and as such a
devotee of Adam Smith;
In 1754 Townsed made a brilliand and lucrative marriage to the Countess
of Dalkeith, the widow of the Duke of Buccleuch;
Needing a tutor for the wife's soon, he invited Adam Smith (500 a year
plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from the
fees that professors collected directly from their students.
In 1764 Smith left to France (his students did not accept a refund; they
said that they had already been more than recompensed)

Adam Smith gets an oer he could not refuse

22

He moves to France in 1764

His book got the attention of Charles Townsend (it was him, as
Chancellor of the Exchequer, who helped to precipitate the American
Revolution, rst by refusing the colonists the right to elect their own
judges and then by imposing a heavy duty on American tea);
Townsend was a sincere student of philosophy and politics, and as such a
devotee of Adam Smith;
In 1754 Townsed made a brilliand and lucrative marriage to the Countess
of Dalkeith, the widow of the Duke of Buccleuch;
Needing a tutor for the wife's soon, he invited Adam Smith (500 a year
plus expenses and a pension of 500 a year for life)

It was too good an oer to be declined;

At best Smith never realized more than 170 pounds from the
fees that professors collected directly from their students.
In 1764 Smith left to France (his students did not accept a refund; they
said that they had already been more than recompensed)

Adam Smith starts working on his masterpiece

23

To relieve his tedium is starts working on a treatise of political economy, whcih came to
become The Wealth of Nations

During part of his stay in France he lived a boring life in the

provinces;
That pushed him to start work on a new book, his masterpiece
(which took 1 years to before it was nished).

Adam Smith in France

24

He then moves to Paris where he meets Franois Quesnay (the foremost economic thinker
in France)
Quesnay had propounded a school of economics known as
Physiocracy;
Quesnay insisted that wealth sprang from production and that
it owed through the nation, from hand to hand;
This was contrary to the ideas of the day: wealth was the solid
stu of gold and silver
Problem with Physiocracy: It insisted that only the agricultural
worker produced true wealth because Nature labored at his
side, whereas the manufacturing worker merely altered its form
in a sterile way.
It failed to see that labor could produce wealth wherever it
performed, not just on the land (seeing this was one of Adam
Smith's greatest insights).

Adam Smith in France

Physiocracy was fundamentally uncongenial to Smith's Scottish vision

Smith had profound admiration for Quesnay;

But he did not agree with Quesnay's denition of wealth;

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The Wealth of Nations

26

His masterpiece was published in 1776. It was not a wholly original book

The book has been called "the outpouring not only of a great
mind, but of a whole epoch".Yet it is not, in the strict sense of the
word, an  original book. There is a long line of observers before
Smith who have approached his understanding of the world: Locke,
Steuart, Mandeville, Petty, Cantillon, Turgot, not to mention
Quesnay and Hume again. Smith took from all of them: there are
over a hundred authors mentioned by name in his treatise. But
where others had shed here and there, Smith spread his net wide;
where others had claried this and that issue, Smith illuminated the
entire landscape. The Wealth of Nations is not a wholly original
book, but it is unquestionably a masterpiece.

The Wealth of Nations

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Questions for further study

1

The Wealth of Nations is in no sense a textbook. Comment on this.

It is an exasperating book. Motivate.

For Smith wealth consisted of the goods that all the people of society
consume, although not, of course, in equal amounts. True or false?
What are Smith's laws of the market?

3
4
5

All this may seem somewhat elementary. But consider what Adam Smith
has done, with his impetus of self-interest and his regulator of
competition. First, he has explained how prices are kept from ranging
arbitrarily away from the actual cost of producing a good. Second, he has
explained how society can induce its producers of commodities to provide
it with what it wants. Third, he has pointed out why high prices are a
self-curing disease, for they cause production in those lines to increase.
And nally, he has accounted for a basic similarity of incomes at each level
of the great producing strata of the nation. In a word, he has found in
the mechanism of the market a self-regulating system for society's orderly
provisioning. Describe how Smith has explained the four points above.

The End

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