ADAM SMITH’S WEALTH OF NATIONS (BOOKS I-III)

INTRODUCTION BY ANDREW SKINNER

A presentation by:
Anshumala
M2021DS005
 ANDREW SKINNER

• Born in Glasgow, England

• He held the position of ‘Adam Smith Professor of Political

Economy from 1994 – 2000

• Best known for his editorial and scholarly work on Adam

Smith

(1935 – 2011)
 ADAM SMITH

• Scottish moral philosopher and pioneer of political economics

• Key figure during the Scottish Enlightenment

• Known as ‘The Father of Economics’ or ‘The Father of

Capitalism’

• Two classic works: The Theory of Moral Sentiments(1759)

An Inquiry into the Nature and Causes of the Wealth of
Nations(1776)

• Laid the foundation of classical free market economy (16 June 1723 – 17 July 1790)
• Adam Smith was a polymath who wrote on a wide variety of subjects.

• Astronomy as a valuable exercise in ‘ philosophical history’ to lead and direct philosophical inquiries

• The question of motivation and understanding by sentiments of surprise, wonder and admiration

• Man is endowed with certain faculties and propensities such as reason, reflection and imagination

• He is motivated by the desire to acquire means of pleasure and avoid pain

• Surprise: when an object or relation does not fall into expected pattern

• Wonder: when there is gap/ interval or lack of connection

Gives rise to feeling of pain

Act of attempted explanation

Restore the mind to equilibrium when explanation is:

• coherent
• stated in terms of familiar
principles
• accounts for the given
observation
• Smith argued ”Nature as a whole seems to be abound with events which appear solitary and
incoherent.”

• The purpose of philosophy is to find ‘the connecting principles of nature’

• Admiration: Once an explanation has been offered for some particular problem, the very existence
of that explanation may heighten our app
• reciation of the ‘appearances’ themselves.

• Smith considered the various ways of organizing scientific discourse whereby we lay down certain
principles or proved in the beginning from whence we account for the several phenomena
connecting all together by the same chain is vastly more ingenious

• Smith’s contribution to social sciences is contained in his work on ethics, jurisprudence and
economics. His work is marked by a degree of systematic thought with a great capacity for model-
building, but also by an attempt to delineate the boundaries of a single system of thought, of which
these separate subjects were the component parts
• Smith taught the elements of economics against philosophical and historical background

• Social Theory: What is virtue?

How do we distinguish between objects of approval or disapproval

• Involves complex of abilities and propensities like sympathy, imagination, reason and reflection

• We may judge an action taken by ourselves or others firstly, in relation to the cause or object which
excites it and secondly, in relation to the end which it proposes

• Smith argues that approval of motive is added to a perception of the beneficent tendency of the action
taken, then such actions deserve reward

• Individual judged will only make the effort to attain a certain ‘mediocrity’ of expression where he
regards the opinion of the spectator as important

“Nature when she formed man for society, endowed him with an original desire to please, and an original
aversion to offend his brethren."
“ Given the desire to acquire the sources of pleasure and to avoid pain, this aspect of the psychology of an
would appear to ensure that he will generally act in ways which will secure the approbation of his brethren and
that he is to this extent fitted for the society of other men. “

• But the spectator cannot be entirely informed regarding the motive of another man

• Further. Smith was well aware that pursuit of status, the desire to be well thought of in public sense, could
be associated with self-delusion and with actions that could inflict damage on others either by accident or
design.

• The solution to this problem is found in the idea of general rules of morality or accepted conduct; a system
of positive laws embodying our conception of those rules of conduct which relates to justice. These rules
must be administered by some system of governance or ‘magistracy’ which will serve as a fundamental pre-
cursor of social order in the society
The Stages of Society:

• Finding the basis of obedience in the principles of utility and authority

Grounds on which we were disposed to obey our ‘magistrates’

• Identified four major sources of authority: personal qualification, age, fortune and birth

• Once basic principles of origin of government and sources of authority are formed, Smith showcases
how the outlines of society and government would vary wit respect to four broad socio-economic
types: the stages of hunting, pasture, agriculture and commerce

• Establishes link between form of economy prevailing and the source and distribution of power/
dependence among the classes of men
First Stage: Hunting

• Modes of subsistence: gathering fruits of soil, hunting and fishing

• No economic dependence, communities are small in size and high degree of personal liberty
• Absence of private property, less dispute, no magistrate or administration of justice required

Second Stage: Pasture

• Mode of subsistence: use of cattle

• Nomadic life, bigger communities
• Inequality of fortune introduced by appropriation of cattle, formation of class, need of government
• Dependence of poor on cattle owners in exchange of personal services, military power
Third Stage: Agriculture

• most complicated, has a lower, middle and upper phase

• lower level : division of available territory, formation of estates, land and property ownership, landless
must obey their lords
• each big landlord acted as a petty prince who had complete jurisdiction over his territory, declared
wars for personal reasons, political instability

• middle level: emergence of self- governing cities which paid rent certain to the king.
• supported king against lords, emerged as first independent republics, also changed the balance of
political power

• upper level: traders and manufacturers of cities had significant powers

• Provided nobles with means to spend their surpluses, reduced the authority of nobles
Fourth Stage: Trade

• All goods and services command a price

• Eliminated direct dependence of the feudal period
• Two sector economy at domestic level
• Shift of power and influence from old aristocracy to mercantile class

Note: The historical analysis has the benefit of showing that the commercial stage or exchange
economy may be regarded as the product certain historical processes

It also demonstrates that when such a form of economy prevails, a particular social structure or set of
relations between classes is necessarily presupposed
Economic Theory and Exchange Economy:

• Rational self interest

“ 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.”

• Division of Labour
“Unlike the savage modern man was largely dependent on the labour of others for the satisfaction of his
full range of wants, thus directing attention to the importance of exchange.”

• Market price determined by aggregate demand and supply vs Natural price

• Natural rate of return to factors of production – rent, wages and profits

• Perfect competition

• Minimum government intervention

Significance:

• Adam Smith’s work on Economics followed his treatment of ethics and jurisprudence

• Each of the three subjects are interconnected and are parts of a single whole

• The merit of Smith’s work is derived less from the novelty of principles but from the scientific manner in
which they are unfolded in their proper order and connection

• In other words, his work is a great synthetic performance whose real distinction was to exhibit a
systematic view of the most important articles of political economy

• His analysis, both systematic and institutional, was largely applicable in Britain ad was a major cause of the
work’s popularity.
Thank You