Adam Smith

Biography

Youth

Adam Smith was born on June 5th, 1723 with Kirkcaldy, small town of 1500 inhabitants in Scotland. As of his birth, Smith is Orphelin of father. This last was controller of the customs, and dies two months before the birth of his/her son. At the four years age, Adam Smith is kidnapped by gipsies, who fascinating fear of the legal action by the uncle of the young boy, give up it on the road where it will be found.

Particularly gifted pupil as of his Childhood, although inattentive, Adam Smith leaves to study with Glasgow at the 14 years age and remains there of 1737 to 1740. He receives there inter alia the teaching of Francis Hutcheson, the predecessor of Adam Smith to the pulpit of moral philosophy. Smith will be very influenced by Hutcheson. He then leaves to study with the university of Oxford, where teaching is then of a very poor quality, so that the young pupil chooses itself his readings. Besides this personal selection is worth to him to be threatened of expulsion of the university when one discovers in his room the Traité human nature of the philosopher David Hume, reading considered to be improper at the time.

Teaching of logic and morals

Choosing a university career, Smith obtains at the age of twenty-seven years the pulpit of Logique to the Université of Glasgow and later that of moral Philosophie. This institution is much more serious than that of Oxford and the teaching body appreciates little this newcomer who smiles during the religious services and which is moreover one declared friend of David Hume. However Smith becomes relatively known with Glasgow. He takes part in intellectual circles, plays Whist the evening… Appreciated its students, its manners and his not very common pace are worth to him to be imitated, and one sees even small Buste S of him in some Librairie S of the city. Its frequent shakings of head and its awkward diction derived from a nervous disease from which he suffered throughout his life.

Beyond her Eccentricity, the celebrity of Adam Smith also comes from her work and the publication in 1759 of the Théorie of the moral feelings , work of Philosophie which make known Smith in Great Britain and even in Europe. In this book, it tries to include/understand how the Individu, regarded as egoistic, manages to carry moral Jugement S which make pass its personal interest in the second plan. Smith affirms that the individual can in fact of placing itself in the position of a third, of an impartial observer, which can thus be freed from its selfishness and base its judgment on the Sympathie. One discusses quickly the theses of this book a little everywhere, and more particularly in Germany.

Adam Smith, whereas he was professor of logic wrote other works which will be published only after its death. One of most known is its Histoire of astronomy . The history of astronomy strictly speaking represents only one small portion of the work, and stops moreover with Descartes, because Smith is interested in fact more at the origins of the Philosophie. According to Smith, the Esprit takes pleasure to discover the resemblances between the objects and the observations, and it is by this process that he manages to combine ideas and to classify them. The spirit seeks in the succession of the noted phenomena of the plausible explanations, and when the directions note a succession which breaks with the habituation of imagination, the spirit is surprised, and it is this surprise which excites it and pushes it towards the search for new explanations.

Philosophy, by exposing the invisible chains which bind all these isolated objects, endeavors to put the order in this chaos of unmatched appearances, to alleviate the tumult of imagination, and to return to him, while dealing with the great revolutions of the universe, this calm and this peace which it likes and which are matched with its nature. ”
Adam Smith, History of Astronomy

The religious convictions of Adam Smith are not known with precision, and he is often regarded as a deist with the image of Voltaire which he admired. Ronald Coase criticized this thesis and notes that, although Smith refers to a “great architect of the universe”, with Nature, or with famous “the invisible hand”, he only speaks very seldom with God, and especially he explains why the wonders of nature poke the curiosity of the men, and that the superstition is the most immediate way to satisfy this curiosity, but that in the long term, it leaves the place to explanations more usual and thus more satisfactory than those of the intervention of the gods.

Travel to Europe

The work of Smith is noticed by Charles Townshend, important politician and Chancellor of the Exchequer of 1766 with his death one year later. This last had married in 1754 lady Caroline Campbell, widow of Lord Dalkeith, duke of Buccleuch, with which it has already two wire. Townshend seeks a tutor for the oldest son of his wife who, like the young English aristocrats of the time must make a Grand Turn, and proposes in Smith to accompany it in her tour.

Smith and his pupil leave Great Britain for the France in 1764. They remain eighteen months with Toulouse, city whose company seems to him tedious. Remaining in the south of France it meets and fills with enthusiasm Voltaire, as well as a Marquis E of which it must push back the advances. During this long stay in a Province which annoys it, Smith starts the drafting of a treaty of economy, subject on which it had been brought to exempt courses in Glasgow. After being last by Geneva, Smith and his pupil arrive at Paris. It is there that it meets the most important economist of the time, the Médecin of Madam de Pompadour, François Quesnay. Quesnay had founded an economic school of thought, the Physiocratie, in rupture with the ideas mercantilists of time. The physiocrats preach that the economy must be governed by a natural order: by the Leave-to make and the pass. They affirm that the Richesse does not come from the noble metals, but always of the only work of the Ground and that this richness extracted the grounds circulates then among various sterile classes (commercial , noble , the Industrie ls). Adam Smith is interested by the liberal ideas of the physiocrats, but does not include/understand the worship that they dedicate to the Agriculture. Having lived in Glasgow, it is aware of the economic importance of industry.

Drafting of the Richness of the nations and reprocesses

In 1766, the voyage of Smith and protected sound is completed, the brother of this last having been assassinated in the streets of Paris. Smith returns to London, then with Kirkcaldy where it devotes to his treaty of political economy. He goes only seldom to London to take part in the debates of his time. He meets there Benjamin Franklin whose influence will make him say that the American colonies are the nation which “will become most probably largest and most formidable which is never in the world. ”

Ten years after his return to Kirkcaldy, Adam Smith publishes finally his treaty of economy that it entitles Recherche on the nature and the causes of the richness of the nations ( An Inquiry into the natural and the causes off the wealth off nations ), title often shortened in Richesse of the nations .

In 1778, Smith becomes police chief with the customs with Edinburgh, which ensures a comfortable retirement to him. He spends the twelve last years of his life as a single person, alive with his mother (until the death of this one at ninety years).

At the end of its life, it becomes Recteur of the Université of Glasgow, and sees its work translated into French, German, Danish, Italian and Spanish. The Prime Minister Pitt the Young person declares even a day to him “we are all your pupils. ”

Smith dies on July 17th, 1790 at the age of sixty-seven years, in a relative indifference considering the turbid revolutionists who agitate France then and threaten the English countryside. He is buried simply in Canongate, one can read on the tomb stone: Ci-to lie Adam Smith, author of the Richness of the nations ”

The thought of Adam Smith

See also: Research on the nature and the causes of the richness of the nations, Theory of the moral feelings

Although known of alive sound for its works of Philosophy, the posterity especially retained its talent of economist. The economic scenes very quickly raised it with the row of founder. The liberal running, as much economic than political, did of them one of its authors of reference. What is there in the Richesse of the nations which justifies such a posterity? Paradoxically, Adam Smith almost did not bring any novel idea to philosophy and the economy in his work. The majority of these ideas were already approached by philosophers and economists like François Quesnay, John Locke, William Petty, David Hume, Turgot or Richard Cantillon. The Richesse of the Nations mentions more than one hundred of authors from which the various analyzes are borrowed.

What gives all its value to the work of Smith is thus not his originality, but the synthesis of the majority of the relevant economic ideas of its time. The majority of the authors who preceded it developed brilliant ideas, but distinct from any coherent total system, and often associated with other economic designs much less relevant (like the sterility of industry among physiocrats). Smith corrects the obvious errors a posteriori authors who preceded it, it looks further into their ideas and the bonds between them to weave a coherent compilation. Its way of thinking often rests on the following principle: for Smith what is wise for the household head cannot be a madness in the management of an empire.

Moral feelings

In the Theory of the moral feelings , it tries to describe the principles of the human nature to include/understand how they cause the creation of common institutions and a social behavior.

Smith wonders about the origin of the capacity which have the individuals to carry of the moral judgments on the others but also on their own attitude. Smith starts by affirming, against the theories of selfishness and the interest, the character not involved in some of our judgments. According to him, each one of us has in itself a “interior man”, able to remotely place its own passions and interests, in order to constitute itself in " observer impartial" able to give its approval or its Moral disapproval , and of which we can be unaware of the judgment. One can see in this thesis an antecedent of the concept of the Surmoi.

In the Theory of the feelings moraux' , sympathy within the meaning of empathy, of capacity to include/understand another while being put to some extent at its place, occupies a central place. For Smith the man in his actions must take account of the point of view of the real spectators or the impartial spectator within the framework of a double process of sympathy. On the one hand the spectators are identified with the actor and manage to include/understand the reasons for its action, on the other hand the actor is identified with the spectators contemplating it and perceives which are their feelings in his connection. He results from this double process of off-centring “a field of knowledge common to the actor and the spectators who generate the whole of the system of the rules (of which those of justice) which allow the control of passions”. The problem is that this double off-centring is not easily accessible to all. Also, Diatkine suggests it which it is because Smith was aware of these difficulties which he wrote the Richesse of the nations where, in the economic domain, the market in a certain way replaces the impartial spectator or at least obliges the economic actors to hold account from/to each other.

The nature of the richness

Before Smith, the economists had proposed two great definitions of the Richesse. Smith begins again, in Book IV of the Richness of the Nations, a criticism of the Mercantiliste S that Schumpeter will qualify " of inintelligente" , namely that the richness is defined by the invaluable stone and metal possession, because it is them which makes it possible to finance the Guerre S, it is them which have a durable value in time and recognized everywhere. It is about a primarily princely richness. " Never the mercantilists supported cela" underline Schumpeter For the physiocrat S, the agricultural production is the only source of richness, the other activities being dedicated only to its transformation.

For Smith, the richness of the nation, it is the whole of the products which decorate the life of the very whole nation, i.e. of all the classes and of all their Consommation S. the Or and the Monnaie thus do not constitute any more the richness, they do not have in themselves any other utility but that of intermediary of the exchange. Adam Smith thus joined the vision of the currency suggested by Aristote in the Antiquité. For him, the origin of the richness is the work of the men. It thus poses the bases of the doctrines of the value work, which will be fully theorized at the next century by David Ricardo.

Is this richness, how produced, and how can one increase it? While trying to answer this question, Smith proposes an analysis of the Economic growth. Analyzing the saving in its time, it distinguishes three great causes from the enrichment of the nation: the Division of the labor, the accumulation of the capital, and cut it market.

The division of the labor

The Division of the labor is not defined with precision by Adam Smith. It is the specialization of the workmen who unceasingly carry out the same operation in a total process of production (but it is not the assembly line work invented in 1914 by Ford). For Adam Smith the division of the labor is a modifiable parameter. If the demand is keen, one needs many workmen and then one can divide work.

Adam Smith advances the theory that the Productivité is proportional to the division of the labor. This theory is exposed in a specious way through the example of manufacture of the pins. It validated forever in experiments. Indeed, the operations which one can distinguish in the production from pins do not have any arbitrary, they correspond to the use of the tools. They are fixed by technology and cannot be modified as one would wish it according to the produced quantities.

What allows the division of the labor, it is the exchange. The men are distributed the tasks to survive, then exchange the fruits of their work. The more the exchanges increase, the more capable the men are to devote themselves to a particular task and to hope for others the satisfaction of their other needs.

There exists however an obstacle with the division of the labor, it is the size of the Marché. The more numerous the men are, the more they can divide the tasks. If the market is not large enough, the surplus of production permitted by an always increased division of the labor will not find purchasing.

In addition, the division of the labor does not have only advantages. Smith notes that it can have disastrous effects on intellect of the Ouvrier S which are stunned by the repetition of gestures of a simplicity increasingly larger. He thus invites the State to do something so that he is differently, perhaps to set up a education system. By doing this, Adam Smith approaches the concept of Externalité which the economists will develop later and who is today still one of the justifications of the neo-classic theories of the intervention of the State in economy.

It is it should be noted that Adam Smith borrowed the example of the factory of pins which illustrates its matter on the division of the labor, and the expression “division of the labor” itself from Henri-Louis Duhamel of the Heap, which wrote in its additions with the “Art of Épinglier”:

“There is nobody who is not astonished by the low price of the pins; but the surprise will undoubtedly increase when one knows how much various operations, the majority strong delicate, are indispensably necessary to make a good pin. We will traverse in few words these operations to give birth to the desire for knowing the details of them; this enumeration will provide us as many articles which will make the division of this work. ”

The market and the invisible hand

Accumulation and growth

Thanks to the laws of the market, Smith describes then an economic dynamic which must lead the company towards opulence. Making the praise of the saving, which is only the manifestation of frugality and the renouncement of the immediate wellbeing so that survives and thrives the Industrie, Smith sees in the accumulation of the capital, i.e. the investment in Machine S, the occasion to multiply by ten the Productivité and to increase the Division of the labor.

For Adam Smith, the accumulation of the machines implies an increase in the manpower needs, and thus an upsurge in wages. But according to him the law of the market controls also the Démographie. Indeed the rise of the wages makes it possible to the poor to make live their children and thus to increase labor available in the long term, then causing a fall of the Salaire S towards their former level, allowing that the profit and thus accumulation increase again. Meanwhile, the production increased, the Infant mortality regressed. At our time, the idea that demography is controlled by the market can seem naive, but Smith notes that at the 18th century, “it is not rare that in Highlands of Scotland, a mother having generated twenty children preserves only two alive. ”

He seems whereas the regulation of the company by the market leads to the increase in richnesses, and on a regular return of the Salaire S towards the vital minimum. Smith speaks thus about “wages of subsistence”, which makes it possible to ensure the satisfaction of the physiological needs for the human being, like those of its descent, necessary to provide the future labor. Is this to say that the standards of living cannot progress? Not, because accumulation always draws the wages to the top so that the concept even of “vital minimum”, regarded as a sociological variable (and not a biological phenomenon) evolves/moves upwards. Why? Because the population increasing, the accumulating capital, the division of the deepening labor, the production (and thus richness) per capita must increase.

Free trade

The role of the State

In the book V of the Richness of the nations , Adam Smith defines finally the functions of a State in load of the General interest (and not of the interest of the prince). They are initially the functions known as kingly (police force, Armée, Justice). The State must protect the Citoyen S against the injustices and violences coming from the inside like outside.

The analysis of the public Droit of Smith falls under the logic of Grotius, Pufendorf and Hobbes, but Adam Smith operates in his courses in Glasgow (1762-1763) a clear rupture in his definition of the functions of the “police force”, i.e. the protection and the regulation of the interior order. However, at the time, the regulation of the interior order is closely related on the abundance and the price of the vivres; to guarantee the law and order, it is to guarantee the provisioning of vivres. The police force would thus imply the economic intervention, it what Smith in his courses opposeopposes Glasgow by explaining that the economic intervention is against-productive considering it harms the opulence of the food products.

Adam Smith thus defines the kingly duties in their modern direction: the protection of fundamental individual freedoms against the aggressions of the inside and the outside. For as much, Smith does not refuse in the State any economic intervention. To the duties to protect the citizens and their goods against the injustices come from the interior and to prevent the invasion S of foreign armies, Smith allots to the State a last function:

“The third and last duty of the sovereign are to maintain these works or these public corporations including one large company derives immense advantages, but are nevertheless likely to be able to be undertaken or maintained by one or more private individuals, waited until, for those, the profit could never refund the expenditure of it to them. ”

With this “duty”, Smith justifies some clearly Interventionnisme of the State in the economic life. He defines also what the economic scene will call later the “Community property. ” According to Smith, the market cannot deal with all the economic activities, because some are not profitable for any Entreprise, and yet they benefit largely the company as a whole. These activities must then be dealt with by the State. It is especially about large the Infrastructure S, but the analysis can extend to the Public services.

Political positions

Through the Richness of the nations , Adam Smith discusses many the political debates of his time and tries, in the light of the economy, to contribute to the ideal of the Lumières of the 18th century.

On the question of the Slavery, he explains why the work of the slaves is in fact much more expensive than that of the free men, moved by the lure of gain and guided by the forces of the market. “The experiment of all times and all the nations, writing Adam Smith, agrees, I believe, to show that the work made by slaves, though it appears to cost only the expenses of their subsistence, is at the end of the day expensive of all. ”

It is in a similar logic that it attacks the Colonialisme, undertaken expensive of exploitation.

This colonies are at most additional dependences, a species of procession that the empire trails with its continuation for the magnificence and the parade.

It devotes a hundred pages to denounce the economic system mercantilist which up to that point dictates the policy of the great nations.

Adam Smith does not save either the land Aristocratie. The criticism of the idle landowners, the shareholders, will be especially the work of David Ricardo, but since 1776 Smith pointed out: the owners, like all the other men, like to collect where they did not sow.

The heritage of Smith

Richnesses of work and inspirations

See also: traditional School, Economic liberalism

Adam Smith did not give birth to the Economic liberalism. Already Montesquieu wrote in 1748 in Of the spirit of the laws : " It is that each one goes to the community property, believing to go to its private interests . " Then the Physiocrate Vincent de Gournay had required of controlling “the to let make the men ” and “ to let pass the goods ”, but it did not act whereas to denounce the system of the Corporations and to encourage freedom of movement of the grains in the provinces of a single kingdom. And Turgot wrote in 1759 in the Praise of Vincent de Gournay: “ the private interest given up with itself will produce more surely the general good than the operations of the government, always faulty and necessarily directed by a vague and dubious theory ”. It is considered nevertheless that it is Adam Smith who, by making private initiative and egoist the engine of the economy and cement of the company, completes to state the liberal dogma.

In the intellectual plan, the most direct influence of Adam Smith appears in the inspiration which in the Richesse of the nations the economists of the following decades find. Among them claim themselves of Smith of the authors whose celebrity will become almost also tall like Thomas Malthus, David Ricardo and John Stuart Mill in England, Jean-Baptiste Say in France. These liberal authors give an impulse without antecedents to the economic scene by discussing in their works the opinions of that which they name D Smith. Karl Marx, itself admiror of Adam Smith, qualifies them the “traditional ones”, although its own work, founded on scientific” and rigorous method the “of traditional, lead it to preach doctrines, Communism, opposed to liberalism.

Most astonishing is to find in the Richesse of the nations many short phrases which seem to announce the great economic ideas of the future centuries. Some examples:

With the beginning of the year 1980, the “theorists of the offer” advanced the idea that rates of too high taxes and social security deduction, by discouraging the activity, can with final generating revenues from taxes lower than that of a more moderate tax. This theory modelled by the Courbe of Laffer, popularized by the famous formula “too much tax kills the tax” and which justified part of the economic policy of Ronald Reagan did not have anything again. In 1776, Smith wrote already:

The tax can block the industry of the people and divert it to be devoted to certain branches of trade or work, which would provide occupation and means of subsistence to many people. Thus, while on a side it obliges the people to pay, other it decreases or perhaps destroys some of the sources which could put it more easily in the case of to do it.

At the end of the 19th century, the American sociologist critical Thorstein Veblen economic postulates on the behavior of the consumer. For him, the consumer often increases his consumption of a good when its price increases, and this by effect of Snobisme in an objective of social demonstration. But Smith had written it a hundred and fifty years earlier:

For the majority of the rich person, the principal pleasure whom they draw from the richness consists in making of it display and in their eyes their richness is incomplete as long as they do not appear to have these decisive marks of opulence that no one cannot have except themselves.

But more generally it is the concept of the Marché, as basic mechanism of the very whole company which became the subject of predilection of the economists who since then are interested in his imperfections, his incapacities, and his relative inexistence in the real economy where the situations of monopolies are current.

If many economists admire Smith, it is perhaps because many currents can see the father of their ideas there. The liberals greet it as that which clarified the importance of the market like automatic mode of regulation of the company, those recommending a moderate intervention of the State can however recall that Smith also underlined the possible imperfections of them and invited the public power to correct them. Although contrary to the political ideas of Smith, Karl Marx itself is inspired some by developing a whole doctrines based on the classical theory by the value.

Obsolescences

For as much, the work of Smith is not free from imperfections and the economic scene knew to be placed in rupture with some of its postulates. The theory of the absolute advantage proved to be a relatively weak argument in favor of the Libre-échange, lower than the analyzes of David Hume on the Balance of the payments which had preceded it, but especially than the theory of the comparative advantage advanced by David Ricardo in 1817. In the world of Smith, two countries had advantage to exchange only when each one of them had an advantage on the other in a given production. No argument was presented for the handicapped countries a priori . It will be thus the demonstration of Ricardo according to which even the least competitive country of the world finds interest to the International business which will be retained like principal argument of the current free-trader.

In the same way the theory of the “Value work” developed by Smith and adopted by the majority of the traditional Anglo-Saxon and the Marxist S, in opposition with the subjective design of Démocrite, of the scholastics and traditional French (Turgot, Say, Condillac), was given up by the economic scene starting from the end of the 19th century. All the analyzes microeconomic rests since on the idea that the value of a good is founded on the Utilité which brings to us the Consommation of an additional unit of this one, i.e. on its marginal Utilité. However Smith had drawn aside the utility like factor of value of the products to the profit of necessary work to their production.

Finally Adam Smith has seems it included/understood only partially the great economic transformations which the Industrial revolution was going to bring. One is astonished by his postulate according to which the purchase of machine increases the need for labor because one has since tendency to postulate the opposite. The idea according to which the individuals are guided by their individual interest can also seem in contradiction with the industrial society of the 19th century when the socio-economic reports/ratios are less the fact of the individuals isolated than from the Social classes to which they say to be identified: the Middle-class and the Proletariat.

Influence political

In the political arena and industrial, the admirors of Smith are numerous. Ten years after the publication of the Richness of the nations the French governments and English sign in 1786 the Traité Eden which founds a certain free trade between the two countries. Unbalanced because granting more advantages to industrial England than in France reduced to export primary education products, it will be called into question by the French revolution and it will have to be waited until 1860 so that a treaty of free trade is signed between France and England.

With the the United States, the Parliamentary Secretary to the Treasury, Alexander Hamilton hopes to found an industrial nation. Its famous Rapport on manufactures rests mainly on a critical reading of the theses of Smith, being largely inspired some but criticizing its leave-to make considered to be excessive and wishing to protect American industry stammering from free trade.

In England, the idea according to which the research of the individual profit is done with the profit of the very whole nation becomes the dogma of the capitalist middle-class which finds a justification there. In this way, the ideas of Smith were deeply diverted. The concept of the invisible Main which became so expensive with the defenders of the capitalist Entrepreneuriat applied only to the primarily artisanal economy of the time of Adam Smith, who was wary itself of the industrialists and their schemes aiming at establishing agreements and Monopole S in order to free itself from the constraints of the market and to impose their Prix. Although caricatured, the analysis smithienne of the market allowed long and progressive transition from the economic legislations, in particular in England, which were favorable to the Industrial revolution and the free-company.

Which extent can one lend to the influence of Adam Smith on the world? The British economist John Maynard Keynes writes at the 20th century:

That they are right or erroneous, the ideas of the theorists of economics and politics exert a power higher than that which one lends to them commonly. In fact, it is they which carry out the world or little is necessary oneself some. Such pragmatic declared, which is believed free of any theoretical influence, follows in fact a late economist blindly. Such maniac of the authority, which hears voices, draws in fact his frenzy only from one learned hack from the previous years. I am certain that one exaggerates the influence of the interests acquired compared to the progressive influence of the ideas.

If one believes Keynes of it, it thus does not seem not exaggerated to claim that Adam Smith and his ideas modelled the world which followed them. However, for Schumpeter and Magnusson, the ideas allotted to Adam Smith have in fact be manufactured after its death for political reasons and ideological and Smith him even, according to Michael Biziou, was more one philosophical moral in the line of his Master Francis Hutcheson, that an economist.

Works of Adam Smith

Theory of the moral feelings , 1759
Research on nature and causes of the richness of the nations , 1776

Published in posthumous title :

Works and Correspondence off Adam Smith , 1976
Readings one Jurisprudence , 1976 (pdf)
Adam Smith Essays one Philosophical Subjets , Clarendon Near, 1981

References

See also: Amorce=Articles related:, Adam Smith Institute, History of the economic thinking, Capitalism, absolute Advantage, invisible Hand, Gone, Research on nature and causes of the richness of the nations, richness of the nations, Theory of the moral feelings, Turgot

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