Adam Smith Known as the founder of modern economics.

Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the
father of modern economics. Smith argued against mercantilism and was a major proponent of laissez-
faire economic policies. In his first book, "The Theory of Moral Sentiments", Smith proposed the idea of
an invisible hand—the tendency of free markets to regulate themselves using competition, supply and
demand, and self-interest.

ble of Contents

Economy Economics

Adam Smith: Who He Was, Early Life, Accomplishments, and Legacy

Known as the founder of modern economics

By Rakesh Sharma Updated October 16, 2024

Reviewed by Erika Rasure

Fact checked by Yarilet Perez

Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the
father of modern economics. Smith argued against mercantilism and was a major proponent of laissez-
faire economic policies. In his first book, "The Theory of Moral Sentiments", Smith proposed the idea of
an invisible hand—the tendency of free markets to regulate themselves using competition, supply and
demand, and self-interest.

Key Takeaways

Adam Smith was an 18th-century Scottish philosopher; he is considered the father of modern
economics.

Smith is most famous for his 1776 book, "The Wealth of Nations."

Smith's writings were studied by 20th-century philosophers, writers, and economists.

Smith's ideas—the importance of free markets, assembly-line production methods, and gross domestic
product (GDP)—formed the basis for theories of classical economics.

During his time in France and abroad, his contemporaries included Voltaire, Jean-Jacques Rousseau,
Benjamin Franklin, Anne-Robert-Jacques Turgot, and François Quesnay.

Biography

The recorded history of Smith's life begins at his baptism on June 5, 1723, in Kirkcaldy, Scotland. His
exact birthdate is undocumented, but he was raised by his mother, Margaret Douglas, after the death of
his father, Adam Smith. He attended the University of Glasgow at the age of 13 and attended Balliol
College at Oxford University, where he studied European literature.

Notable Accomplishments and The Wealth of Nations

In "The Wealth of Nations", Smith popularized many of the ideas that form the basis for classical
economics. Other economists built on Smith's work to solidify classical economic theory, the dominant
school of economic thought through the Great Depression. Smith's ideas are evident in the work of
David Ricardo and Karl Marx in the 19th century, and John Maynard Keynes and Milton Friedman in the
twentieth century.

Smith's work addresses the idea of the "economic man," defined as someone who pursues their self-
interested goals and interests, which impacts their behavior in economics.

The Philosophy of Free Markets

The philosophy of free markets emphasizes minimizing the role of government intervention and taxation
in the free markets. Although Smith advocated for a limited government, he did see the government as
responsible for the education and defense sectors of a country.

From Smith comes the idea of the "invisible hand" that guides the forces of supply and demand in an
economy. According to this theory, by looking out for themselves, every person inadvertently helps
create the best outcome for all.

The Invisible Hand Theory

According to Smith's beliefs and theory, a wealthy nation is one that is populated with citizens working
productively to better themselves and address their financial needs. In this kind of economy, a man
would invest his wealth in the enterprise most likely to help him earn the highest return for a given risk
level. The invisible-hand theory is often presented in terms of a natural phenomenon that guides free
markets and capitalism in the direction of efficiency, through supply and demand and competition for
scarce resources, rather than as something that results in the well-being of individuals.

Trade
Table of Contents

Economy Economics

Adam Smith: Who He Was, Early Life, Accomplishments, and Legacy

Known as the founder of modern economics

By Rakesh Sharma Updated October 16, 2024

Reviewed by Erika Rasure

Fact checked by Yarilet Perez

Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the
father of modern economics. Smith argued against mercantilism and was a major proponent of laissez-
faire economic policies. In his first book, "The Theory of Moral Sentiments", Smith proposed the idea of
an invisible hand—the tendency of free markets to regulate themselves using competition, supply and
demand, and self-interest.

Key Takeaways

Adam Smith was an 18th-century Scottish philosopher; he is considered the father of modern
economics.

Smith is most famous for his 1776 book, "The Wealth of Nations."

Smith's writings were studied by 20th-century philosophers, writers, and economists.

Smith's ideas—the importance of free markets, assembly-line production methods, and gross domestic
product (GDP)—formed the basis for theories of classical economics.

During his time in France and abroad, his contemporaries included Voltaire, Jean-Jacques Rousseau,
Benjamin Franklin, Anne-Robert-Jacques Turgot, and François Quesnay.

Biography
The recorded history of Smith's life begins at his baptism on June 5, 1723, in Kirkcaldy, Scotland. His
exact birthdate is undocumented, but he was raised by his mother, Margaret Douglas, after the death of
his father, Adam Smith. He attended the University of Glasgow at the age of 13 and attended Balliol
College at Oxford University, where he studied European literature.

After returning to Scotland, Smith held a series of public lectures at the University of Edinburgh. The
success of his lecture series helped him earn a professorship at Glasgow University in 1751. He
eventually earned the position of Chair of Logic in 1751 and then Chair of Moral Philosophy in 1752.
During his years spent teaching and working at Glasgow, Smith worked on getting some of his lectures
published. His book, "The Theory of Moral Sentiments", was eventually published in 1759.

Smith moved to France in 1763 to accept a more remunerative position as a personal tutor to the
stepson of Charles Townshend, an amateur economist and the future Chancellor of the Exchequer.

During his time in France, Smith counted as his contemporaries Benjamin Franklin and the philosophers
David Hume and Voltaire.

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Smith published his most important work, "An Inquiry into the Nature and Causes of the Wealth of
Nations" (shortened to "The Wealth of Nations"), in 1776 after returning from France and retiring to his
birthplace of Kirkcaldy, Scotland.

3
Adam Smith died on July 17, 1790, at age 68, in Edinburgh, Scotland, and was buried in Canongate
Kirkyard.

Adam Smith

Notable Accomplishments and The Wealth of Nations

In "The Wealth of Nations", Smith popularized many of the ideas that form the basis for classical
economics. Other economists built on Smith's work to solidify classical economic theory, the dominant
school of economic thought through the Great Depression. Smith's ideas are evident in the work of
David Ricardo and Karl Marx in the 19th century, and John Maynard Keynes and Milton Friedman in the
twentieth century.

Smith's work discusses the evolution of human society from a hunter stage without property rights or
fixed residences to nomadic agriculture with shifting residences. The next stage is a feudal society where
laws and property rights are established to protect privileged classes. Finally, modern society is
characterized by laissez-faire or free markets, where new institutions are established to conduct market
transactions. Smith's work addresses the idea of the "economic man," defined as someone who pursues
their self-interested goals and interests, which impacts their behavior in economics.

The Philosophy of Free Markets

The philosophy of free markets emphasizes minimizing the role of government intervention and taxation
in the free markets. Although Smith advocated for a limited government, he did see the government as
responsible for the education and defense sectors of a country.

From Smith comes the idea of the "invisible hand" that guides the forces of supply and demand in an
economy. According to this theory, by looking out for themselves, every person inadvertently helps
create the best outcome for all.
A hypothetical butcher, brewer, and baker in this economy hope to make money by selling products that
people want to buy. If they are effective in meeting the needs of their customers, they will enjoy
financial rewards. While they are engaging in enterprise to earn money, they also provide products that
people want. Smith argued that this kind of system not only creates wealth for the butcher, brewer, and
baker, but creates wealth for the entire nation.

The Invisible Hand Theory

According to Smith's beliefs and theory, a wealthy nation is one that is populated with citizens working
productively to better themselves and address their financial needs. In this kind of economy, a man
would invest his wealth in the enterprise most likely to help him earn the highest return for a given risk
level. The invisible-hand theory is often presented in terms of a natural phenomenon that guides free
markets and capitalism in the direction of efficiency, through supply and demand and competition for
scarce resources, rather than as something that results in the well-being of individuals.

First Gen

First Gen owns three hydro facilities producing an estimated 300 MW renewable energy supply. Besides
a source of power supply, hydroelectric plants are also used for flood control, irrigation, and water
supply.

Sponsored By First Gen Corporation

Learn more

For Smith, an institutional framework is necessary to steer humans toward productive pursuits that are
beneficial to society. This framework consists of institutions like a justice system designed to protect and
promote free and fair competition. However, there must be competition undergirding this framework,
and competition is the "desire that comes with us from the womb, and never leaves us, until we go into
the grave."

While Smith is considered "the father of economics," his studies were in philosophy and literature.

Wealth and Production of Goods

The ideas promoted by "The Wealth of Nations" generated international attention and were a
motivating factor in the evolution from land-based wealth to wealth created by assembly-line
production methods made possible by the division of labor. Smith used the example of the labor
required to make a pin to illustrate the effectiveness of this method.

If one person were to undertake the 18 steps required to complete the tasks, they could only make a
handful of pins per week. However, if the 18 tasks were completed in assembly-line fashion by 10
individuals, production would jump to thousands of pins per week. Smith argued that the division of
labor and resulting specialization produces prosperity.

Gross Domestic Product (GDP)

The ideas in "The Wealth of Nations" provided the genesis for the concept of gross domestic product
(GDP) and transformed the importing and exporting business. Before the publication of "The Wealth of
Nations," countries declared their wealth based on the value of their gold and silver deposits.

However, Smith was highly critical of mercantilism; he argued that countries should be evaluated based
on their levels of production and commerce. This concept was the basis for creating the GDP metric for
measuring a nation's prosperity.

When "The Wealth of Nations" was published, many countries were hesitant to trade with other
countries. Smith argued that a free exchange should be created because both countries are better off
from the exchange.

As a result of this shift in attitudes toward trading, there was an increase in imports and exports. Smith
also argued for legislation that would make trading as easy as possible.

Adam Smith ordered that all his unpublished works be destroyed after his death.

8
Legacy

Smith's most prominent ideas—the "invisible hand" and division of labor—are now foundational
economic theories. His theories on economics continue to live on in the 21st century in modern
economic theory.

Smith was a proponent of the belief that the labor of the poor is a key measure of how an economy
performs, but Smith was known for being concerned with inequality itself. Karl Marx, a political
economist and social philosopher like Smith, was greatly inspired by "The Wealth of Nations" and built
greatly upon Smith's works. However, while Smith wrote that capitalism was an ideal state for economic
growth, Marx believed that capitalism led to greed and inequality among citizens, and would ultimately
lead itself to collapse.

Why Is Adam Smith Called the Father of Economics?

Adam Smith is called the "father of economics" because of his theories on capitalism, free markets, and
supply and demand.

What Books Did Adam Smith Write?

Adam Smith wrote "The Wealth of Nations, The Theory of Moral Sentiments, Lectures on Justice, Police,
Revenue, and Arms, and Essays on Philosophical Subjects."

11

What Were Adam Smith's 3 Laws of Economics?

The law of self-interest, the law of competition, and the law of supply and demand were the three laws
of economics written by Adam Smith.

The Bottom Line

Smith is also known for creating the concept of gross domestic product (GDP) and for his theory of
compensating wage differentials. According to this theory, dangerous or undesirable jobs tend to pay
higher wages to attract workers to these positions.

12
 Smith's most notable contribution to the field of economics was his 1776 book, "An Inquiry into the
Nature and Causes of the Wealth of Nations". The ideas he popularized live on in the classical school of
economics, and in institutions like the Adam Smith Institute, Britain's leading free-market neoliberal
think tank.

Adam Smith Moral Sentiments

Central to Smith’s theory is the proposition that the perception of right and wrong comes from sense
and feeling rather than reason. Human happiness, according to Smith, chiefly “arises from the
consciousness of being beloved”. Because we desire to be loved by our brethren— taken to mean
relatives, friends, neighbors, and countrymen—we seek their approval and avoid their disapprobation. It
is through this pursuit of love and happiness humans acquire sympathy, the ability to share and approve
the feelings or interests of another person. However, to truly sympathize with another’s feelings—to
empathize with them (although Smith never used this term)—we must first overcome our own
selfishness.

Protestant Ethics

Leif Geiges

Key People:Max Weber

Protestant ethic, in sociological theory, the value attached to hard work, thrift, and efficiency in one’s
worldly calling, which, especially in the Calvinist view, were deemed signs of an individual’s election, or
eternal salvation.

German sociologist Max Weber, in The Protestant Ethic and the Spirit of Capitalism (1904–05), held that
the Protestant ethic was an important factor in the economic success of Protestant groups in the early
stages of European capitalism; because worldly success could be interpreted as a sign of eternal
salvation, it was vigorously pursued. Calvinism’s antipathy to the worship of the flesh, its emphasis on
the religious duty to make fruitful use of the God-given resources at each individual’s disposal, and its
orderliness and systemization of ways of life were also regarded by Weber as economically significant
aspects of the ethic.

Conclusion :

Illustrates the complexity of Smith’s thought beyond free market interpretations, showing his emphasis
on social relationships and significant roles for government in the economy

Thoughtfully examines the importance of happiness as a social good to be pursued by policy making.

Eclipse of the Orient

Oriental" means generally "eastern". It is a traditional designation (especially when capitalized) for
anything belonging to the Orient or "East" (for Asia), and especially of its Eastern culture.

20th century intellectualism in Europe and the US lost sight of higher Reason, and the problem
continues until this day. People are simply unaware of the distinction, and blithely assume that
ratiocination yields the highest and most accurate form of knowledge.

What is the place of Eastern thought - Buddhism, Taoism, Hinduism, Confucianism - in the Western
intellectual tradition? Oriental Enlightenment shows how, despite current talk of 'globalization', there is
still a reluctance to accept that the West could have borrowed anything of significance from the East,
and explores a critique of the 'orientalist' view that we must regard any study of the East through the
lens of Western colonialism and domination.

Oriental Enlightenment provides a lucid introduction to the fascination Eastern thought has exerted on
Western minds since the Renaissance.

Locke's theory of empiricism is built on the idea that there is no knowledge innate to the mind. Because
of this, sensory experience of the material world is how one must attain valid knowledge. This is done
through the interrelationships of universal simple ideas, composition of complex ideas, and interaction
with material objects in the world through their primary and secondary qualities.

What is tabula rasa?

Tabula rasa is the Latinization of the phrase "blank slate" and refers to Locke's phrase 'white paper' in
his Essay Concerning Human Understanding. It represents the mind of the child as being without innate
inborn ideas or knowledge of any kind.

David Hume

Hume was an Empiricist, meaning he believed "causes and effects are discoverable not by reason, but by
experience". He goes on to say that, even with the perspective of the past, humanity cannot dictate
future events because thoughts of the past are limited, compared to the possibilities for the future.

Hume believed that what we know comes from sense experience, a school of thought called empiricism.
As a Scottish philosopher living in the 18th century, he took a great interest in the scientific discoveries
of his time. These discoveries involved testing, calculations, and experiments to learn about the world.

Adam Smith: Smith believed that reason is subservient to passions, and that people will only act if their
sentiments incline them to do so. He also believed that people's desires are shaped by social interaction,
and that it's difficult to know one's true intentions. Smith's economic conclusions included that free
trade, infrastructure improvements, labor specialization, and economies of scale and scope are the
direct causes of a nation's wealth.
John Locke: Truth is independent of human desires

Locke believed that truth was independent of human desires and tastes, and that at least some of it was
within human understanding.

The quantity theory of money

Locke believed that the demand for money is regulated by its quantity, regardless of whether the
demand is unlimited or constant.

Sensory experience is the only source of truth

Locke believed that sensory experience was the only undeniable source of truth because it didn't rely on
faith or pre-given information.

David Hume: Hume concluded that no theory of reality is possible, and that knowledge is limited to what
can be experienced. He also argued that value judgments cannot be made purely on the basis of facts,
and that economic freedom is a necessary condition for political freedom. Hume's philosophical
empiricism and skepticism had a lasting impact.