The story

Smith, Adam - History

Smith, Adam

Smith, Adam (1723-1790) Economist and Philosopher: Born in Scotland, he studied at Glasgow and Oxford. In Edinburgh, he joined an intellectual circle which included such men as David Hume. He became a professor of logic, then of moral philosophy at Glasgow, where he wrote Theory of Moral Sentiments based on Hume's teachings. Smith traveled to Paris as the tutor of a duke, then returned to Edinburgh, where he witness the illness and death of his friend Hume. He edited Hume's non-controversial papers and wrote a touching account of his death. In 1776, Hume published a five-chapter volume on the consequences of economic freedom, which was intended to be the first book in a series discussing a complete theory of society. This volume was entitled An Inquiry into the Nature and Causes of the Wealth of Nations, and it became the seminal work in the field later called economics. One of the chapters dealt with colonies, and Smith asserted that mother countries should not regulate or restrict the trade of the colonies, an idea which the American colonists found appealing on grounds of principle. The Inquiry was a work of both political economy and philosophical history, and Smith's description of the progress of societies enabled Americans to re-examine their ideas about progress after they won independence from Britain. Smith also wrote about languages, astronomy, classical physics and logic, and the arts. He was appointed commissioner of customs in Edinburgh in 1778, and named lord rector of Glasgow University in 1787. Three years later, he died.

In Smith’s day, people saw national wealth in terms of a country’s stock of gold and silver. Importing goods from abroad was seen as damaging because it meant that this wealth must be given up to pay for them exporting goods was seen as good because these precious metals came back.

So countries maintained a vast network of controls to prevent this metal wealth draining out – taxes on imports, subsidies to exporters, and protection for domestic industries. The same protectionism ruled at home too. Cities prevented artisans from other towns moving in to ply their trade manufacturers and merchants petitioned the king for protective monopolies labour-saving devices were banned as a threat to existing producers.

Abigail Adams: Early Life

Born in 1744, Abigail Smith grew up in Weymouth, Massachusetts, a village some 12 miles from Boston. Her father, William Smith, was minister of the First Congregational Church there, and also made a living as a farmer.

He and his wife, Elizabeth Quincy Smith, both belonged to distinguished families in New England. Elizabeth’s father, John Quincy, was active in the colonial government and served as Speaker of the Massachusetts Assembly for 40 years, and his career in public service greatly influenced his granddaughter.

Educated at home, Abigail read widely from the family library. When she was just 11, she and her sisters began receiving tutoring from Richard Cranch, a transplant from England who later married Abigail’s elder sister, Mary.

A friend of Cranch’s, a young lawyer named John Adams, met 17-year-old Abigail and fell in love. After a long engagement that her parents insisted on, they married on October 24, 1764, when Abigail was 19 and John was 28.

What is Adam Smith’s economic theory?

Adam Smith’s economic theory is the idea that markets tend to work best when the government leaves them alone. Smith argued that rational people (aka acting in their own interest) would naturally find the best way to use the nation’s resources — He viewed government regulation as potentially detrimental to economic growth.

Smith’s laissez-faire (French for “let it/them do”) approach to economic policy in the 18th-century came at a time when governments discouraged international trade. Many believed that a nation’s wealth was measured by the amount of gold it had — And while imports meant bringing goods into a country, it also meant sending gold out. Domestic businesses (aka merchants) tended to support these policies because it eliminated foreign competition for their products. These merchant protection policies later became known as mercantilism .

In The Wealth of Nations, Smith showed that a nation’s wealth wasn’t determined by the precious metals it held in its vaults. Instead, he argued that wealth existed in the value a commercial society created through production and trade. Smith’s ideas formed the basis for how most countries determine their wealth to this day — By determining the market value of the products created within their borders (aka gross domestic product ), or by their people (aka gross national product ).

Adam-ondi-Ahman, Missouri

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

�m-ondi-Ahman,” in Encyclopedia of Latter-day Saint History, 7 �m-ondi-Ahman," in Encyclopedia of Mormonism, 1:19� Baugh, �ll to Arms,” 154�.  

Encyclopedia of Latter-day Saint History. Edited by Arnold K. Garr, Donald Q. Cannon, and Richard O. Cowan. Salt Lake City: Deseret Book, 2000.

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

Baugh, Alexander L. 𠇊 Call to Arms: The 1838 Mormon Defense of Northern Missouri.” PhD diss., Brigham Young University, 1996. Also available as A Call to Arms: The 1838 Mormon Defense of Northern Missouri, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

�m-ondi-Ahman," in Encyclopedia of Mormonism, 1:19� Gentry, “Latter-day Saints in Northern Missouri,” 83�.  

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

Gentry, Leland Homer. 𠇊 History of the Latter-day Saints in Northern Missouri from 1836 to 1839.” PhD diss., Brigham Young University, 1965. Also available as A History of the Latter-day Saints in Northern Missouri from 1836 to 1839, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

Gentry, “Latter-day Saints in Northern Missouri,” 83� JS, Journal, 19 May 1838 Berrett, Sacred Places, 4:364� Brown et al., Historical Atlas, 42.  

Gentry, Leland Homer. 𠇊 History of the Latter-day Saints in Northern Missouri from 1836 to 1839.” PhD diss., Brigham Young University, 1965. Also available as A History of the Latter-day Saints in Northern Missouri from 1836 to 1839, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

Berrett, LaMar C., ed. Sacred Places: A Comprehensive Guide to Early LDS Historical Sites. 6 vols. Salt Lake City: Deseret Book, 1999�.

Brown, S. Kent, Donald Q. Cannon, and Richard H. Jackson, eds. Historical Atlas of Mormonism. New York: Simon and Schuster, 1994.

Gentry, “Latter-day Saints in Northern Missouri,” 83�.  

Gentry, Leland Homer. 𠇊 History of the Latter-day Saints in Northern Missouri from 1836 to 1839.” PhD diss., Brigham Young University, 1965. Also available as A History of the Latter-day Saints in Northern Missouri from 1836 to 1839, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

Leopard et al., History of Daviess and Gentry Counties, 94, 124.  

Leopard, John C., Buel Leopard, R. M. McCammon, and Mary McCammon Hillman. History of Daviess and Gentry Counties, Missouri. Topeka, KS: Historical Publishing Co., 1922.

Gentry, “Latter-day Saints in Northern Missouri,” 83�.  

Gentry, Leland Homer. 𠇊 History of the Latter-day Saints in Northern Missouri from 1836 to 1839.” PhD diss., Brigham Young University, 1965. Also available as A History of the Latter-day Saints in Northern Missouri from 1836 to 1839, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

�m-ondi-Ahman,” in Encyclopedia of Latter-day Saint History, 7 �m-ondi-Ahman," in Encyclopedia of Mormonism, 1:19�.  

Encyclopedia of Latter-day Saint History. Edited by Arnold K. Garr, Donald Q. Cannon, and Richard O. Cowan. Salt Lake City: Deseret Book, 2000.

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

�m-ondi-Ahman," in Encyclopedia of Mormonism, 1:19�.  

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

Baugh, Alexander L. 𠇊 Call to Arms: The 1838 Mormon Defense of Northern Missouri.” PhD diss., Brigham Young University, 1996. Also available as A Call to Arms: The 1838 Mormon Defense of Northern Missouri, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

�m-ondi-Ahman," in Encyclopedia of Mormonism, 1:19� Brown et al., Historical Atlas, 42.  

Encyclopedia of Mormonism. Edited by Daniel H. Ludlow. 5 vols. New York: Macmillan, 1992.

Brown, S. Kent, Donald Q. Cannon, and Richard H. Jackson, eds. Historical Atlas of Mormonism. New York: Simon and Schuster, 1994.

Baugh, �ll to Arms,” 154� Berrett, Sacred Places, 4:364�.  

Baugh, Alexander L. 𠇊 Call to Arms: The 1838 Mormon Defense of Northern Missouri.” PhD diss., Brigham Young University, 1996. Also available as A Call to Arms: The 1838 Mormon Defense of Northern Missouri, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

Berrett, LaMar C., ed. Sacred Places: A Comprehensive Guide to Early LDS Historical Sites. 6 vols. Salt Lake City: Deseret Book, 1999�.

Baugh, �ll to Arms,” 154� Berrett, Sacred Places, 4:364�, 424�.  

Baugh, Alexander L. 𠇊 Call to Arms: The 1838 Mormon Defense of Northern Missouri.” PhD diss., Brigham Young University, 1996. Also available as A Call to Arms: The 1838 Mormon Defense of Northern Missouri, Dissertations in Latter-day Saint History (Provo, UT: Joseph Fielding Smith Institute for Latter-day Saint History BYU Studies, 2000).

Berrett, LaMar C., ed. Sacred Places: A Comprehensive Guide to Early LDS Historical Sites. 6 vols. Salt Lake City: Deseret Book, 1999�.

Cancel Culture Stalks Adam Smith, an Ardent Foe of Slavery

Statue of economist Adam Smith in Edinburgh, Scotland, in 2008. (David Moir/Reuters)

Editor’s Note: This article is based in part on “Adam Smith’s Rebuke of the Slave Trade, 1759,” published previously in The Independent Review.

T he political left often invokes “race” to intimidate its opponents when arguing against them. That impetus may not be conscious, but the effect can be real.

A case in point concerns the legacy of Adam Smith, the great Scottish moral philosopher and economist. His grave and statue in Edinburgh, Scotland, are going to be considered for “reconfiguring” by the “Slavery and Colonialism Legacy Review Group,” a body appointed by the left-leaning Edinburgh City Council, according to an article in The Telegraph.

The article speaks of a dossier in which Smith has been “linked” to “slavery and colonialism.” Smith can be linked to slavery and colonialism only in the same way that Martin Luther, the great religious reformer, can be linked to indulgences and Martin Luther King Jr., the great civil-rights leader, can be linked to Jim Crow.

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Adam Smith fulminated against the injustice of slavery in his first book, The Theory of Moral Sentiments, speaking of slave traders as the brutal and baseless refuse of the jails of Europe.

“There is not a negro from the coast of Africa who does not, in this respect, possess a degree of magnanimity which the soul of his sordid master is too often scarce capable of conceiving,” Smith wrote. “Fortune never exerted more cruelly her empire over mankind than when she subjected those nations of heroes to the refuse of the jails of Europe, to wretches who possess the virtues neither of the countries which they come from, nor of those which they go to, and whose levity, brutality, and baseness, so justly expose them to the contempt of the vanquished.”

Smith endorsed the contempt that victims of slavery felt for their oppressors, and led his readers to feel that contempt as well.

He framed the condemnation in a way so as to induce British readers to sympathize and identify with the victims of the slavers. Compared to the French and Italians, he suggested, the British were less refined and amiable, but more respectable. If Britons felt an invidious pride at being told that they were a step above in the respectable virtues, imagine their sentiment in pondering Smith’s words that the Africans are five steps above them in those same virtues.

Smith’s words, published in 1759, came 48 years before Britain’s 1807 act to abolish the slave trade. His words were quoted by a number of others, including Thomas Clarkson in his famous 1808 two-volume account of the abolitionist movement, The History of the Rise, Progress, & Accomplishment of the Abolition of the African Slave-trade, by the British Parliament.

In a Glasgow classroom on February 16, 1763, a student recorded Smith as saying that slavery was born of the “love of domination and tyrannizing,” which is why slaveholders clung to it. Contrary to popular belief, slavery was not profitable, and, as early as 1776, in his landmark book, Wealth of Nations, Smith emphasized that costliness.

So, in the first of Smith’s two published books, he railed against the injustice of slavery. And in the second, he demonstrated that slavery wasn’t even in slaveholders’ self-interest.

For years Smith was acknowledged by British abolitionists as an opponent of slavery. Yet now, in 2021, we’re supposed to believe that his “link” to slavery was discreditable?

Smith is not the only Scottish professor whom Clarkson commemorated in his great 1808 work. The others include Smith’s Glasgow teacher, Francis Hutcheson, and Smith’s Glasgow student, John Millar, as well as William Robertson of Edinburgh University. Clarkson also could have noted Gershom Carmichael, Hutcheson’s teacher at Glasgow. In other words, a long line of liberal moral philosophers helped to persuade their fellow citizens of the rank injustice of slavery. Their words deserve to be commemorated.

As for colonialism, Smith again is guilty. . . of being an opponent. In Wealth of Nations, appearing just a few months before the American Declaration of Independence, he suggested that the British government just let the American colonies go. And he advocated bringing an end to the British East India Company, which effectively ruled India as a monopoly backed by the Crown.

What impetus, conscious or otherwise, is behind the interest in effacing Smith from Edinburgh? Clarkson was deeply involved with William Wilberforce, one of Britain’s most prominent abolitionists, in the cause against slavery. If he saw fit to celebrate Smith as a leader in that cause, where did he go wrong?

The answer is that Clarkson didn’t go wrong. Smith had no association with slavery and should be seen today as a giant in the kind of clear-headed moral thinking that the political left, as it pursues its antiliberal crusades in tolerant societies such as the U.K., finds so challenging.

The same is happening in the United States, of course. Leftists are making quick work of towering figures from our past. But for the sake of our culture and of ourselves, we shouldn’t let them lie about history.


Born in Washington, D.C. and raised in SeaTac, Washington, Smith was adopted as an infant by Lelia June (née Grant) and his maternal uncle Ben Martin Smith III. [1] [2] He attended Bow Lake Elementary and Chinook Middle School, before graduating from Tyee High School in 1983. While in high school Smith participated in the Close Up Washington civic education program. His father, who worked for United Airlines as a ramp serviceman and was active in the Machinists' Union, died when Smith was 19. [3]

Smith attended Western Washington University in Bellingham for a year, later graduating from Fordham University in 1987 with a Bachelor of Arts degree in political science. He completed a Juris Doctor from the University of Washington in 1990. He worked his way through college by loading trucks for United Parcel Service.

After law school, Smith worked as a private practice attorney with Cromwell, Mendoza & Belur. From 1993 to 1995, he served as a prosecutor for the city of Seattle. In 1996, he worked temporarily as a pro tem judge.

Tenure Edit

Smith served in the Washington State Senate from 1991 to 1997. He was just 25 years old at the time of his election in 1990, defeating a 13-year incumbent Republican, Eleanor Lee, to become the youngest State Senator in the country. Smith won his seat in the U.S. House of Representatives in 1996 by defeating another incumbent Republican, religious conservative Randy Tate. Smith has been reelected 12 times since then without serious opposition, as what was originally drawn as a "fair fight" district turned into a fairly safe Democratic seat.

For his first seven terms, Smith represented a district that straddled Interstate 5, from Renton through Tacoma to just outside of Olympia. Smith's district was significantly redrawn after the 2010 census. It absorbed much of southeast Seattle, as well as most of the Eastside. As a result, it became the state's first with a majority of residents who are racial or ethnic minorities. [4] It is also the second-most Democratic district in the state only the neighboring 7th district, which covers the rest of Seattle, is more Democratic. For the 2012 election, Smith moved from his longtime home in Tacoma to Bellevue.

He has been a leader in moderate "New Democrats" organizations. He serves as the chair of the political action committee of the New Democrat Coalition. [5]

On October 10, 2002, Smith was among the 81 Democratic members of the House voting in favor of authorizing the invasion of Iraq. [6] In March 2012, Smith said that US troops had done “amazing work” in Afghanistan and that it was “time to bring the troops home.” [7]

In 2006, Smith won his sixth term in Congress against Republican Steve Cofchin. Smith won 65.7% of the vote to Cofchin's 34.3%. [8]

In April 2007, Smith supported U.S. Senator Barack Obama in the 2008 U.S. presidential election. [9] He also appeared on Hardball with Chris Matthews speaking for Obama. In the same year he also appeared on the Colbert Report, in the show's 434-part series known as "Better Know A District".

Smith voted against the Protect America Act of 2007, which has been criticized for violating Americans' civil liberties by allowing wiretapping without issued warrants. [10] He also voted in favor of the 2001 Patriot Act and in favor of extending the “Bush administration's warrantless wiretapping program.” [11]

In 2008, Smith won a seventh term in the House, defeating James Postma, a 74-year-old retired engineer running on a pro-nuclear power platform, with 65% of the vote. [12]

On December 16, 2010, Smith defeated Silvestre Reyes and Loretta Sanchez to become the Ranking Member of the House Armed Services Committee after Chairman Ike Skelton was defeated for reelection. In the first round, Sanchez and Smith earned 64 votes with Reyes earning 53. In the runoff, Smith defeated Sanchez by 11 votes. [13]

In 2011, recognized for his work in fighting global poverty, Smith became only the second member of Congress selected to the Borgen Project's Board of Directors. [14] In the same year, he argued against cuts that could “jeopardize our national security” and leave the US “more vulnerable to nuclear terrorism.” [15]

In 2001, Congress passed the Authorization for Use of Military Force (AUMF), [16] which gave the President authority to use “all necessary and appropriate force” against those who committed and aided the September 11 attacks. While this power has been rarely used to detain persons in the United States, Smith introduced a bill to ensure that any individual detained on U.S. soil under the AUMF has access to due process and the federal court system. [17] The bill also prohibits military commissions and indefinite detention for individuals detained in the United States and affirms that any trial proceedings “shall have all the due process as provided for under the Constitution.”

Smith co-sponsored, with Republican congressman Mac Thornberry, an amendment to the fiscal 2013 defense spending bill reversing previous bans on disseminating Defense and State Department propaganda in the United States, reversing the Smith–Mundt Act of 1948 and the Foreign Relations Authorization Act of 1987, designed to protect U.S. audiences from government misinformation campaigns. [18] The bill passed on May 18, 2012, 299 to 120. [19]

Issues Edit

  • Smith voted to approve the invasion of Iraq. [6]
  • Smith voted to approve the Cyber Intelligence Sharing and Protection Act (CISPA) [20]
  • Smith Co-Sponsored the Smith-Mundt Modernization Act of 2012 which allowed domestic dissemination of US propaganda. [21]
  • Smith voted against an amendment that would restrict the National Security Agency from collecting phone records of Americans suspected of no crimes without a warrant [22]

Committee assignments Edit

  • Committee on Armed Services (Chair)
    • As the chairman on the committee, Smith may serve as an ex officio member of all subcommittees.

    Caucus memberships Edit

    • 21st Century Healthcare Caucus
    • American Sikh Congressional Caucus
    • European Union Caucus
    • Goods Movement Caucus
    • Intellectual Property Caucus (Co-Chair) [23]
    • Waterways Caucus
    • Congressional Arts Caucus [24][25][26][27][28][29]

    In 1993, Adam married Spokane native Sara Bickle-Eldridge, a graduate of the University of Washington and Seattle University School of Law. Their daughter, Kendall, was born in July 2000, followed by their son, Jack, in June 2003. [30]

    Smith, Adam

    Smith, Adam (1723-1790): Scottish philosopher and political economist.

    Born in Kircaldy in Scotland, Adam Smith was raised in the middle-class family of a public official. In 1737, he attended the University of Glasgow where he was a student of Hutcheson, Francis, who exercised a profound influence on his thought. He left the University to 1740 to study classical literature at Oxford. In 1750, he was appointed to the Chair of Logic at the University of Glasgow and a year later to the Chair of Moral Philosophy, which Hutcheson had held. During this time, he published his Theory of Moral Sentiments in 1759 and lectured on a variety of topics including rhetoric and jurisprudence, the notes from which were preserved by his students.

    In 1764, Smith resigned from the University to accompany the young Duke of Buccleuch as a tutor on his tour of the continent. After settling for a few months in Paris, where he frequented the intellectual circles of the philosophes, he returned to Great Britain in 1766. In 1776, he published his seminal An Inquiry in the Nature and Causes of the Wealth of Nations. After the work’s publication he was appointed Commissioner of Customs in Scotland, from which he became involved in issues of free trade for Ireland.

    Smith’s two great masterworks are the Theory of Moral Sentiments and The Wealth of Nations and the difficulty of reconciling the doctrines of the two having become known as “The Adam Smith Problem.” With The Theory of Moral Sentiments, Smith gained international attention with his incorporation of Christian and Stoic views in a sophisticated and original reworking of Scottish moral sense theory, which asserted that humans have a distinctive moral sense that enables them to distinguish between right and wrong, virtue and vice. Smith identified two capacities, sympathy and imagination, as fundamental in matters of morality. The capacity for sympathy binds society together by enabling persons to transcend narrow self-interest and interesting them in the circumstances of others. Imagination permits one to project oneself into the situation of another and view oneself from that other person’s point of view. Taken together, persons are able to assume the standpoint of an impartial spectator in evaluating theirs and other’s actions and character. The book went through six editions in his lifetime with a final revised edition published the year he died.

    Smith’s The Wealth of Nations was the first great treatise on economics and founded the discipline. Smith’s goal was to promote economic growth in order to generate a high-wage economy that would redound to the benefit of the majority. Influenced by the doctrines of physiocrats such as Quesnay, François, Smith criticized the dominant mercantilist view, which defined national wealth in terms of the accumulation of specie and sought to generate a net inflow of it by means of restrictions on trade. Instead, Smith defined national wealth in terms of the goods produced by human labor, with their relative prices determined by the amount of labor involved in their production. The primary source of economic growth, then, was the increasing productivity of that labor, generated by division of labor into different tasks. Along with Ferguson, Adam, Smith was one of the first to call attention to the economic importance of specialization.

    As a matter of government policy, Smith argued for free trade and free markets. According to Smith, human beings have a natural tendency to trade, and the pursuit of self-interest by economic agents increased production and was coordinated as if by an invisible hand to promote the general well-being. Thus, mercantilist restrictions were counterproductive. Smith did identify the tendency monopoly and the formation of cartels as impediments to trade in need of redress by the government. Furthermore, government action was required in areas where the market did not function effectively. Hence, he proposed public works to expand the physical infrastructure, thereby extending the market and its consequent division of labor, and public support for education as an investment in human capital.

    Though generally laudatory of the free market, Smith was concerned with some of its negative, dehumanizing effects. Specialization and the predominance of exchange relationships threatened to undermine the imagination and sympathy required for moral conduct. Education, religion, and voluntary associations operating in a robust public sphere were necessary counterweights to these negative consequences. Furthermore, commerce tends to detach the merchant from his community and weaken his devotion to it. Smith advised merchants to make their fortunes in trade and invest it in land.

    Istvan Hont and Michael Ignatieff, Wealth and Virtue: The Shaping of Political Economy in the Scottish Enlightenment, 1983.

    108 Famous Quotes By Adam Smith, The Author Of Wealth Of Nations

    Had it not been for Scottish philosopher and political economist Adam Smith the world would have definitely been a poorer place to live in. a towering figure in the history of economic thought, Adam Smith was a key figure of the Scottish Enlightenment who is best known for his book, the magnum opus of his life, ‘The Wealth of Nations’. He was the first political economist to pen a comprehensive system of political economy. His classic work which is now considered as the ‘Bible of capitalism’ set the first modern work of economics, and became a precursor to the modern adaptation of the academic discipline of economics. Through his book, he laid the foundation of the classical free market economic theory, a concept unknown to the world until then. The book went on to feature in the 100 Best Scottish Books of all time.Apart from his fiscal theory, Adam Smith was a great moral philosopher and pioneer of economic principles. His quotes till date stand relevant to the society’s glaring economic needs, moral principles and give a glimpse of the real factors that assure a better life and a happy future. Go through them and see for yourself.

    Science is the great antidote to the poison of enthusiasm and superstition.

    The first thing you have to know is yourself. A man who knows himself can step outside himself and watch his own reactions like an observer.

    All money is a matter of belief.

    The real tragedy of the poor is the poverty of their aspirations.

    Labour was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased.

    Happiness never lays its finger on its pulse.

    It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country.

    Consumption is the sole end and purpose of all production and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

    What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?

    No complaint. is more common than that of a scarcity of money.

    Never complain of that of which it is at all times in your power to rid yourself.

    Humanity is the virtue of a woman, generosity that of a man.

    The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals.

    As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.

    With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches.

    On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity.

    Great ambition, the desire of real superiority, of leading and directing, seems to be altogether peculiar to man, and speech is the great instrument of ambition.

    Resentment seems to have been given us by nature for a defense, and for a defense only! It is the safeguard of justice and the security of innocence.

    Adventure upon all the tickets in the lottery, and you lose for certain and the greater the number of your tickets the nearer your approach to this certainty.

    I have never known much good done by those who affected to trade for the public good.

    Adam Smith&rsquos Theory of Economic Development | Economics

    Adam Smith is known as father of economics. We get his ideas about economic development from his well-known book, “An Enquiry into the Nature and Causes of Wealth of Nations” (1976) which has tremendously influenced the thinking about economic growth and development.

    We briefly explain below his ideas about economic development. We will study below that he advocated the policy of laissez faire, that is, non-intervention of government in economic activities of the individuals. He laid stress on individual freedom in conducting their economic affairs without any obstructions and restrictions by the Government. He advocated free trade among nations of the world and urged that all restrictions on foreign trade should be removed to promote international specialization so as to increase the incomes of the nations.

    Aspects of Adam Smith’s Theory:

    The crucial aspects of development theory as propounded by Adam Smith are – (1) division of labour and (2) capital accumulation. Productivity of labors increases through division of labour. The two factors that facilitate the use of more division of labour are capital accumulation and size of market. We explain below these factors in detail. Also learn about the relevance of Adam Smith’s Theory to developing countries.

    A very important contribution made by Adam Smith to the analysis of the factors that bring about expansion of output is the division of labour. His treatment of this aspect of production is classic. He pointed out that there was a natural tendency among human beings “to truck, barter, and exchange one thing for another.” Among the benefits of division of labour he refers to increase in dexterity, saving in time, and invention of better machines and appliances. But Adam Smith points out that the degree of division of labour is limited by the extent of the market. Division of labour is profitable only if there is adequate market for the goods produced. He, thus, emphasized the expansion of international trade, which widens market for goods.

    One of the most significant contributions to economics by Adam Smith was to introduce the idea of increasing returns caused by division of labour. He thought the gain from by division of labour or specialization was a basic feature of social economy otherwise everyone, like Robinson Crusoe, will produce everything they want for themselves. Thus Thirlwall writes, “It is the notion of increasing returns, based on division of labour that lay at the heart of Adam Smith’s optimistic vision of economic progress as a self-generating process, in contrast to later classical economists who believed that economies would end up in a stationary state owing to diminishing returns in agriculture.”

    Given the crucial significance of increasing returns based on division of labour, productivity of labour rises with the increase in the size of market. Along with division of labour it is acceleration of investment or capital accumulation that leads to the increase in growth of output and living standards of people. It is worth noting that Adam Smith expressed the view that industry generally permitted greater scope for division of labour or specialization than agriculture and, therefore, in rich developed countries industrialization had taken place to a greater extent.

    Another important related notion put forward by Adam Smith was that division of labour is limited by the size of market’. If the extent of market is small, it will not be profitable to produce on a large scale which requires introducing a higher degree of division of labour or specialization.

    This is because if size of market for a good (i.e., the magnitude of demand for it) is quite small, it will not be profitable to introduce a higher degree of division of labour along with the use of large capital stock. In the absence of adequate demand, only a little degree of division of labour or specialization can be used and a good deal of capital stock is likely to remain underutilized. It is in this context that he advocated for free international trade which leads to the increase in the extent of market for goods and makes their production on a large scale profitable and induces the capitalist class to accumulate more capital.

    2. Accumulation of Capital:

    As a means of economic development, Adam Smith gave an important place to saving and accumulation of capital. To quote his words, “Capitalists are increased by parsimony and diminished by prodigality and misconduct parsimony and not industry is the immediate cause of the increase of capital. Industry indeed provides the subject which parsimony accumulates. But whatever industry might acquire, if parsimony did not save and store up, the capital would never be greater.” Here is a clear guideline and suggestion to the developing countries. Their greatest obstacle to economic development is the deficiency of capital. In this respect they are caught up in a vicious circle of poverty.

    Productivity of people is low because the capital stock is small capital stock is small because savings of the people are small and savings are low because incomes of the people are small due to the their low productivity. The way out of the vicious circle, according to Smith, is if capitalist class that saves most of their profits and invest in capital accumulation for accelerating economic growth. Thus, according to Adam Smith, saving of the society is increased by ‘parsimony’ (i.e., habit of frugality) of the capitalists. In fact, Adam Smith assumed that capitalist class behaves in such a manner and save a very large proportion of their profits.

    Besides, capital accumulation, according to Smith, facilitates a greater degree of division of labour which causes productivity of labour to rise. Without capital accumulation the extent of division of labour cannot be increased much. Increase in capital formation leads to the production of different types of specialized equipment which are operated by different classes of workers who are skilled and specialized in various tasks. Thus, capital accumulation along with division of labour leads to the increase in industrial output and employment.

    Development Process is Cumulative:

    Adam Smith points out that the development process once started gathers momentum and becomes cumulative, that is, it feeds upon itself. This happens in the following ways. First, increase in saving causes more accumulation of capital which in turn facilitates a great degree of division of labour and thereby raising productivity of labour and levels of incomes of the people. Second, the higher incomes due to the capital accumulation and a higher degree of division of labour lead to the increase in the size of market or demand for goods. This expansion in demand for goods causes increase in national output and income which brings about more saving and further investment and capital accumulation. In this way spiral of economic growth rises higher and higher. Third, the increase in size of market and availability of capital induces improvement in technology.

    This cumulative process of development provides a cheerful note for the developing countries. That is, if they start the development process in right earnest they can be sure of further and rapid economic development and can catch up with the presently advanced developed countries.

    Sequence of Development:

    According to Adam Smith, the natural course of development is first agriculture, then industry and finally commerce. Agriculture creates a surplus and increases the purchasing power of the people which generates demand for industrial products. It also supplies raw materials for industries. Agricultural growth thus provides a base for industrial development.

    Through his belief in increasing returns based on the increase in the extent of division of labour. Adam Smith was optimistic about economic growth in future. In fact, he emphasized the cumulative and self-propelling nature of development process. However, he also pointed out that there is limit to the economic development which ultimately lands a free market economy in a stationary state in which further capital accumulation ceases to take place and therefore there is no more growth of the economy. This happens because of two reasons. First, there is a limited amount of natural resources at the disposal of the economy and after passing through a phase of growth a point is reached when they are fully utilized and do not permit further growth of output.

    The second factor responsible for occurrence of stationary state is fall in profits which reduces inducement to invest further. Profits tend to fall as a result of competition among the capitalists, i.e., investors. This results in decrease in demand for more capital accumulation. With slackening of capital accumulation, demand for labour decreases resulting in decline in wages. Thus, after a significant economic growth, stationary state of the economy is reached where further capital accumulation ceases and profits fall to a low level and with the further increase in population wages become equal to the subsistence level.

    Policy of Laissez-Faire:

    As an instrument of economic development, Adam Smith was a strong champion of the policy of laissez-faire or allowing economic freedom to every individual not hampered in any manner by State action. He believed that “there is a set of rules of rights or justice, and perhaps even of morality in general, which are, or may be known by all men by the help either of ‘reason’ or of a moral sense.” He was thus a strong believer in ‘natural reason’ guiding human affairs and he regarded State interference not only superfluous but positively harmful to economic progress.

    Guided by enlightened self-interest, each individual was capable of promoting his own well-being and while promoting his own interests he promotes the welfare of the whole society in the process. It is, therefore, according to Adam Smith, the production by individuals is led as if by the ‘invisible hand’, to promote social welfare. Thus, though individual capitalists produce goods to make profits for them but in doing so they promote social welfare though it was no part of their intention. As a matter of policy, therefore, Adam Smith advocated the removal of all restrictions on trade, choice of occupation and the use of property by individuals.

    Critical Evaluation of Adam Smith’s Theory of Development:

    The great influence of Adam Smith on subsequent thinkers can be traced in the pattern he set for later discussion on development problems. The emphasis he laid on the accumulation of capital as fundamental to the development process finds a place in subsequent theories of development.

    His idea of stationary state is also taken up and repeated in later writings on the subject. The policy of laissez-faire advocated by him is emphasized in the theories propounded by later classical writers. Similarly, his view that development was gradual and cumulative process was adopted by subsequent economists.

    One of Smith’s significant contributions to the theory of development has been to introduce into economics the concept of increasing returns based on the division of labour. According to him, gains from division of labour or specialization are the basis of a social economy as without it man’s productivity will be very low. His model represents optimistic view of development in contrast to the pessimistic views of later classical economists such as Ricardo and Malthus and to Marx A.P. Thirlwall rightly writes, “It is the notion of increasing returns, based on the division of labour that lay at the heart of his optimistic version of economic progress as a self-generating process in contrast to later classical economists who believed that economies would end up in a stationary state owing to diminishing returns to agriculture and also in contrast to Marx who believed that capitalism would collapse through its own contradictions.” Increasing returns implies rising labour productivity and higher per capita income while diminishing returns means fall in labour productivity and therefore per capita income which set a limit to the growth of output and employment.

    The most important contribution of Smith to the theory of economic development is his emphasis on capital accumulation and division of labour as the factors that determine economic growth of a country and further that capital accumulation or investment depends on savings out of profit generated by growth of industry and agriculture. This is very much relevant to the growth problem of present- day developing countries which requires acceleration of investment and capital formation.

    Besides, Smith’s emphasis on division of labour for raising productivity of labour is a highly significant contribution to economic thought and to the theory of development. He uses the term ‘Division of Labour’ in a wider sense which incorporates technological progress though he does not say so explicitly. He also rightly pointed out that division of labour provides greater scope for capital accumulation and the use of machinery in the complex production processes in the production of commodities that result in higher labour productivity.

    It is worth mentioning that Smith’s vision of development as a cumulative interactive process based on the division of labour and increasing returns remained neglected for a long time until an American economist, Allyn Young, revived it in 1928 in his important paper entitled “Increasing Returns and Economic Progress”. It may be noted that unlike Marshall, Young was not simply concerned with the factors that raise productivity or cost-reduction within an individual industry as it expands but explained the increase in productivities in interrelated industries of the economy as a whole. Therefore, the notion of increasing returns put forward by Young is sometimes called macroeconomics of scale.

    Finally, it goes to the credit of Smith that he explained the gains from international trade based on specialization by various countries on the basis of greater efficiency in the production of different goods and then trade with each other. That is, he extended his division of labour to the international level. He advocated free trade as it would increase the size of market for goods produced by different countries to reap benefits of higher degree of division of labour.

    Relevance of Adam Smith’s Theory to Developing Countries:

    Adam Smith based his theory of development on the socio-economic conditions prevailing at his time in Europe. It was a period when the seeds of industrialization had already been dispersed in the economy. Industrial revolution was in its inception. Smith’s views on development are, therefore, an answer to the questions posed by the problems of economic transition from a pre-industrial to an industrial England.

    Basically, he, like all other classicals, regarded that economic welfare of the society was roughly proportional to the volume of output and level of economic activity. The society was regarded to be composed of two classes—the capitalists and the labourers. The wages being at the subsistence level, the labouring class was incapable of saving. Only the capitalists were able to save.

    The institution of private property, social attitudes and existence of perfect competition were considered congenial to economic growth. He believed in political liberalism and the philosophy of laissez-faire. He wanted that government should perform only those functions which individuals cannot. In his view the forces of competition were powerful enough to establish an optimum equilibrium in a society.

    Division of labour symbolizes the core of Smith’s theory of development. It in turn depends on the ‘size of the subsistence fund with which to maintain labour, i.e., on the amount of savings’. As such, division of labour has got to be preceded by capital accumulation. Further, ‘capitals are increased by parsimony and diminished by prodigality and misconduct’. Division of labour is also dependent on the extent of market. So Smith favoured a widening of market through greater freedom of exchange.

    Now, given adequate size of market, and sufficient amount of capital accumulation, division of labour would make its sway in pushing up the level of productivity. As such, with increased incomes, greater saving would be forthcoming. This goes to improve further the degree of specialization. The development proceeds ahead and becomes cumulative. Thus, in his theory, the economy grows like a tree in a steady and continuous way. It is this approach which forms the crux of Smith’s theory of development.

    It is against this background that we have to estimate the relevance of Adam Smith’s theory to the socio-economic environment of presently developing countries. This theory has only limited relevance to the developing countries because of the following reasons. The size of market in these countries is quite small so that the effective demand for goods is low. Consequently, the inducement to invest is low. The size of market in turn depends on the level of income. Thus, the volume of production could be increased only if people’s incomes increased.

    Again this can be possible only if productivity is increased. But productivity depends to a large extent on the degree to which capital is employed in the productive process. However, in the developing economies, small size of the market keeps productivity and hence income at a low level. This results in a small capacity to save and invest. This in turn reinforces the forces keeping the extent of market small.

    Besides, the policy implications of Smith’s theory are quite inapplicable to the developing economies. His policy recommendations of laissez-faire, free trade and harmony of interests are unsuitable in the context of the development of developing economies. As it is, the market economy of developing economies has been distorted due to the emergence of various kinds of monopolistic elements. The monopolists inhibit technological progress on account of the fear that innovations might result into a devaluation of their investments in capital in their existing business.

    In a free market competitive economy where prices perform parametric functions, the entrepreneurs have to submit themselves to the losses resulting from innovations, because there is no way out to counteract these innovations. But when monopoly in any of its forms exists, the prices lose their parametric functions and the possibilities of free entry of new firms into the industry becomes less effective, so that the tendency to resist the devaluation of the capital invested becomes stronger and stronger. This becomes a drag on technological progress.

    The monopolists assume market powers to fix higher prices and obtain larger profits as compared to competitors. This not only accentuates economic inequality but also distorts the consumers’ preferences through sales promotion techniques. It is on these grounds that the governments of the developing economies have opted to intervene and exercise control on such undesirable forms of business activities. Besides, factors such as the loss of flexibility of wage rates, the unpredictable instability of demand and growth of mass production have all added to the impracticability of Smithian advice of laissez-faire. Even if competition was sought to be restored, there is no surety that efficiency in production would necessarily be increased. This is because of following reasons–

    First, competitive prices generally fail to include social costs. As such, the possibility of a divergence between marginal social net product and marginal net private product in a competitive economy cannot be ruled out. The magnitude of this divergence might be so great that it becomes the responsibility of the government to intervene to make the desired adjustments.

    Second, competition may also fail to achieve maximum social welfare. Demand price does not reflect relative urgency of demands or wants of different persons in an environment of inequality. As such, an allocation of resources sought to be determined by demand price that is offered for consumer goods may in fact give rise to distortions in the economy. In view of these arguments, we find that government intervention is desirable, be it monopoly or competition.

    Apart from the above explained reasons, there are certain special grounds for the developing countries to necessitate greater intervention in the economic affairs by the government. It is only through rigorous and systematic planning and judicious government intervention that these economies can be lifted up from the depths of stagnation.

    The developing countries are confronted with the colossal problems of:

    (a) Acute inadequacy of capital resources in relation to their requirements,

    (b) Open and disguised unemployment of a vast chunk of population and

    (c) Low per capita productivity of the working force.

    These stupendous problems cannot be surmounted unless the government steps in a big way to take positive steps to transform the traditional economies into the industrial ones.

    Further, due to the ill-bred structure of the industry in the developing countries, the capacity to produce capital goods falls short of the availability of savings. What it really means is that even when the economy’s belt is tightened so as to extract larger savings, capital formation cannot be correspondingly increased to the same extent. This is because there is immobility of resources, plants and equipment are primitive and obsolete and there is huge capital wastage involved due to rapid depreciation. It is only the government which can undertake huge investments in plants and equipment and ensure mobility of resources for increasing capital formation through increased savings.

    Besides, there is the need for building infrastructures and social overheads like roads, transport, communications, river valley projects, power, schools, hospitals and things like that. They involve huge investments with long gestation periods. The returns are uncertain and long delayed. As such, no private entrepreneur would come forward to undertake investments in these. Government must step in to provide these basic facilities. Furthermore, the developing countries are greatly ill-placed on account of their being consumption-oriented.

    Due to the widespread poverty, the marginal propensity to consume of people is very high and thus the savings are very low. However, in case of a developing economy, the consumption would increase not only due to an increase in income but also due to the rise in the propensity to consume because the working of demonstration effect, both domestic and international. As such, it becomes incumbent for the government to take special measures to mobilise savings to step up capital formation.

    The upshot of the discussion is that the government must play a positive role in accelerating the process of economic development in developing economies. It is, of course, very much true that the government machinery in developing countries is not that competent to bring about the desired rate of growth. But this should in no way be taken to mean that the government intervention has to be limited or eliminated. What is actually required is that the efficiency of the government be increased so that it can play its desired role to achieve the warranted rate of growth.

    Nevertheless, some of the crucial variables of Smith’s model are as valid in the developing countries as they were for the economies that formed the basis of his theory of development. Capital accumulation and technology (i.e. division of labour) that played the strategic role in his model, are even today recognised as the key variables in the process of economic progress of the developing countries.

    Further, for economies which are just on the threshold of take-off, Smith’s prescriptions in terms of division of labour, extension of the market, rational distribution of national income, anti- usury and anti-monopoly laws, furtherance of the interests of agriculturists, industrialists and those engaged in commerce by a proactive, promotional and developmental role of government, provide a comprehensive theory of economic development.

    But it should always be kept in mind that this was a theory mainly formulated in the context of England with a view to tackle the problems involved in the process of transition from a pre-industrial to an industrial state. We should, therefore, not hope to get proper and direct solution to all the problems of development which are posed by the development and industrialisation of developing countries owing to the tremendous difference in the circumstances in the two cases.

    Watch the video: The Essential Adam Smith: The Invisible Hand (November 2021).