Smith, Adam 1723–1790
Adam Smith was a Scottish political economist and moral philosopher, and founder of the classical school of economics. An influential advocate of freer foreign trade and of limitations on government intervention in economic affairs, Smith is best known for his monumental An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith was educated at the universities of Glasgow and Oxford. In 1752 he was appointed professor of moral philosophy at the University of Glasgow, where he was a popular lecturer and wrote his Theory of Moral Sentiments (1759), which gave him the beginnings of an international reputation that persists to this day.
In the eighteenth century national governments granted monopoly privileges to mercantile companies in foreign trade for certain commodities. Smith asserted that these monopolies were impediments to the realization of the benefits of free exchange, which would occur, he believed, only with competition among many players. In Smith's phrase, an "invisible hand" of the marketplace regulated such competition—a self-checking mechanism that managed millions of individual decision makers in terms of the laws of supply and demand, producing and allocating goods and services a society wanted, in the quantities a society desired, and at prices a society would pay. In his writings, Smith also introduced the idea of the division of labor as a method of production and the paradox of self-interest serving the public good, and elaborated the principles of a laissez-faire economy.
Smith argued against government devices that interfered with the free flow of trade, such as tariffs on imports and bounties for exports. He considered, however, that government had a legitimate role in creating those conditions in which commerce could flourish, such as the provision of infrastructure, law and order, and national defense. He accepted government intervention that reduced poverty and regulation in support of workers. He also admitted the need for an occasional restriction of free trade where there was a national security interest involved, and for this reason, was loathe to dispose of the centuries-old British Navigation Acts too hastily.
Kindleberger, Charles. The Worldly Philosophers. New York: Simon and Schuster, 1996.
Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. . New York: Modern Library, 1994.
Peter E. Austin