Adam Smith

Chapter 1 · A Fatherless Boy in a Customs Town

Kirkcaldy, Glasgow and a miserable Oxford

1723 – 1746 · Kirkcaldy · Glasgow · Oxford

Adam Smith was baptised in Kirkcaldy, Fife, on 5 June 1723; his exact birth date is not recorded. His father, a customs official, had died a few months earlier, and he was raised by his mother Margaret, to whom he remained devoted for her whole long life. Kirkcaldy was a small port where nail-making, salt panning and smuggling were daily facts — a boy there could watch trade, tariffs and evasion working at close range.

At fourteen he entered the University of Glasgow, where Francis Hutcheson lectured in English rather than Latin on moral philosophy and on the idea that human beings possess a natural moral sense. Smith called it the never-to-be-forgotten Hutcheson.

Glasgow was followed by six years at Balliol College, Oxford, on a scholarship, and he detested it. He wrote later, in the *Wealth of Nations*, that the professors there had given up even the pretence of teaching — a case he used to argue that endowments which pay teachers regardless of performance destroy the incentive to teach well. He read enormously on his own, reportedly getting into trouble for possessing a copy of Hume's *Treatise*.

He returned to Scotland in 1746 without a career, and began giving public lectures in Edinburgh on rhetoric and jurisprudence. They were successful enough to bring him a professorship at Glasgow in 1751.

Why this matters

Smith's criticism of Oxford is the earliest example of his method: look at what incentives an institution actually creates, and expect people to respond to them.

You have met the student who taught himself. What would you ask him about that education?

Ask Adam Smith

• “What was wrong with the way Oxford was funded?”
• “What did you learn from Francis Hutcheson?”
• “What did growing up in a port town show you about trade?”
• “Why did reading Hume get you into trouble?”
• “How did public lecturing help you build your ideas?”

Chapter 2 · The Theory of Moral Sentiments

The book he thought was his best

1751 – 1764 · Glasgow

Smith taught at Glasgow for thirteen years and called them the happiest of his life. His first book, published in 1759, was not about economics at all.

*The Theory of Moral Sentiments* asks where morality comes from if not from divine command or pure reason. Smith's answer begins with sympathy — not pity, but the imaginative act of putting yourself in another person's situation and feeling a version of what they feel. We judge others by whether we can go along with their feelings, and we learn to judge ourselves by imagining how we appear to others.

From this he builds his most original device: the impartial spectator, an internalised observer we construct from experience of other people's judgements, who becomes our conscience. Morality, on this account, is neither invented by rulers nor handed down; it grows from the ordinary human need to be approved of by people whose approval we would respect.

The book also contains sharp observations that undercut his later reputation. Smith argued that we admire the rich and powerful far more than their merit warrants, and that this disposition — however useful in maintaining social order — is the great and most universal cause of the corruption of our moral sentiments.

He revised it repeatedly, and the sixth edition of 1790, published in the last year of his life, contains substantial additions. He never regarded it as superseded by his economics.

Why this matters

Smith's economics rests on his moral philosophy: he assumed people are motivated by the desire for others' approval as well as by gain, which is why reading only the Wealth of Nations distorts him.

You have the moral philosophy that came first. What would you ask him about it?

Ask Adam Smith

• “What do you mean by the impartial spectator?”
• “How does sympathy produce moral judgement?”
• “Why is admiring the rich corrupting?”
• “Do you think people are naturally selfish?”
• “Why did you keep revising this book to the end of your life?”

Chapter 3 · The Wealth of Nations

How a pin factory explains prosperity

1764 – 1776 · France · Kirkcaldy · London

In 1764 Smith resigned his chair to tutor the young Duke of Buccleuch on a European tour, at triple his professor's salary with a pension for life. In France he met the Physiocrats, who held that all real wealth came from agriculture; he disagreed, but their systematic approach shaped his own. Then he went home to Kirkcaldy and spent ten years writing.

*An Inquiry into the Nature and Causes of the Wealth of Nations* appeared on 9 March 1776. It opens not with markets but with a pin factory: one worker alone might make a pin a day, but ten workers dividing the eighteen distinct operations between them can make tens of thousands. The division of labour, limited only by the size of the market, is the engine of productivity — and it is what makes an ordinary labourer in a commercial society better provided for than a chief in a subsistence one.

Prices, wages and output, he argued, are coordinated without central direction. His famous line is that we expect our dinner not from the benevolence of the butcher, brewer or baker but from their regard to their own interest.

The phrase 'invisible hand' appears exactly once in the book, in a limited argument about why merchants tend to invest at home. It became a slogan for a doctrine far broader than anything Smith stated.

His target throughout was mercantilism: the belief that a nation grows rich by hoarding gold, restricting imports and granting monopolies. Against it he argued that the real wealth of a nation is what its people can consume, and that trade is not a contest with winners and losers.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

— An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, chapter 2, 1776

Why this matters

The Wealth of Nations founded economics as a systematic subject and made the decisive argument that prosperity comes from productivity and exchange rather than from hoarding treasure.

You have the founding book of economics. What would you ask him about it?

Ask Adam Smith

• “Why does the pin factory explain so much?”
• “What did you actually mean by the invisible hand?”
• “What was wrong with mercantilism?”
• “How can prices be right without anyone setting them?”
• “What did the Physiocrats get wrong?”

Chapter 4 · What Smith Actually Warned About

Monopolies, employers, and the damage of repetitive work

The Smith invoked in modern politics is often unrecognisable from the text. Four of his own arguments make the point.

First, he distrusted businessmen as a class. People of the same trade, he wrote, seldom meet even for merriment without the conversation ending in a conspiracy against the public or a contrivance to raise prices. Any proposal for new commercial regulation coming from merchants, he warned, should be examined with suspicion because it comes from people whose interest is to deceive the public.

Second, he understood bargaining power. In disputes over wages, he pointed out, masters can hold out longer than workmen, and the law had historically permitted employers to combine while forbidding workers to do the same.

Third, he saw the human cost of his own central mechanism. A man whose whole life is spent performing a few simple operations, he wrote, becomes as stupid and ignorant as it is possible for a human creature to become — and he concluded that governments must therefore provide education for ordinary people to prevent it.

Fourth, he accepted a substantial role for the state: justice, defence, public works, education, and taxation that falls more than proportionately on the rich, since he thought it not unreasonable that the wealthy should contribute more than in proportion to their revenue.

He attacked the East India Company repeatedly as a monopoly that misgoverned a subcontinent for private profit, and he opposed the slave trade, arguing among other things that slavery was economically inefficient as well as unjust.

Why this matters

Reading Smith's own warnings is the fastest cure for the caricature version of him — and it shows students how routinely a famous thinker's name is used for arguments they did not make.

You have the arguments people leave out. What would you ask him about them?

Ask Adam Smith

• “Why did you distrust merchants who asked for new regulations?”
• “Why does the division of labour damage the people doing it?”
• “What should governments actually do, in your view?”
• “Why did you attack the East India Company?”
• “What was your argument against slavery?”

Chapter 5 · The Customs Commissioner and the Burnt Papers

A quiet ending and a loud afterlife

1778 – 1790 and after · Edinburgh

In 1778 Smith accepted the post of Commissioner of Customs in Edinburgh — the office his father had held, and an odd job for the century's great critic of trade restrictions. He took it seriously, and reportedly discovered on reviewing his own wardrobe that much of it had been smuggled.

He lived quietly with his mother and a cousin, was famously absent-minded, gave away a great deal of money privately, and was a central figure of the Scottish Enlightenment alongside his closest friend David Hume, whose death in 1776 he described publicly with an admiration that scandalised the pious, since Hume died an unbeliever and cheerful about it.

A few days before his own death he had his executors burn sixteen volumes of unpublished manuscripts, including work on law and government he judged unfinished. He died on 17 July 1790, aged sixty-seven.

His afterlife has been contested ever since. Nineteenth-century free-traders used him to argue against all state intervention; twentieth-century economists built formal models on foundations he would not have recognised; his image appeared on the Bank of England twenty-pound note. Meanwhile scholars have worked to reunite the two books, arguing that the 'Adam Smith problem' — the supposed contradiction between the sympathetic being of the *Moral Sentiments* and the self-interested one of the *Wealth of Nations* — dissolves once you notice that both books describe people who care what others think of them.

Students encountering him for the first time are usually surprised by how much of him is moral argument.

Why this matters

Smith's reception is a case study in selective quotation: the same book has been used to justify positions its author explicitly warned against.

You have seen the quiet ending and the noisy legacy. What would you ask him?

Ask Adam Smith

• “Why burn sixteen volumes of your own manuscripts?”
• “How do your two books fit together?”
• “What would you say to people who quote you against all regulation?”
• “Why did defending David Hume cause such offence?”
• “Was taking the customs job a contradiction?”

What Adam Smith changed

Smith turned scattered observations about trade into a systematic subject, and his account of the division of labour, market coordination and the case against protectionism remains the starting point of economics. His moral philosophy — that conscience is built from imagining how we appear to others — is now taken seriously again by philosophers and behavioural scientists alike.

A debate that continues

The live argument is over ownership of his legacy: whether Smith is best read as a founder of free-market liberalism, or as a moral philosopher whose warnings about monopoly, employer power and the effects of repetitive labour make him a critic of the system named after him.

Keep exploring — ask Adam Smith

• “What would you say about the size of modern corporations?”
• “How much did living through early industrialisation shape your conclusions?”
• “Which of your warnings do you think has been most ignored?”

Related lives

• Karl Marx — Author of Das Kapital
• Benjamin Franklin — Printer · Diplomat · Philosopher
• John Locke — Father of Liberalism

Related themes

The Scottish Enlightenment · The Industrial Revolution · Economics and moral philosophy