Adam Smith (1723-1790) is a world-renowned Scottish thinker known for his work in philosophy and economics during the Scottish Enlightenment in the 18th century. His seminal 1776 work, Wealth of Nations , is considered to be the first work in modern economics and played a key role in Smith eventually being considered both the “Father of Economics” and the “Father of Capitalism.”
Smith was born in a small town outside Edinburgh in Scotland. Little is known about his early life but Smith began attending university at age 14, studying philosophy. Smith furthered his philosophical studies at the University of Glasgow and at Balliol College in Oxford, England before beginning his teaching career in the late 1740’s. During his schooling, Smith developed passions for free speech and the nature of liberty amongst other things.
In 1750, Smith met David Hume, a leading philosophical thinker of the day and one of Smith’s inspirations growing up. The two became friends and scholarly peers and worked closely to develop philosophical and economic ideas throughout the Scottish Enlightenment.
For the next 15 years, Smith taught at the University of Edinburgh or was touring Europe, giving lectures and working on his first book, The Theory of Moral Sentiments (1759). The published work was a huge success and attracted students from all over Europe to attend Smith’s lectures. It was here that Smith largely transitioned to what he is most known for – his ideas on free market capitalism.
His popular lectures led him to begin his second book and the magnum opus of his life, Wealth of Nations, which took a decade from inception to publication. The book was hugely successful, selling out almost immediately. And rightfully so.
Smith’s 1776 work lays the basic groundwork for so many modern capitalistic practices. In it, he coined the phrases “invisible hand”, “absolute advantage”, and “division of labor”, three of the most fundamental pillars of modern laissez-faire economics.
Smith notes that individuals are guided by their own self-interest and as a result, actually benefit society as the fundamental idea of supply and demand leads to the most efficient outcome economically. Smith goes on to further this notion by explaining this efficiency as a “general equilibrium”, arguing that this equilibrium that occurs when the “invisible hand” guides the markets is most beneficial when there is little government interference or regulation.
Smith adds that furthering the division of labor promotes increased levels of productivity as well as emboldened innovation. He also examined mercantilism, criticizing the system for failing to recognize absolute advantage and therefore, failing to exercise free trade.
Smith’s career and works were truly revolutionary and his legacy as a free-market economist has transcended generations, laying the groundwork for much of what economists are still taught today.
In Wealth of Nations, Smith writes on the benefits of freedom in a society, stating, “[Without trade restrictions] the obvious and simple system of natural liberty establishes itself of its own accord. Every man…is left perfectly free to pursue his own interest in his own way…The sovereign is completely discharged from a duty [for which] no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society.”
Sources:
Wikipedia entry
Britannica biography
Adam Smith Institute