Adam Smith (baptized June 16 [O.S. June 5], 1723 – July 17, 1790) was a Scottish economist and philosopher who helped shape the study of political economy during the Scottish Enlightenment. Many people call him the "father of economics" or the "father of capitalism." He is best known for writing The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776), often shortened to The Wealth of Nations. This second work is considered his most important contribution and is seen as the beginning of modern economic study as a structured academic field. Smith explained wealth and power by focusing on natural, political, social, economic, legal, environmental, and technological factors, rather than divine will. His work helped develop economic theory, especially the idea of absolute advantage.

Smith was born in Kirkcaldy, Fife. He studied social philosophy at the University of Glasgow and the University of Oxford, where he was one of the few students to receive scholarships from John Snell. After graduating, he gave public lectures in Edinburgh that were widely praised. This led to a partnership with David Hume during the Scottish Enlightenment. Smith later became a professor at the University of Glasgow, teaching moral philosophy. During this time, he wrote and published The Theory of Moral Sentiments. Later, he worked as a tutor, which allowed him to travel across Europe and meet important thinkers of his time.

Smith challenged the economic policies of his era, which focused on protecting national markets by limiting imports and increasing exports, a system called mercantilism. He introduced the ideas behind classical free-market economic theory. The Wealth of Nations helped create the modern study of economics. In his writings, he explained the division of labor and showed how self-interest and competition could lead to economic growth. Smith was often criticized during his lifetime, and his writing style was sometimes mocked by authors like Horace Walpole.

Biography

Adam Smith was born in Kirkcaldy, Fife, Scotland. His father, Adam Smith senior, was a Scottish Writer to the Signet (a senior lawyer), an advocate (a type of lawyer), and a prosecutor (a type of judge). He also worked as the comptroller of customs in Kirkcaldy. Smith’s mother was Margaret Douglas, the daughter of Robert Douglas of Strathendry, also in Fife. She married Adam Smith senior in 1720. Two months before Smith was born, his father died, leaving his mother a widow. Smith was baptized into the Church of Scotland in Kirkcaldy on June 5, 1723. This date is often mistaken for his birth date, though his actual birth date is unknown.

Few details about Smith’s early childhood are known. However, John Rae, a Scottish journalist and biographer of Smith, wrote that Smith was taken by force from his home by a group of Romani people when he was three years old. He was later rescued by others. Smith was close to his mother, who likely supported his interest in learning. He attended the Burgh School of Kirkcaldy from 1729 to 1737. This school was described by Rae as "one of the best secondary schools in Scotland at that time." There, Smith studied Latin, mathematics, history, and writing.

At age 14, Smith entered the University of Glasgow, where he studied moral philosophy under Francis Hutcheson. There, he developed an interest in ideas about reason, freedom, and free speech. In 1740, Smith received a scholarship to study at Balliol College, Oxford, under the Snell Exhibition. Smith believed the teaching at Glasgow was much better than at Oxford, which he found to be less stimulating. In The Wealth of Nations, he wrote that many professors at Oxford had stopped teaching effectively. Smith also faced difficulties at Oxford, including being punished for reading a book by David Hume. Despite these challenges, he used the Bodleian Library to study on his own. He left Oxford in 1746 before his scholarship ended.

In The Wealth of Nations, Smith criticized the low quality of education at English universities compared to Scottish ones. He believed that wealthy colleges at Oxford and Cambridge allowed professors to earn money without depending on students, and that talented people could earn more working as church ministers.

In 1748, Smith began giving public lectures in Edinburgh, sponsored by the Philosophical Society of Edinburgh under Lord Kames. His lectures covered topics like rhetoric, literature, and the growth of wealth. He introduced his idea of "natural liberty," which argued that allowing people freedom to act without government interference could lead to economic success. Though Smith was not a confident speaker, his lectures were well-received.

In 1750, Smith met David Hume, a philosopher older than him. They shared strong intellectual and personal connections. In 1751, Smith became a professor at Glasgow, teaching logic. In 1752, he joined the Philosophical Society of Edinburgh. The following year, he became the head of Moral Philosophy at Glasgow. He worked as a teacher for 13 years, which he called "the most useful and happiest period of his life."

In 1759, Smith published The Theory of Moral Sentiments, which included ideas from his lectures. This book explored how people’s morality is based on the ability to understand and share the feelings of others, a concept he called "mutual sympathy." He believed this was different from ideas about a "moral sense" or "utility" proposed by other thinkers.

After The Theory of Moral Sentiments was published, Smith became very popular. Many wealthy students from other countries traveled to Glasgow to study under him. During this time, Smith focused more on economics and law in his lectures. He argued that a nation’s wealth grew from labor, not from the amount of gold or silver it owned, which was a common belief at the time.

In 1762, the University of Glasgow awarded Smith the title of Doctor of Laws (LL.D.). In 1763, he agreed to tutor Henry Scott, the young Duke of Buccleuch, in preparation for a career in politics. Smith left his teaching job in 1764 to take this position. He tried to return the money he had earned from his students, but they refused.

As a tutor, Smith traveled across Europe with Henry Scott. He was paid £300 a year, plus expenses, and received a £300 annual pension. This was twice his previous income as a teacher. He first went to Toulouse, France, where he stayed for 18 months. He later traveled to Geneva, where he met the French writer Voltaire. From there, the group went to Paris, where Smith met Benjamin Franklin, an American publisher and diplomat. Franklin later opposed British laws that threatened American independence. In Paris, Smith also met members of the Physiocracy school, who believed in letting the economy operate freely, as shown by their motto: "Let do and let pass, the world goes on by itself!"

At the time, France’s wealth had been greatly reduced by wars and by helping the American Revolution. Meanwhile, the British economy had a different way of distributing income compared to other countries.

Personality and beliefs

Not much is known about Smith’s personal opinions, except what can be learned from his published writings. His personal papers were destroyed after his death, as he had requested. He never married and lived with his mother after returning from France. His mother died six years before he did.

People described Smith as easily distracted, with unusual ways of speaking and walking. He often smiled in a kind and gentle way. He was known to talk to himself, a habit he had as a child when he would smile while talking to invisible friends. He also sometimes pretended to be sick and kept books and papers in tall stacks in his study. One story says Smith took a friend on a tour of a tanning factory and accidentally walked into a large pit, needing help to get out. Another story says he put bread and butter into a teapot, drank it, and said it was the worst tea he had ever had. Another account says he once walked outside in his nightgown and ended up 15 miles from town before church bells reminded him where he was.

James Boswell, who studied with Smith at Glasgow University and later met him at a literary club, said Smith avoided talking about his ideas in conversation because he thought it might reduce book sales. He once told a painter that he never discussed things he understood when in company.

Smith was described as having a large nose, bulging eyes, and a speech problem. However, others said his face looked strong and friendly. Smith once joked about his appearance, saying, “I am a beau in nothing but my books.” He rarely sat for portraits, so most images of him were drawn from memory. The best-known portraits of Smith are a profile by James Tassie and two etchings by John Kay. The images on the covers of 19th-century editions of The Wealth of Nations were based on Tassie’s portrait.

Scholars have debated what Smith believed about religion. His father was interested in Christianity and belonged to a moderate group in the Church of Scotland. Smith may have gone to Oxford with the goal of becoming a priest in the Church of England.

Ronald Coase, a British economist, questioned whether Smith was a deist, arguing that Smith never directly mentioned God in his writings as an explanation for natural or human events. Coase noted that Smith sometimes referred to the “Great Architect of the Universe,” but later scholars exaggerated how much Smith believed in a personal God. Coase found little evidence of such belief in Smith’s work, such as a passage in The Wealth of Nations where Smith wrote that curiosity about natural phenomena led people to seek explanations, first through superstition and later through science. Some scholars argue Smith’s ideas about society depend on the concept of God’s role in nature. Brendan Long believes Smith was a theist, while Gavin Kennedy says Smith was “in some sense” a Christian.

Smith was also close friends with David Hume, who was often seen as an atheist in his time. In 1777, a letter Smith wrote to William Strahan about Hume’s bravery in the face of death, despite his lack of religious belief, caused much discussion.

Published works

In 1759, Smith published his first book, The Theory of Moral Sentiments. It was sold by two publishers: Andrew Millar in London and Alexander Kincaid in Edinburgh. Smith kept changing the book until he died. While The Wealth of Nations is often considered Smith’s most important work, Smith himself believed The Theory of Moral Sentiments was more important.

In The Theory of Moral Sentiments, Smith studied the moral ideas of his time. He argued that people’s sense of right and wrong comes from how they interact with others. He believed that people learn to care about others’ feelings and how others see them. This helps them understand themselves and form habits that become their conscience. Smith’s idea was that when people notice how others judge them and others, they feel motivated to act in ways that others will approve of.

Scholars once thought there was a contradiction between The Theory of Moral Sentiments and The Wealth of Nations. This idea is called the "Adam Smith Problem." However, modern scholars believe the two books are part of the same system of ideas about morality and economics. They argue that The Theory of Moral Sentiments explains how people want to be liked by others, while The Wealth of Nations explains how people act in their own interests. Smith believed that both works focus on different parts of human nature depending on the situation. In The Theory of Moral Sentiments, he explained how people’s sense of right and wrong is shaped by others. In The Wealth of Nations, he explained how people’s actions in the economy, like working or trading, can help society grow. Smith planned to write more about justice in a third book.

Some scholars, like James Otteson, say both books use a similar method to explain how large human systems, like society or the economy, work. Others, like Robert Ekelund and Hebert, argue that self-interest is a key idea in both books. They say that in The Theory of Moral Sentiments, people’s desire to be liked by others helps control self-interest. In The Wealth of Nations, competition among people helps control self-interest.

There is disagreement among economists about the main message of The Wealth of Nations. Neoclassical economists focus on the idea of the "invisible hand," which Smith mentioned in the middle of the book. Classical economists believe Smith’s main message was in the beginning of the book, where he talked about how dividing tasks among workers helps society grow. Smith also discussed the idea of prudence, which he saw as how people manage their lives in the economy. He planned to write more about justice in a third book.

Smith used the phrase "invisible hand" in different places. He first used it in a book about astronomy to describe "the invisible hand of Jupiter." He later used it in both The Theory of Moral Sentiments and The Wealth of Nations. People have interpreted this phrase in many ways.

Smith believed that when people act in their own interests under fair rules, they can help society without meaning to. He said that competition in the free market helps keep prices low and encourages variety in goods and services. However, he warned that businesses might work together to raise prices or form monopolies. He also said that if businesses had too much influence over politics, they could harm the public by pushing for laws that favor them. Smith argued that laws proposed by businesses should be carefully examined before being passed.

Neoclassical economists see the "invisible hand" as a key idea that connects to modern economic theories. Paul Samuelson, a famous economist, wrote about the "invisible hand" in his book Economics. He changed the phrase slightly to "general interest" instead of "public interest." Samuelson said Smith could not prove his idea about the "invisible hand" until the 1940s.

Classical economists believe Smith’s main message in The Wealth of Nations was to help society grow by increasing productivity. They used an idea from French economist François Quesnay, who said that unproductive work should be reduced to use labor more efficiently. Smith added that dividing tasks among workers even more could make production more efficient. He believed that competition and expanded markets would lead to better production methods, lower prices, and a higher standard of living for everyone.

Legacy

Wealth of Nations was an early work that helped create the modern study of economics. In this and other writings, Adam Smith explained how people acting in their own best interests and competing with each other can help an economy grow. Smith was often debated during his time, and some writers criticized his ideas and style, as noted in a discussion at the University of Winchester. In 2005, Wealth of Nations was listed as one of the 100 Best Scottish Books of all time.

As Smith and other British economists shared their ideas, many people in Britain began to question the old economic idea of mercantilism by the late 1700s. During the Industrial Revolution, Britain adopted free trade and Smith’s idea of letting markets operate with little government control. Through the British Empire, Britain promoted a system of open trade and few trade barriers across the world.

George Stigler said Smith’s most important idea in economics is that, when competition exists, people who own resources like labor, land, and money will use them in the most profitable way. This leads to similar returns for all resources, after considering factors like skill, risk, and job conditions.

Paul Samuelson noted that Smith’s use of supply and demand to explain wages, rents, and profits was an early step toward the economic models developed by Léon Walras over a century later. Smith believed wages could rise temporarily due to new inventions or investments, which was different from other economists like Malthus, Ricardo, and Marx, who thought wages were limited by basic needs.

Joseph Schumpeter said Smith’s writing lacked technical depth, but this made his ideas easier for more people to understand. Schumpeter believed that if Smith had used more complex methods, his work might not have been as widely read or respected.

Other economists, such as those who followed the "labour theory of value," disagreed with Smith. This idea, later used by Marx, claimed that the value of a product depends on the labor used to make it. This contrasts with modern economics, which says value depends on what people are willing to give up to get something. Frédéric Bastiat argued that value comes from usefulness to others, like a diamond found with little effort but still desired by many.

A new school of economics called "neoclassical economics" or "marginalism" developed between 1870 and 1910. Economists like Alfred Marshall helped popularize the word "economics" as a shorter term for "economic science." This period saw the use of math in economics, similar to how it was used in science. Neoclassical economics focused on how supply and demand together determine prices and how goods and income are shared. It moved away from the idea that labor alone determines value, instead using theories about usefulness and costs.

In 1976, the 200th anniversary of Wealth of Nations was celebrated, leading to more interest in Smith’s other works, like The Theory of Moral Sentiments. After 1976, Smith was often seen as both the founder of economics and a thinker who cared about morality. Economists David Levy and Sandra Peart highlighted Smith’s support for equality, including racial equality, and his opposition to slavery, colonialism, and empire. They also noted Smith’s belief that workers should earn fair wages and that common people, like street porters, were not less intelligent than philosophers.

Smith explained how the growth of private property relates to the development of government. He opposed the idea that colonies were essential to Britain’s power and argued that cultures like China and India were not less advanced than Europe. While he supported free trade, he did not support forcing it on other societies. He suggested that colonies should either gain independence or be given full political rights.

Smith’s ideas about colonies influenced debates in Britain about its empire from the mid-1800s onward. In Wealth of Nations, he discussed how to address tensions with Britain’s American colonies. He proposed two solutions: granting independence or creating a united imperial government with shared trade policies.

Richard Cobden, a 19th-century economist, supported independence for colonies and helped end trade restrictions in Britain, promoting free trade. This approach became known as Cobdenism or the Manchester School. Later, others like Joseph Shield Nicholson argued for a stronger imperial government, calling for an imperial federation. Some historians say Smith’s followers used his ideas to support both free trade and stronger imperial ties, depending on their views.