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May
11

Adam smith 1723 – 1790

Adam smith 1723 – 1790


      Adam Smith was born on the east coast of Scotland in the “middling rank” town of Kirkcaldy. His father had died 2 months before he was born, leaving him to his mother who was very disciplined. Adam was a child of poor health, in fact, for a time he wasn’t even expected to live. He attended the local school receiving an excellent education in classical subjects, Latin, mathematics, History and contemporary British philosophy. At the age of 16 he was sent to the newly reformed moderate Presbyterian, Glasgow University in 1736. Where he was taught Newtonian science, mathematics (by Robert Simpson), and Moral philosophy (by Francis Hutcheson). From there he received a scholarship to Oxford University. He spent the over whelming! majority of free time by himself reading everything he could get his hands on; likely to distract himself from how much he despised Oxford. At age 23 this young shy man found his voice through writing and teaching. He wrote letters to the authors of the books he disagreed with. This is how he met his good friend David Hume. When finished with Oxford he traveled back home to Scotland in search of a career. He began giving lectures in Edinburgh on rhetoric, jurisprudence, and language.

      In 1752 he (29) became a professor of Moral Philosophy in Glasgow. He writes 2 books “The Theory of Moral Sentiments” and “An Inquiry into Causes and Nature of The Wealth of Nations”. In a sense, he wrote them in the same train of thought, having revised moral sentiments several times while writing wealth of nations. His writing style in Moral Sentiments suggests that he likely dictated the first draft to a clerk, and constantly refining his theory, reworked it numerous times before his final publication in 1759. This book was more than likely a response to a few influential writings at the time concerning societal behavior included Rousseau’ writings concerned with the destruction of individuality in the civilization process. And a satyr by Mandaville  “The Fable of the Bees” (1732) and its commentary. Holding a cynical view of virtue and morality that everybody is steered by guilt and pride. And possibly another, a satyr on Optimism: “Candide” by Voltaire (1759). Which Mr Smith took in stride and even owed a bust of Voltaire.

*the hyperlinks are to the free on line version of the text.

~

The Theory of Moral Sentiments” (1759 final revision)”

      His object of study was, what Hume referred to as the “Science of Man”, the moral dimensions of human conduct and relation with one another in a civil society (Communication, Justice, Property and Exchange). It was really an early contribution to Sociology and Political Science. His writing style borrowed upon a certain level of introspect, to relay his thoughts on such things as Motives, Reactions, Guilt, Shame, Integrity, Divided sympathies, Expression or Repression of emotion, and Societal ranking.. e.g. Generally societies see the death of an infant differently than an old man who has lived a long life. He writes sharing the roll of “impartial observer” as if giving a grand tour of humanity stopping along the way to apply what he observed to different levels of society and in different situations. How the customs of a culture reveal and define a societies sense of morality, justice, prudence, beneficence, and perceptions of beauty, expressed through Fashion, Architecture, Clothing, Art and Literature.

      He found much of the laws or moral customs, to be implicit in societies. Not enforced legally through rule of law, but by the shame and admiration of those who have the greatest knowledge of us. Morality to him seemed to be rooted in sympathy, yet judged on the basis of results, instead of intentions or effort. If you have the best of intentions the action you take may seem moral, but result in something negative (like creating dependency). These laws shape individual honor and virtue. The benefits of instinct and nature, tempered by reason. It guides, like a sense of self preservation. e. g. too hot or cold, hunger. Virtues benefits are more orderly, longer lasting, Relationships are more worthy of trust (as opposed to those on vice). He shows how virtue can become worn down or desensitized. e.g. like a soldier courageously defying his self preservation instinct to engage in battle. He encounters the impact of death and after a while, death can become simply “just loss of lives”. Death being such a close possibility, often pleasure becomes the highest value. Most emerge from a state of hopelessness into a state of admiration.

       This book was influential in the age of reason; Because he clearly demonstrated that morality was a by product of reason. He included human imperfections in society from a “is” rather than a “ought” perspective (apparently Alfred Marshall picked that up. lol). Analyzing as an impartial spectator found that lack of self command in the areas of fear, and anger, etc often result in regret or shame, in turn jealous, critical. He sited Ambition, vanity, and passions; misleading the inner-man to a place outside of personal convictions. e.g. The man of system views people merely as pieces on a chess board, with no consideration beyond what effort it takes to moved them around. Over time even the creator of nature seems to condone the actions of Factions, Parties, or Nationality.

The Impartial Spectator

      He saw that talking to a person with no vested interest, or “impartial spectator” may serve better than a friend in some cases. Objectively giving perspective, or influencing the expression, of anger or resentment in a dignified way. e.g. Wrath is not an admirable quality because it reveals a lack of self-command. On the other hand if a man has justification for wrath, but doesn’t choose to indulge it, this action is generally admired. If no one is around at a time you may question the morality of your action. He suggested imagining how an impartial spectator might judge the expressiveness and defect. An old saying “what if your mamma say if she saw you doin that?” Each society judges on either a basis of Perfection or what is acceptable among their peers. He shows the benefits of conducting yourself in a prudent manner (for some being“gods reward”). Happier lives that respect the innocent and just.

~

     I thought this book gave a lot of insight into the thoughts and understanding of humanity during this period of “enlightenment”.He showed through reason a Moral foundation to a“Natural Law” that might exist in a common wealth. He references “the invisible hand” only 3 times in his writings. Once in sentiments, once in wealth, and once in a paper on jurisprudence. I think this was his way describing the wonder of spontaneous order. The benefits of these moral codes extend to the market process as well. If you pursue profit in an honest manner; you are naturally in service of your fellow man. He saw the purchase of more luxurious items increase in Scotland. He knew that interaction in a civil society more than language and actions were exchanged.

~

An inquiry into The Nature and Causes of the Wealth of Nations”(1776)

      Adam smith wrote extensively about the sentiments that define our general morality as a society. He would now focus on the conditions that facilitated wealthy societies. He saw Exchange as part of human experience, whether its language, behavior, or … trade. This product of reason, facilitates contracts. He jokes that no one has seen dogs trading bones for things they value more. In this process of Trade, a medium of exchange was developed settling predominately with gold and silver. The value was based on the quantity, which was determined by weight, be it dust, nugget, or Bullion. Efficiency prevailed over the hassle of scales. Gold smiths created coins that certified weight and purity with a stamp that covered both sides of the coin and sometimes the sides. like the ridges of a dime or quarter.

      He records the benefits of division of labor with the pin factory. By specializing in a sub-division of the process dexterity and diligence increased. Production was greater, Time, Training cost and Energy were decreased, making profit possible. Employees serving their own interests, finding ways to save themselves time and effort. Many times leading to the invention of machinery, which again increased levels of production through efficiency. Everybody, in this “economy of scale” benefits from more man hours than they have contributed. e.g. He takes [a coat] All the labor involved its making, the shepherds, the shearers, comber, scribbler, weavers, and dyers. The tools, like a [pair of shears] involved in that process, the miners, forgers, smiths, and transportation.

      He notices 2 kinds of prices, the “Market Price” and “Natural price”. He investigated the increased price of black clothe during a national mourning. As demand rose, the price rose to reflect the diminishing supply of black fabric, shortage of labor causes competition and the“Market Price” (wages) increases to attract workers it couldn’t with the “Natural Price” to increase production. He saw the price of labor varied on cleanliness, ease, honor, skill, cost of training, or quality. e.g. He noted that careful cultivation of the land led to better wines, which sold for higher prices. He use a “Theory of Value” in the example of “Diamonds and Water” “exchange value” vs.“in use” value. He saw that property value varied with the resources on, or around it. e.g. Lumber, a Quarry, Water, or Established town markets. He studied the prices of meat, grains, wines, home building materials, and rents. And these Pricesdirected the allocation of resources such as land use.

~Modes of Transportation (land or water) effected locations of centers of wealth as well as the prices of goods. ~In comparing Great Britain, New York, and China. He saw population playing a role when business compete for workers via wages. If more people are competing for fewer jobs, most will accept lower wages to work. ~He shows how prices were manipulated using “barriers to entry” like the guild system.(Apprentice, Journeyman, and Master). By limiting the amount of actors in that market. You control the cost of labor, limit supply, and increase prices. The king restricted the purchase of wheels to Master wheelwright’s. The apprentice spent his youth serving a master for 7 years, unable to legally benefit from his strongest most enthusiastic years. Smith saw this state sponsored monopoly as fraud. but prices become uncompetitive in a global market, losing share of demand. Other things affected Market pricing like Tariffs on imports or exports, and Natural Disasters. ~Repayment of stock, Wages, and Competition for the lowest price / greatest market share, limit the amount of profit kept from increased efficiency. ~Growing Nations have higher returns, and When interest rates are unfavorable in your investments, they become more attractive.

      He observed the value of silver, compared to labor cost in investment made silver mining in Peru unprofitable. Peru encouraged ownership and production by allowing citizens to mark out a plot to mine, keeping what they found. Over abundance also lowers the value like timber in north America or the of gold worn as ornament by Cuban natives, not knowing the value of it gave it freely to Spanish sailors. He goes through recorded history and compares prices of commodities to those of his time (adjusting for inflation). Smith also makes mention of early “futures contracts” with farmers.

~

From 1766-1767, He worked for Lord Townshend, Chancellor of the Exchequer. His close friend David Hume dies in 1776 at age 65. While Commissioner of Customs and Salt Duties for Scotland; His mother dies in 1784, 6 years later, in 1790 he was in poor health again. 2 weeks before he died he had all of his correspondence, notes, journals etc burned in a large bond fire. Thomas Jefferson had these books in his library, and recommended wealth of nations as the best book to understand economy.

Further info: 

Smiths findings in Wealth were not consistent in some areas, such as values based cost of labor instead of scarcity, inconsistent with what he lectured before the book.  He was also vague enough to inspire Marx to wright his theory based on flawed economic explanation.

I still think that It is important to read the things that impacted history.


Sources:

Books: The free text online versions are linked within the titles.

John Rae, Life of Adam Smith (London: Macmillan, 1895). Great insight into Smiths personality

Podcasts:

search “econ talk”  podcast 10/22/10 in your I tunes store.  A great podcast that applies economics to everyday life.

Russ Roberts interviews author about Smiths life and what in was like trying to write a book when so much was burned.  

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