Реферат: Adam Smith

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USSIAN ECONOMICACADEMYNAMED AFTER

G V P

LEKHANOV

I

NTERNATIONAL BUSINESSSTUDIES

ADAMSMITH

Student: Anton Skobelev

Group: 855

Moscow 1997

Aftertwo centuries, Adam Smith remains a towering figure in the history of economicthought. Known primarily for a single work, AnInquiry into the nature an causes of the Wealth of Nations (1776), thefirst comprehensive system of political economy, Smith is more properlyregarded as a social philosopher whose economic writings constitute only thecapstone to an overarching view of political and social evolution. If hismasterwork is viewed in relation to his earlier lectures on moral philosophyand government, as well as to allusions in TheTheory of Moral Sentiments (1759) to a work he hoped to write on “thegeneral principles of law and government, and of the different revolutions theyhave undergone in the different ages and periods of society”, then The Wealth of Nations may be seen notmerely as a treatise on economics but as a partial exposition of a much largerscheme of historical evolution.

Early Life

Unfortunately,much is known about Smith’s thought than about his life. Though the exact dateof his birth is unknown, he was baptised on June 5, 1723, in Kikcaldy, a small(population 1,500) but thriving fishing village near Edinburgh, the son bysecond marriage of Adam Smith, comptroller of customs at Kikcaldy, and MargaretDouglas, daughter of a substantial landowner. Of Smith’s childhood nothing isknown other than that he received his elementary schooling in Kirkcaldy andthat at the age of four years he was said to have been carried off by gypsies.Pursuits was mounted, and young Adam was abandoned by his captors. “He wouldhave made, I fear, a poor gypsy”, commented his principal biographer.

Atthe age of 14, in 1737, Smith entered the university of Glasgow, alreadyremarkable as a centre of what was to become known as the ScottishEnlightenment. There, he was deeply influenced by Francis Hutcheson, a famousprofessor of moral philosophy from whose economic and philosophical views hewas later to diverge but whose magnetic character seems to have been a mainshaping force in Smith’s development. Graduating in 1740, Smith won ascholarship (the Snell Exhibition) and travelled on horseback to Oxford, wherehe stayed at Balliol College. Compared to the stimulating atmosphere ofGlasgow, Oxford was an educational desert. His years there were spent largelyin self-education, from which Smith obtained a firm grasp of both classical andcontemporary philosophy

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Returningto his home after an absence of six years, Smith cast about for suitableemployment. The connections of his mother’s family, together with the supportof the jurist and philosopher Lord Henry Kames, resulted in an opportunity togive a series of public lectures in Edinburgh — a form of education then muchin vogue in the prevailing spirit of “ improvement”.

Thelectures, which ranged over a wide variety of subjects from rhetoric historyand economics, made a deep impression on some of Smith’s notablecontemporaries. They also had a marked influence on Smith’s own career, for in1751, at the age of 27, he was appointed professor of logic at Glasgow, fromwhich post he transferred in 1752 to the more remunerative professorship ofmoral philosophy, a subject that embraced the related fields of naturaltheology, ethics, jurisprudence, and political economy.

Glasgow

Smiththen entered upon a period of extraordinary creativity, combined with a socialand intellectual life that he afterward described as “ by far the happiest, andmost honourable period of my life”. During the week he lectured daily from 7:30to 8:30 am and again thrice weekly from 11 am to noon, to classes of up to 90students, aged 14 and 16. (Although his lectures were presented in English,following the precedent of Hutcheson, rather than in Latin, the level ofsophistication for so young an audience today strikes one as extraordinarilydemanding.) Afternoons were occupied with university affairs in which Smithplayed an active role, being elected dean of faculty in 1758; his evenings werespent in the stimulating company of Glasgow society.

Amonghis circle of acquaintances were not only remembers of the aristocracy, manyconnected with the government, but also a range of intellectual and scientificfigures that included Joseph Black, a pioneer in the field of chemistry, JamesWatt, later of steam-engine fame, Robert Foulis, a distinguished printer andpublisher and subsequent founder of the first British Academy of Design, andnot least, the philosopher David Hume, a lifelong friend whom Smith had met inEdinburgh. Smith was also introduced during these years to the company of thegreat merchants who were carrying on the colonial trade that had opened to Scotlandfollowing its union with England in 1707. One of them, Andrew Cochrane, hadbeen a provost of Glasgow and had founded the famous Political Economy Club.From Cochrane and his fellow merchants Smith undoubtedly acquired the detailedinformation concerning trade and business that was to give such a sense of thereal world to The Wealth of Nations.

The Theory of Moral Sentiments

In1759 Smith Published his first work, TheTheory of Moral Sentiments. Didactic, exhortative, and analytic by turns, The Theory lays the psychologicalfoundation on which The Wealth of Nationswas later to be built. In it Smith described the principles of “human nature “,which, together with Hume and the other leading philosophers of his time, hetook as a universal and unchanging datum from which social institutions, aswell as social behaviour, could be deduced.

Onequestion in particular interested Smith in TheTheory of Moral Sentiments. This was a problem that had attracted Smith’steacher Hutcheson and a number of Scottish philosophers before him. Thequestion was the source of the ability to form moral judgements, includingjudgements on one’s own behaviour, in the face of the seemingly overridingpassions for self-preservation and self-interest. Smith’s answer, at considerablelength, is the presence within each of us of an “inner man” who plays the roleof the “impartial spectator”, approving or condemning our own and others’actions with a voice impossible to disregard. (The theory may sound less naiveif the question is reformulated to ask how instinctual drives are socializedthrough the superego.)

Thethesis of the impartial spectator, however, conceals a more important aspect ofthe book. Smith saw humans as created by their ability to reason and — no lessimportant — by their capacity for sympathy. This duality serves both to pitindividuals against one another and to provide them with the rational and moralfaculties to create institutions by which the internecine struggle can be mitigated and even turned to thecommon good. He wrote in his MoralSentiments the famous observation that he was to repeat later in The Wealth of Nations: that self-seekingmen are often “led by an invisible hand… without knowing it, withoutintending it, to advance the interest of the society.”

Itshould be noted that scholars have long debated whether Moral Sentiments complemented or was in conflict with The Wealth of Nations, which followedit. At one level there is a seeming clash between the theme of social moralitycontained in the first and largelyamoral explanation of the manner in which individuals are socialized to becomethe market-oriented and class-bound actors that set the economic system intomotion.

Travels on the Continent

TheTheory quickly brought Smith wideesteem and in particular attracted the attention of Charles Townshend, himselfsomething of an amateur economist, a considerable wit, and somewhat less of astatesman, whose fate it was to be the chancellor of the exchequer responsiblefor the measures of taxation that ultimately provoked the American Revolution.Townshend had recently married and was searching for a tutor for his stepsonand ward, the young Duke of Buccleuch. Influenced by the strong recommendationsof Hume and his own admiration for TheTheory of Moral Sentiments, he Approached Smith to take the Charge.

Theterms of employment were lucrative (an annual salary of £300 plustravelling expenses and a pension of £300 a year after), considerablymore than Smith had earned as a professor. Accordingly, Smith resigned hisGlasgow post in 1763 and set off for France the next year as the tutor of theyoung duke. They stayed mainly in Toulouse, where Smith began working on a book(eventually to be The Wealth of Nations)as an antidote to the excruciating boredom of the provinces. After 18 months ofennui he was rewarded with a two-month sojourn in Geneva, where he metVoltaire, for whom he had the profoundest respect, thence to Paris where Hume,then secretary to the British embassy, introduced Smith to the great literarysalons of the French Enlightenment. There he met a group of social reformersand theorists headed by Francois Quesnay, who are known in history as thephysiocrats. There is some controversy as to the precise degree of influencethe physiocrats exerted on Smith, but it is known that he thought sufficientlywell of Quesnay to have considered dedicating The Wealth of Nations to him, had not the French economist diedbefore publication.

Thestay in Paris was cut short by a shocking event. The younger brother of theDuke of Buccleuch, who had joined them in Toulouse, took ill and perisheddespite Smith’s frantic ministration. Smith and his charge immediately returnedto London. Smith worked in London until the spring of 1767 with Lord Townshend,a period during which he was elected a fellow of the Royal Society andbroadened still further his intellectual circle to include Edmund Burke, SamuelJohnson, Edward Gibbon, and perhaps Benjamin Franklin. Late that year hereturned to Kirkcaldy, where the next six years were spent dictating andreworking The Wealth of Nations,followed by another stay of three years in London, where the work was finallycompleted and published in 1776.

The Wealth ofNations

Despiteits renown as the first great work in political economy. The Wealth of Nations is in fact a continuation of thephilosophical theme begun in The Theoryof Moral Sentiments. The ultimate problem to which Smith addresses himselfis how the inner struggle between the passions and the “impartial spectator’ — explicated in Moral Sentiments interms of the single individual — works its effects in the larger arena ofhistory itself, both in the long-run evolution of society and in terms of theimmediate characteristics of the stage of history typical of Smith’s own day.

Theanswer to this problem enters in Book 5, in which Smith outlines he four mainstages of organization through which society is impelled, unless blocked bydeficiencies of resources, wars, or bad policies of government: the original“rude’ state of hunters, a second stage of nomadic agriculture, a third stageof feudal or manorial “farming”, and a fourth and final stage of commercialinterdependence.

Itshould be noted that each of these stages is accompanied by institutions suitedto its needs. For example, in the age of the huntsman, “there is scar anyestablished magistrate or any regular administration of justice. “ With the advent of flocks there emerges amore complex form of social organization, comprising not only “formidable”armies but the central institution of private property with its indispensable buttress of law and order aswell. It is the very essence of Smith’sthought that he recognized this institution, whose social usefulness he neverdoubted, as an instrument for the protection of privilege, rather than one tobe justified in terms of natural law: “Civil government,” he wrote, “so far asit is instituted for the security of property, is in reality instituted for thedefence of the rich against the poor, or of those who have some propertyagainst those who have none at all.” Finally, Smith describes the evolutionthrough feudalism into a stage of society requiring new institutions suchas market-determined rather than guild-determinedwages and free rather than government-constrained enterprise. This later becameknown as laissez-faire capitalism; Smith called it the system of perfectliberty.

Thereis an obvious resemblance between this succession of changes in the materialbasis of production, each bringing its requisite alterations in thesuperstructure of laws and civil institutions, and the Marxian conception ofhistory. Though the resemblance is indeed remarkable, there is also a crucialdifference: in the Marxian scheme the engine of evolution is ultimately thestruggle between contending classes, whereas in Smith’s philosophical historythe primal moving agency is “human nature “driven by the desire forself-betterment and guided (or misguided) by the faculties of reason.

Society and “the invisible hand”

Thetheory of historical evolution, although it is perhaps the binding conceptionof The Wealth of Nations, issubordinated within the work itself to a detailed description of how the“invisible hand” actually operates within the commercial, or final, stage ofsociety. This becomes the focus of Books I and II. In which Smith undertakes toelucidate two questions. The first is how a system of perfect liberty,operating under the drives and constraints of human nature and intelligentlydesigned institutions, will give rise to an orderly society. The question,which had already been considerably elucidated by earlier writers, requiredboth an explanation of the underlying orderliness in the pricing of individualcommodities and an explanation of the “laws” that regulated the division of theentire “wealth” of the nation (which Smith saw as its annual production ofgoods and services) among the three great claimant classes — labourers,landlords, and manufacturers.

Thisorderliness, as would be expected, was produced by the interaction of the twoaspects of human nature, its response to its passions and its susceptibility toreason and sympathy. But whereas TheTheory of Moral Sentiments hadrelied mainly on the presence of the “inner man” to provide the necessaryrestraints to private action, in TheWealth of Nations one finds an institutional mechanism that acts toreconcile the disruptive possibilities inherent in a blind obedience to thepassions alone. This protective mechanism is competition, an arrangement bywhich the passionate desire for bettering one’s condition — a “desire thatcomes with United States from the womb, and never leaves United States until wego into the grave “ — is turned into a socially beneficial agency by pittingone person’s drive for self-betterment against another’s.

Itis in the unintended outcome of this competitive struggle for self-bettermentthat the invisible hand regulating the economy shows itself, for Smith explainshow mutual vying forces the prices ofcommodities down to their natural levels, which correspond to their costs ofproduction. Moreover, by inducing labour and capital to move from less to moreprofitable occupations or areas, the competitive mechanism constantly restoresprices to these “natural” levels despite short-run aberrations. Finally, byexplaining that wages and rents and profits (the constituent parts of the costsof production) are themselves subject to this natural prices but also revealedan underlying orderliness in the distribution of income itself among workers,whose recompense was their wages; landlords, whose income was their rents; andmanufacturers, whose reward was their profit.

Economic growth

Smith’sanalysis of the market as a self-correcting mechanism was impressive. But his purpose was more ambitious than todemonstrate the self-adjusting properties of the system. Rather, it was to showthat, under the impetus of the acquisitive drive, the annual flow of nationalwealth could be seen steadily to grow.

Smith’sexplanation of economic growth, although not neatly assembled in one part of The Wealth of Nations, is quite clear.The score of it lies in his emphasis on the division of labour (itself anoutgrowth of the “natural” propensity to trade) as the source of society’scapacity to increase its productivity. The Wealth of Nations opens with afamous passage describing a pin factory in which 10 persons, by specialising invarious tasks, turn out 48,000 pins a day, compared with the few, perhaps only1, that each could have produced alone. But this all-important division oflabour does not take place unaided. It can occur only after the prioraccumulation of capital (or stock, as Smith calls it ), which is used to paythe additional workers and to buy tools and machines.

Thedrive for accumulation, however, brings problems. The manufacturer whoaccumulates stock needs more labourers ( since labour-saving technology has noplace in Smith’s scheme), and in attempting to hire them he bids up their wagesabove their “natural” price. Consequently his profits begin to fall, and theprocess of accumulation is in danger of ceasing. But now there enters aningenious mechanism for continuing the advance. In bidding up the price oflabour, the manufacturer inadvertently sets into motion a process that increases the supply of labour, for “thedemand for men, like that for any other commodity, necessarily regulates theproduction of men.” Specifically, Smith had in mind the effect of higher wagesin lessening child mortality. Under the influence of a larger labour supply,the wage rise is moderated and profits are maintained; the new supply oflabourers offers a continuing opportunity for the manufacturer to introduce afurther division of labour and thereby add to the system’s growth.

Herethen was a “machine” for growth — a machine that operated with all thereliability of the Newtonian system with which Smith was quite familiar. Unlikethe Newtonian system, however, Smith’s growth machine did not depend for itsoperation on the laws of nature alone. Human nature drove it, and human naturewas a complex rather than a simple force. Thus, the wealth of nationswould grow only if individuals, throughtheir governments, did not inhibit this growth by catering to the pleas forspecial privilege that would prevent the competitive system from exerting itsbegin effect. Consequently, much of TheWealth of Nations, especially Book IV, is a polemic against the restrictivemeasures of the “mercantile system” that favoured monopolies at home andabroad. Smith’s system of “natural liberty”, he is careful to point out,accords with the best interests of all but will not be put into practice ifgovernment is entrusted to, or heeds, the “mean rapacity, who neither are, norought to be, the rulers of mankind.”

The Wealth of Nations

is therefore far from the ideologicaltract it is often supposed to be. Although Smith preached laissez-faire (withimportant exceptions), his argument was directed as much against monopoly asgovernment; and although he extolled the social results of the acquisitiveprocess, he almost invariably treated the manners and manoeuvres of businessmenwith contempt. Nor did he see the commercial system itself as wholly admirable.He wrote with decrement about the intellectual degradation of the worker in asociety in which the division of labour has proceeded very far; for bycomparison with the alert intelligence of the husbandman, the specialisedworker “generally becomes as stupid and ignorant as it is possible for a humanbeing to become”.

Inall of this, it is notable that Smith was writing in an age of preindustrialcapitalism. He seems to have had no real presentiment of the gatheringIndustrial Revolution, harbingers of which were visible in the great ironworksonly a few miles from Edinburgh. He hadnothing to say about large-scale industrial enterprise, and the few remarks in The Wealth of Nations concerning thefuture of joint-stock companies (corporations) are disparaging. Finally, oneshould bear in mind, that, if growth is the great theme of The Wealth of Nations, it is not unending growth. Here and there inthe treatise are glimpsed at a secularly declining rate of profit; and Smithmentions as well the prospects that when the system eventually accumulates its“full complement of riches” — all the pin factories, so to speak, whose outputcould be absorbed — economic declinewould begin, ending in an impoverished stagnation.

The Wealth of Nations

was received with admiration bySmith’s wide circle of friends and admires, although it was by no means an immediate popular success. The work finished,Smith went into semiretirement. The year following its publication he wasappointed commissioner both of customs and of salt duties for Scotland, posts that brought him £600 a year.He thereupon informed his former charge that he no longer required hispension, to which Buccleuch replied thathis sense of honour would never allow him to stop paying it. Smith wastherefore quite well off in the final years of his life, which were spentmainly in Edinburgh with occasional trips to London or Glasgow (which appointedhim a rector of the university). The years passed quietly, with severalrevisions of both major books but with no further publications. On July 17,1790, at the age of 67, full of honours and recognition, Smith died; he wasburied in the churchyard at Canongate with a simple monument stating that AdamSmith, author of The Wealth of Nations,was buried there.

Beyondthe few facts of his life, which can be embroidered only in detail,exasperatingly little is known about the man. Smith never married, and almostnothing is known of his personal side. Moreover, it was the custom of his timeto destroy rather than to preserve the private files if illustrious men, withthe unhappy result that much of Smith’s unfinished work, as well as hispersonal papers, was destroyed (some as late as 1942). Only one portrait ofSmith survives, a profile medallion by Tassie; it gives a glimpse of the olderman with his somewhat heavy-lidded eyes, aquiline nose, and a hint ofprotrusive lower lip. “I am a beau in nothing but my books, ”Smith once told afriend to whom he was showing his library of some 3,000 volumes.

Fromvarious accounts, he was also a man of many peculiarities, which included astumbling manner of speech ( until he had warmed to his subject), a gaitdescribed as “vermicular”/ and above all an extraordinary and even comicabsence of mind. On the other hand, contemporaries wrote of a smile of“inexpressive benignity,” and of his political tact and dispatch in managingthe sometimes acerbic business of the Glasgow faculty.

Certainlyhe enjoyed a high measure of contemporary fame; even in his early days atGlasgow his reputation attracted students from nations as distant as Russia,and his later years were crowned not only with expression of admiration frommany European thinkers but by a growing recognition among British governingcircles that his work provided a rationale of inestimable importance forpractical economic policy.

Overthe years, Smith’s lustre as a social philosopher has escaped much of theweathering that has affected the reputations of other first-rate politicaleconomists. Although he was writing for his generation, the breadth of hisknowledge/ the cutting edge of his generalization, the boldness of his vision,have never ceased to attract the admiration of all social scientists, and inparticular economists. Couched in the spacious, cadenced prose of his period,rich in imagery and crowded with life, TheWealth of Nations projects a sanguine but never sentimental image ofsociety. Never so finely analytic asDavid Ricardo nor so stern and profound as Karl Marx, Smith is the very epitomeof the Enlightenment: hopeful but realistic, speculative but practical, alwaysrespectful of the classical past but ultimately dedicated to the greatdiscovery of his age — progress.

BIBLIOGRAPHY:

JohnRae. “Life of Adam Smith” 1985

WilliamScott. “Adam Smith as Student and Professor” 1987

AndrewS. Skinner. “Essays on Adam Smith” 1988

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