Unit 2 - Adam Smith and the Wealth of Nations
In the eighteenth century, European political theorists responded to the great changes through which they were living. They built on the legacy of the Enlightenment's (the cold logic of the Enlightenment) praise of the power of reason to define "how man should live" in the wake of the American, Napoleonic, and Industrial Revolutions.
The rising middle and commercial classes found their interests and ideals best expressed in the doctrine of liberalism. Liberalism affirmed the dignity of the individual and the "pursuit of happiness" as an inherent right. The ideology's roots were set firmly in the eighteenth-century constitutionalism, laissez-faire economics, and representative government.
Liberals thought in terms of individuals who shared basic rights, were equal before the law, and used parliament to gain power and carry out gradual reform. In addition, liberals believed that individuals should use their power to ensure that each person would be given the maximum amount of freedom from the state or any other external authority. In economics, liberals believed in the fair competition among individuals responding to the laws of supply and demand with a minimum of governmental regulation or interference. Scottish economist Adam Smith (1723-1790) best expressed this view in his Wealth of Nations.
Adam Smith was born in Kirkcaldy, Scotland, on June 5, 1723. Between 1740 and 1746 he attended Oxford University. After leaving Oxford, he gave lectures on English Literature and Economics, and in 1751 became professor of logic, and in 1752 of moral philosophy, at the University of Glasgow.
Long before Adam Smith, political economy had been studied, but with the publication of the Wealth of Nations economics may be said to constitute a separate science for the first time. The book met with immediate success and in a few years had taken an authoritative place with both philosophers and men of affairs. In the following year Smith was appointed a Commissioner of Customs and moved to Edinburgh, Scotland, where he lived till his death on July 17, 1790.
The most notable feature of the teaching of the Wealth of Nations is the statement of the principle of natural liberty. Smith believed that "man's self-interest is God's providence" and held that if government abstained from interfering with free competition, industrial problems would work themselves out and the goal of efficiency would be reached. This same doctrine was applied to international relations and the argument for free trade.
The Wealth of Nations used relevant illustrations to provide some of the fundamental principles of the science of economics. Smith's achievement was to combine insight, information, and anecdote, and to express it in a consistent framework.