ADAM SMITH: BIOGRAPHY, THEORY, CONTRIBUTIONS - HISTORY - 2024

Adam Smith (1723-1790) was a philosopher and economist considered the ideologue of the principles of capitalism. Not only was he a great exponent of classical economics, but he also contributed his own contributions to the development of social theories based on a proposed economic system. He based his life developing an understanding of the phenomenon known as the Industrial Revolution.

The works of this Scottish economist and author marked a before and after in the economic and labor notions of the time. His thinking was applied in such a way that he forged the foundations of economic systems that persist worldwide.

The thought of Adam Smith is popularly considered as an opposition to another economic and social thinker who would appear later: Karl Marx. However, there is sufficient evidence today to show that Smith's proposals have endured over time, in theory and in practice.

Smith left a short but complete written work, in which he presented almost, if not all, of his ideas. The Wealth of Nations, published in 1776, is considered his work of greatest theoretical and historical value.

Biography

Adam Smith was born in Scotland on June 5, 1723. The city where Smith comes from is Kirkcaldy, characterized by being a fishing area.

When he was three months old, Smith was orphaned, since his father passed away. His mother was Margaret Douglas, and she was the second wife of Adam Smith's father. When he died, Adam was left under the care only of his mother, who is said to have always been very close.

When he was 4 years old, an important event occurred in his life, since he was kidnapped by a group of gypsies. As soon as they noticed his disappearance, his family began looking for him until they finally found him in a forest, where he had been abandoned.

Apparently, this experience did not leave him psychological consequences, because according to the records found in history it is known that he was an equally studious and affectionate child, only that he was always weak and easily fell ill.

University studies

Smith's family was wealthy, for Margaret was the daughter of a wealthy local landlord. Because of this, Adam was able to study at the University of Glasgow. He entered this house of studies in 1737, when he was 14 years old.

There he felt a very strong attraction towards mathematics; Furthermore, in this room he came into contact for the first time with Francis Autcheson, who taught Moral Philosophy, and of whom a considerable influence is recognized in the later thought of Smith.

Three years later he finished his studies in Glasgow and was awarded a scholarship thanks to which he had the opportunity to study at Balliol College, located in the United Kingdom.

Several historians agree that the fact of having received training in these two houses of study had a notable influence on the thought that Adam Smith would later present.

Smith finished his studies in 1746, when he was 23 years old, and that same year he returned to Kirkcaldy. He started looking for a job and his beginnings were as a lecturer, giving exhibitions in Edinburgh.

College professor

Little by little he was achieving a certain fame in the academic sphere, since his lectures used to deal with topics as diverse as economics, history or even rhetoric. In addition, he managed to publish some writings in the Edinburgh Review, thanks to which he also became better known.

After this work as a lecturer, in 1751 Adam Smith was considered for a position as Professor of Logic at the University of Glasgow. Smith lasted 1 year teaching this subject, and then he decided to start teaching Moral Philosophy classes, since this was an area that always interested him a lot.

All this experience allowed him to be part of a group of professors, academics, intellectuals and businessmen. In particular, there were men who were specialists in colonial trade, and the interactions they had with these men in those circles allowed him to learn a great deal about the economic dynamics of the moment.

In the midst of this context, Adam Smith published his first book in 1759; The theory of moral sentiment.

Preceptor

In 1763 Adam Smith obtained a job offer, which was to mean a much higher financial remuneration. The assigned task was to be tutor to the Duke of Buccleuch.

Smith accepted the proposal and traveled to different parts of the world together with the Duke of Buccleuch. During these trips, he had the opportunity to meet prominent figures from the academic world and to forge ties in circles of importance.

He first traveled to Toulouse, France, in 1764; they were there for 18 months. They then stayed for two months in Geneva and then traveled to Paris.

During his stay in Geneva, he looked for a way to meet Voltaire; and then in Paris he was put in contact with personalities such as François Quesnay, who at the time spoke in a concrete way about the origin of wealth.

Adam Smith took advantage of this time of travel to write, but in 1767 the brother of the Duke of Buccleuch died unexpectedly, so that Smith and the Duke quickly returned to London.

Summit essay

The year 1767 was for Adam Smith the beginning of the creation of what would be his next work. This book was entitled An inquiry into the nature and causes of the wealth of nations, and it turned out to be his most important work. He finished writing it in 1776, six years after starting it.

Two years later, in 1778, after the great reception of his last publication, Smith decided to retire. He moved to Edinburgh and there he continued with his life, calmly and with total dedication to review and improve his two most important publications.

1784 was a strong year for Adam Smith, as his mother passed away. Although she was already 90 years old, her death meant a great loss for him.

So ill was Smith that in 1787 he was appointed rector of the University of Glasgow, and his weakness made it impossible for him to address the audience. When he was 77 years old, on July 17, 1790, he died in Edinburgh, where he spent his last years of life.

Economic theory

Adam Smith has been considered the father of economic liberalism. The main question that disturbed him during his lectures was the origin of wealth, being located in the context of the Industrial Revolution, a time when England considerably increased the production of different goods.

Smith considered that there are mainly two factors that have influence: the market and increased productivity thanks to the division of labor.

Divided work

According to Smith, in order to increase productivity, which is the primary objective, it is necessary to carry out a division of tasks; In other words, a specific task will be done more efficiently if it is carried out by several people specialized in that task, and if each one is in charge of a certain area.

This concept is easily observable in a factory or establishment, and Smith's bet was that, if this model works correctly in a certain establishment, it would also work efficiently if it is extrapolated to the economy of a country. In this case, the appropriate term to use would be the social division of labor

Within the dissertation on the division of labor. Smith was also able to conceive the aspects that would not be so positive, perhaps as a consequence of his philosophical training.

Among these unfavorable elements, Smith recognized the danger of a specialization so marked that it would make workers become automatons when carrying out monotonous activities, which could negatively affect people's intellectual abilities.

Market

For Smith, once the goods produced as a consequence of the division of labor were obtained, they had to be traded through exchange. Smith indicated that, by nature, human beings seek a benefit from our actions.

In this sense, according to Smith, everyone who produces a good and hands it over to another does so with the intention of having something beneficial for him in return. In addition, Smith proposed that this benefit would not be just any, but that each person will always seek to obtain the greatest benefit that is possible.

Smith indicated that, as a consequence of this, producers would naturally seek to offer the best finished and most useful goods, produced at the lowest possible price.

Extending this action to all producers, we have that the market would be full of goods and that, naturally, the same market would be balanced. So, in this scenario there would be no place for the State or its regulations.

For Smith, the State only had to defend the nation against external threats, take charge of the construction and maintenance of common use works that were expensive for the private sector, administer justice and defend private property.

Plays

Adam Smith produced two fundamental works, which have transcended and have been a reference in the economic field at different times. Below we will describe the most relevant characteristics of each one:

Theory of moral feelings

This book was published in 1759 and deals with the need to create moral judgments that are based on what he called an established "natural order" in society.

In the creation of these judgments participated what Smith called "sympathy", which is the ability to relate personal vision with the vision of someone outside. Thanks to sympathy it is possible to create that natural order, which for Smith was infallible.

The Wealth of Nations

It was published in 1776 and is Adam Smith's most important book. In this he takes as a reference the economic evolution of nations such as the Netherlands or England, talks about the market, the division of labor and the value-labor relationship that he considers should exist.

According to Smith, to the extent that there is individual freedom, each person can benefit the common interest -in an unintentional way-, managing to meet the needs of a society thanks to the application of a free market and free competition.

Main contributions

Intellectual founder of capitalism

Capitalism, as a grounded economic system, cannot be considered as founded by one man; From feudalism, commercial practices were carried out that showed signs of what capitalism would be centuries later.

However, it is considered that Adam Smith was the first to develop its mechanisms theoretically. Smith approached the economic processes in all the possible scales, and allowed to elucidate how some commercial methods had the capacity to increase or decrease the wealth of an individual, a company or a State.

With these investigations, the Scottish economist allowed himself to sketch a scheme of social order based on the commercial and production relations that are born from his thought, began to be practiced during the Industrial Revolution, and eventually antagonized with the first communist ideas.

Theory of moral feelings

Smith's first work, and the second in importance behind The Wealth of Nations. Before delving into economic systems and business relationships, Smith developed his own conception of man in society.

Smith considered man as a being who looks after his own interests above others. However, he is able to recognize the need to offer or accept help and cooperation from others, as long as this also reports a maximization in his moral, spiritual or monetary return.

For Smith, individuality prevailed over collective values, at the human and business level.

To justify how such a society could remain functional, Adam Smith resorted to the presence of an "invisible hand" that regulated human phenomena and behavior, subjecting his thinking.

The Wealth of Nations

His most important work, from which all his economic thinking is born and breaks down.

The ideas presented by Smith were reflected in such a way that for the first time they could be understood by anyone, and thus improve the general notion that was had about the classical economic system.

Smith studied, as it happened, European industrial development. His theory of the mechanisms of classical economics would remain strong until the early 20th century, when the Great Depression would push for a rethink.

He managed to adapt the individual interests of man to the business field, they affirm that by ensuring his own, a profitable collective environment is guaranteed.

In this work Smith develops individual points such as the conception of the free market, capital, the division of labor, etc. It is these factors in themselves that reinforce the importance of its author's thinking.

Free market

Smith was considered a critic of commercialism and economic secrecy, so he sought to promote the free market through his concepts and exemplifications, at a time when nations viewed foreign trade with some suspicion.

The free market economic theory proposed by Adam Smith consisted of determining prices for products according to their level of production and consumption; as well as the implicit laws of supply and demand.

The free market proposed by Smith is open and without the intervention or regulations of state entities such as the government.

Division of labour

Smith promoted the specialization of tasks in the work and commercial environment, not so much for the democratization of working conditions, but to reduce production costs, creating a chain of simple mechanisms that would maximize the speed of production, and reduce risks.

This outline in classical economics would strengthen over time, generating structures that only function under a hierarchical and vertical division system.

It was the bases of these postulates that would later confront Smith's economic thought with ideas that seek greater economic equity.

Use value and exchange value

Adam Smith qualified the commercial valuation of a product according to its use potential and the time of work and effort that was necessary to produce it.

The economist worked an abstract equation of time and effort to determine the value that this product could have in the market.

Then it was faced with the capacity or potential of use that this product could have for man. These two factors allowed a better notion of the commercial value of the products.

Gross Domestic Product (GDP)

Developed in his work, The Wealth of Nations, Smith decided to put aside the national conception that existed at that time of measuring national wealth according to the deposits and reserves of gold silver that were had, and give way to the classification according to the levels internal production and trade.

From this foundation, the outline of one of the most used economic indicators in today's society is born: GDP or Gross Domestic Product, which generally encompasses the commercial and production relations of a country, yielding an approximate of its income as a result of all commerce.

References

1. Ashraf, N., Camerer, CF, & Loewenstein, G. (2005). Adam Smith, Behavioral Economist. Journal of Economic Perspectives, 131-145.
2. Blenman, J. (April 19, 2017). Adam Smith: The Father of Economics. Retrieved from Investopedia: investopedia.com
3. Campbell, T. (2007). Seven theories of society. Chair.
4. Carmona, JL (sf). The Ethics of Adam Smith: Towards a utilitarianism of sympathy.
5. Fry, M. (2005). Adam Smith's Legacy: His Place in the Development of Modern Economics. Routledge.