Adam Smith; J. Powell

THEFREEMAN IDEASON LIBEAlY Adam Smith--"I had almost forgot that I was the author of the inquiry concerning The Wealth of Nations" by Jim Powell B efore Adam Smith, it seemed that most people believed government was nec essary to make an economy work. In Britain and Europe, governments promoted eco nomic self-sufficiency as a bulwark of na tional security. They subsidized" strategic" industries like miningand silk-making. Gov ernment helped protect apothecaries, brick layers, woodmongers, playing-card makers, and myriad other workers against what they considered unfair competition. Govern ments restricted imports in the name of accumulating gold hoards, thought to be a secret of wealth and power. Life without government intervention was unthinkable. Adam Smith defied all this with The Wealth of Nations, a clarion call for eco nomic liberty. Although many specifics weren't original with Smith, he created a bold vision which inspired people every where. He showed that the way to achieve peace and prosperity is to set individualsfree.

He attacked one type of government inter vention after another. He recommended liberating Britain's American colonies. He denounced slavery. Smith had an enormous impact on ideas, where change begins. Mr. Powell is editor of Laissez-Faire Books. He has written for The New York Times, The Wall Street Journal, Barron's, American Heritage, and more than three dozen other publications. Smith was an unlikely revolutionary. He came across as a serious, absent-minded, thoroughly likable man. He was a dedicated scholar all his life, amassing a library of some 3,000 volumes. He was often so pre occupied with ideas that he forgot what he was doing. Once, reportedly, he was giving a tour of a Glasgow tannery, and he absent mindedly fell right into the tannery pit, from which his friends extricated him. He seemed to make friends wherever people enjoyed playing cards or talking about such things as current affairs, history, literature, philos ophy, or government policy. Voltaire, the famed French defender of religious tolera tion, wrote admiringly about Smith: "We have nothing to compare with him, and I am embarrassed for my dear compatriots. " Ma dame Riccoboni, a French novelist, gushed: ,'I wish that the devil would carry off all of our own men of letters, all of our philoso phers, and bring Mr. Smith to me. Superior men seek him out."

Writing was always tough for Adam Smith. The bookish bachelor wrote with a "schoolboy hand," forming big, round let ters which were laboriously connected. Composition was just as tough. Smith wres tled with a few big ideas for decades and agonized over how to express himself. The Wealth of Nations was at least 27 years in the making. 185 186 THE FREEMAN • MARCH 1995 Kirkaldy, Glasgow, and Oxford It isn't known exactly when Adam Smith was born, but he was baptized June 5,1723, in Kirkaldy, a fishing village on Scotland's east coast. Smith's father, a customs official also named Adam, died several months before his son was born. The youngster was raised by his mother Margaret Douglas, daughter of a landowner. The only thing we know about his childhood was that at age four he was briefly abducted by a band of gypsies. "He would have made, I fear, a poor gypsy," noted John Rae, Smith's most scholarly biographer.

Smith entered Glasgow University at 14, the customary age for enrollment. The town of 25,000 prospered largely as an entrepot for American tobacco, and this commerce stimulated intellectual life-the Scottish En lightenment was in full flower. Glasgow University was famed for its teaching, in part because professors were compensated directly by student fees. They had an incen tive to perform well. Smith studied with moral philosopher Francis Hutcheson, a forceful character who broke with tradition and delivered his lectures in English instead of Latin. Hutcheson expressed a passion for reason, liberty, and free speech, inspiring Smith. It seems to have been Hutcheson who brought his bright student to the atten tion of controversial rationalist philosopher David Hume; Smith and Hume were to become best friends. To be sure, Smith was his own man, disagreeing with Hutcheson on some key issues. Hutcheson, for example, believed that self-love was a bad thing and that only well-intended actions were virtuous. As Smith wrote later: "Regard to our own private happiness and interest, too, appear upon many occasions very laudable princi ples of action. The habits of economy, industry, discretion, attention and applica tion of thought, are generally supposed to be cultivated from self-interested motives, and at the same time are apprehended to be very praiseworthy qualities which deserve the esteem and approbation of every body."

How did Smith discover the wondrous effects of self-interest? Well, he was a re markably perceptive person who spent years in a thriving commercial center, so he must have learned much from his own observatiens. Smith scholar Edwin Cannan thought that the Dutch doctor Bernard Mandeville must have influenced Smith's thinking, too, with his provocative satire The Fable of the Bees: or Private Vices, Publick Benefits (expanded edition, 1729). In it, Mandeville scandalized high-minded folks by suggestingthat self-interest is good, because it leads people to serve each other and help society prosper. In 1740,Smith accepted a £40annual Snell scholarship to continue his philosophical pursuits at BalliolCollege, Oxford. It turned out that professors were paid regardless of how much teaching they did, so they did little. Smith was on his own for six years at Oxford. He educated himself in the library, gaining a considerable knowledge of Greek and Roman classics as well as modern French and Italian literature. The one thing Oxford officials felt strongly about was ra tionalism-they hated it. When Smith was caught reading a copy of David Hume's Treatise of Human Nature, which he prob ably got from Francis Hutcheson, he was reprimanded. The offensive volume was confiscated.

Smith wanted to teach at a Scottish uni versity, and the traditional method of seek ing a professorship was to show what you could do-deliver some public lectures. If university officials were impressed and needed to fill an opening, one might be appointed. Accordingly, in 1748, in Edin burgh, Smith began delivering lectures about ethics, economics, and defense pol icy. He was to spend the rest of his life expanding this material into books. As early as 1749-before major works of the French laissez-faire economists were published-Smith had concluded that the way to promote prosperity is for govern ments to leave people alone. Dugald Stew art, a student of his, reported that in a lecture that year, Smith declared: "Little else is required to carry a state to the highest degree of affluence from the lowest barbar ism but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into an other channel, or which endeavor to arrest the progress of society at a particular point, are unnatural, and, to support themselves, are obliged to be oppressive and tyrannical."

Smith's lectures were well received, and by 1751 he was teaching logic at Glasgow University. A year later, he was asked to teach moral philosophy there. Five times a week at 7:30 in the morning, he delivered an hour-long lecture. Three days a week at 11 :00, he taught private classes. He seemed to have won the respect of students and faculty alike, because in 1758 he was named dean. Recalled one of his students, James Boswell, later a famous literary biographer: "Mr. Smith's sentiments are striking, pro found and beautiful. He has nothing of that stiffness and pedantry which is too often found in professors." Evenings, Smith played whist and chatted with some of Scotland's brightest minds. These included David Hume, steam engine inventor James Watt, and chemist Joseph Black. Smith participated in a discussion club started in the 1740s by banker Andrew Cochrane, which met weekly to talk about economic and political issues. Smith didn't have much luck with ladies, however; he proposed marriage two or three times but was rejected.

The Theory of Moral Sentiment Meanwhile, Smith spent about four years transforming lecture material into his first book, The Theory of Moral Sentiments. It was about motivations other than self interest which influenced human behavior. Published in London in 1759, it made him a literary celebrity. He dined with all kinds of successful people, including Benjamin Franklin. In The Theory of Moral Sentiments, Smith announced his next project: "I shall ADAM SMITH 187 in another discourse endeavour to give an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns pol icy revenue and arms, and whatever else is the object of law." That project, of course, was The Wealth of Nations. Hume sent a copy of The Theory ofMoral Sentiments to the English statesman Charles Townshend. As colonial minister, he was to earn notoriety for depriving the American colonies of cherished preroga tives and unintentionally provoking the rev olutionary movement. Townshend wanted someone distinguished to tutor his stepson, Henry Scott, the Duke of Buccleugh. Town shend agreed to pay Smith £300 a year plus expenses-about three times more than Smith got from the University of Glasgow for givingthe Duke a Grand Tour of Europe.

Moreover, Smith got a £300 annual pension for life. Smith might never have worked in business, but he knew how to cut a good deal! Smith met the Duke in London in January 1764, and from there traveled to Toulouse, a resort town popular among the English. In Toulouse, Smith acquired another young charge, the Duke's younger brother, Hew Campbell Scott. With letters of introduction from Hume among others, Smith introduced himself and his young charges to the most interesting people he could find. For anyone interested in liberty, France was an ideal destination at that time. Smith saw firsthand how the French were strug glingwith a much more costly, intervention ist government than he had experienced. Smith visited with leading intellectual rebels. In Paris, he met Fran~ois Quesnay, founder of the Physiocratic school of laissez faire economics. Smith got to know Anne Robert Jacques Turgot, the passionate French advocate of laissez faire policies.

Smith visited Geneva and met Voltaire who reportedly declared: "This Smith is an ex cellent man!" Equally important, Smith became bored and restless in Toulouse. He resolved to 188 THE FREEMAN • MARCH 1995 Smith never sat for a portrait, but James Tassie did a medallion in 1787, when Smith was 64 and ill. Such medallions were typically modeled from wax, so this one is presumed to be accurate. As Royal Economic Society cataloguer James Bonar described it: "The head, which appears turned in pure profile to the right of the spectator, shows a particularly full forehead, a full nose, slightly aquiline in its curve; a long thin upper lip and a lower lip that protrudes a little; and a firm, well-shaped chin and jaw. The eyebrow is strongly curved, the upper eyelid heavy and drooping, the eyeball particularly prominent, and beneath the lower eyelid the skin is loose and wrinkled. A wig is worn, tied behind in a bag with ribbons, showing small curls in front, and two large curls at the side which cover and conceal the ear." Smith admitted to a friend: "I am a beau in nothing but my books."

pursue the project he had described five years previous in The Theory of Moral Sentiments. On July 5, 1764, he wrote Hume: "I have begun to write a book in order to pass away the time." Thus began his initial draft of The Wealth of Nations. Smith's European stay ended abruptly after Hew Scott was murdered in Paris in October 1766. Smith and the Duke returned to London, and Smith turned to revising The Theory ofMoral Sentiments. Then he made his way back to Kirkaldy where, living with his mother, he worked· on The Wealth of Nations. "My business here is study," he wrote. "My amusements are long solitary walks· by the Sea side . . . I feel myself, however, extremely happy, comfortable, and contented, I was never perhaps more so in all my life." By 1770, Smith plunged into laborious revisions. During 1773, he added important material on rent, wages, and the American colonies. In April that year, he moved to London so he could gain access to more research materials. He did research at the British Museum. He worked on revisions at the British Coffee-House, Cockspur Street, where many Scottish artists and intellectu als gathered. He belonged to a weekly dining club at the coffee house, joining portrait painter Joshua Reynolds and architect Robert Adam, among others. Apparently, Smith gave copies of each new chapter to friends who discussed and criticized it. Smith's friend Adam Ferguson, in the fourth edition of his History ofCivil Society, alerted read ers to what was coming: "The public will probably soon be furnished (by Mr. Smith, author of The Theory ofMoral Sentiments) with a theory of national economy equal to what has ever appeared on any subject of science whatever."

"An Excellent Work" Finally, on March 9, 1776,An Inquiry into the Nature and Causes of the Wealth of Nations was published by the firm Strahan and Cadell. Smith was 52. Smith's painstak ing revisions paid off, because the book reads as if Smith were speaking to you across a table, explaining simply what makes an economy tick. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, " he wrote, "but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. " The Wealth of Nations conveyed a deep understanding of why a free society works best. Smith's most famous lines: "[a typical investor] intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he fre quently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affect to trade for the public good."

The first reactions came from his friends who had seen the book evolve. For exam ple, David Hume, April 1, 1776-"DearMr. Smith: I am much pleas' d with your Perfor mance, and the Perusal of it has taken me from a State of great Anxiety. It was a Work of so much Expectation, by yourself, by your Friends, and by the Public, that I trembled for its Appearance; but am now much relieved. Not but the Reading of it necessarily requires so much Attention, and the Public is disposed to give so little, that I shall still doubt for some time of its being at first very popular." Historian Edward Gibbon wrote Adam Ferguson: "What an excellent work is that with which our common friend Mr. Adam Smith has enriched the public! An extensive science in a single book, and the most profound idea expressed in the most per spicuous language." Some critics like Sir John Pringle believed that The Wealth of Nations couldn't be a good book, since Smith never had any business experience.

But literary lion Samuel Johnson re marked: "He is mistaken, sir, a man who had never engaged in trade himself may undoubtedly write well upon trade, and there is nothing that requires more to be illustrated by philosophy than does trade." Thomas Jefferson was enthusiastic. In a letter to a friend, he wrote: "If your views ADAM SMITH 189 of political inquiry go further, to the subjects of money & commerce, Smith's Wealth of Nations is the best book to be read .... " The first printing sold out in six months and made Smith a sensation. A German edition appeared in 1776,a Danish edition in 1779,an Italian edition in 1780,and a French edition in 1781. The Spanish Inquisition suppressed the book for what officials con sidered "the lowness of its style and the looseness of its morals." Smith had no sooner finished the book than he began revising it. New English editions appeared in 1778, 1784, 1786, and 1789. Smith seems to have had time for little else. With a mischievous flash of humor, referring to his well-known absent-minded ness, he told his London publisher in 1780: "I had almost forgot that I was the author of the inquiry concerning The Wealth of Nations."

The Duke of Buccleuch was thrilled with Smith's success and pulled strings to get his former tutor appointed Commissioner of Customs, a lucrative though not very de manding position (£600a year) which Smith accepted. Some reward for a free trader! Smith died quietly at his Kirkaldy home on July 17, 1790. As he had asked, his executors Joseph Black and James Hutton burned almost all his papers, frustrating generations of biographers. His work lived on, and he became a guiding light whose love of liberty helped make the nineteenth century the most peaceful period in modern history. Now some two hundred years after Smith's death, economists have identified technical errors in his work, yet his reputation towers over challengers like Karl Marx and John Maynard Keynes. Nobel Laureate George Stigler dubbed Smith "the patron saint of free enterprise." H.L. Mencken declared: "There is no more engrossing book in the English language than Adam Smith's The Wealth of Nations." He remains a com manding presence as liberty is being reborn at the dawn of the twenty-first century. D Economics on Trial Friedman Challenges Hayek "The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false."