6. Trading and spending

In Book IV of the Wealth of Nations, Smith identifies two faulty alternatives to his own explanation of the wealth of nations: the French Physiocrats, who argued that land is the sole source of wealth and revenue, and the mercantile system that aimed to achieve a favourable balance of trade by encouraging a surplus of exports over imports. ‘Trading and spending’ outlines the core of Smith’s system: free trade underlined by the principle of natural liberty. Smith believed that government in a commercial society has three duties: protection from external foes, maintenance of public works, and an ‘exact administration of justice’. How public expenses can be met through taxation and through borrowing is also explained.

4. Living virtuously

Does someone deserve to be praised or punished? Can one individual merit owning more resources than another? Can blame be rightly attached to unintended actions? These are examples of moral questions that arise in everyday life. The Moral Sentiments is an ‘analysis of the principles’ that govern or underlie judgments of human conduct and character. ‘Living virtuously’ considers Adam Smith’s views on justice, benevolence, prudence, and other virtues. It is a central plank in Smith’s overall philosophy that individuals in a commercial society are able to act justly, prudently, and benevolently. There is no divergence between the ‘moral’ and ‘economic’ aspects of his thought.

7. Legacy and reputation

‘Legacy and reputation’ considers historical and contemporary views of the Wealth of Nations and why Adam Smith is ritually referred to as the ‘father of economics’. Ever since the Wealth of Nations was published it has been interpreted differently. Karl Marx, his most influential reader on the Left, both praised and damned him. Smith’s principles are central to the ‘free market model’ associated with the ‘New Right’. However, a more accurate picture of Smith’s legacy is his contribution to liberalism. For Smith, what is valuable about liberty is that it makes possible the greater public good. The true public good (the real wealth of nations) lies in the world of material well-being.

5. Making and working

‘Making and working’ describes the organization of the Wealth of Nations, which provides an account of economic growth or development that also accounts for the increase in social and individual well-being. Smith identified four types of society, developing through hunter, shepherd, agricultural, and commercial stages. The division of labour is discussed, along with the relation between price and value. Labour, land, and stock comprise the three components of the natural price. In the form of wages, rent, and profit this provides Smith with a basic division of income sources, establishing three corresponding ‘orders of people’—workers, merchants or manufacturers, and renters/farmers—each an equal component of society, but with differing relationships to the public or general interest.

1. Life and times

There is more to Adam Smith than The Wealth of Nations, a book on the workings of the economy. He wrote an important treatise on moral philosophy, published an exceptionally well-informed history of astronomy, and was an author who cared about literary style and how to communicate both orally and in print. ‘Life and times’ provides a biographical outline from his birth in Kirkcaldy in 1723 to his student years at Glasgow University and Balliol College, Oxford, and his return to Glasgow University as the Professor of Logic in 1751. It also describes the sort of society in which Smith lived, with the backdrop of the 1707 Treaty of the Union and the Scottish Enlightenment.

3. Sympathetic spectators

Adam Smith published The Theory of Moral Sentiments in 1759. What the book sets out to do is investigate or analyse how, in practice, judgments and decisions about what is right or wrong are made. ‘Sympathetic spectators’ first discusses empiricism, a particular tradition of moral philosophy that was especially strong in Scotland. It goes on to consider the views of Francis Hutcheson and David Hume on moral sense and sympathy. It then examines Smith’s thoughts on sociality, morality, negotiated discord, self-interest, the impartial spectator and conscience (an internalized standard or benchmark of what is right or wrong), relativism, and moral judgment.

2. Communication and imagination

In the breadth of his interests and knowledge, Adam Smith was a typical member of the Enlightenment. ‘Communication and imagination’ explains how the arguments in the Moral Sentiments and the Wealth of Nations intersect, and Smith’s posthumously published Essays on Philosophical Subjects throws light on recurrent themes in his work. Smith investigated forms of social interaction, and considered how humans try to make sense of the world around them and of one another in it. Humans, as social creatures, have to interact or communicate. Smith’s thoughts on the origins of language and development of grammar are discussed, along with his attempts to account for why humans are always looking for explanations.