Adam Smith's Wealth of Nations: Economics and Moral Philosophy

Introduction: Smith as Economist and Moral Philosopher

In his classic text on political economy, An Inquiry into the Nature and Causes of the Wealth of Nations, eighteenth-century Scottish philosopher-economist Adam Smith deftly laid the foundation for contemporary discourse concerning ethical issues in business. Modern scholars characterize the work as one "which [argues] that a nation's wealth is maximized by permitting individuals to pursue their own interests, rather than through political intervention to secure some notion of the common good" (Oakley, 1997, p. 383). Smith largely focuses on topics such as the division of labor, self-interest as the main principle of economics, national wealth as represented by production capacity rather than by stocks of gold (introducing in rough form the concept of gross national product), free markets, a theory of real price, a theory of rent, and not least, the principles of market forces:

"The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgement with which it is any where directed, or applied, seem to have been the effects of the division of labour." (Smith, 1776).

Adam Smith describes the free market as "an obvious and simple system of natural liberty" (Smith, 1776). In short, he reveals the theoretical basis of the economic system known today as capitalism.

Smith is generally known as the founder of the modern school of political economy, particularly with his celebrated Wealth of Nations, published in 1776. Those theorists who support free market economics have conferred on Smith the honor of being the founder of their discipline. Yet despite his special status in the history of economic thought, it is not generally recognized that Smith was a philosopher by vocation and published in the areas of moral philosophy and jurisprudence. The reason is that economic theory has undergone a radical epistemological transformation since Smith's day; he is now considered a political economist whose theories were founded not only on the facts of human economic life but also on the value judgments that yielded optimal economic decision-making.

Smith's liberalism was qualified by his commitment to a moral worldview. Contemporary scholarly attention to the psychological judgments on which the Wealth of Nations is frequently based has not merely given Smith's economic analysis renewed prominence but has also attracted attention to and made familiar Smith's classic statement:

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, 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. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens. Even a beggar does not depend upon it entirely." (Smith, 1776, p. 19).

References

Aldrich, J. (1999, September). Adam Smith, 1723–1790: Views of Adam Smith, 18th century economist. Economic Review (UK), 17(1), p. 34.

Canfield, J. V. (Ed.). (1997). Philosophy of meaning, knowledge, and value in the twentieth century. New York: Routledge.

Fleischacker, S. (2004). On Adam Smith's Wealth of Nations: A philosophical companion. Princeton, NJ: Princeton University Press.

Mandeville, B. (1988). The fable of the bees or private vices, publick benefits (Vols. 1–2). Indianapolis, IN: Liberty Fund.

Smith, A. (1976). An inquiry into the nature and causes of the Wealth of Nations (Vol. 2). Oxford: Clarendon Press.

Smith, A. (1981). An inquiry into the nature and causes of the Wealth of Nations. In A. S. Skinner and W. B. Todd (Eds.). New York, NY: Liberty Press.

Smith, A. (1790). The theory of moral sentiments. Library of Economics and Liberty. Retrieved May 10, 2010, from