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On this day in history in 1790, died Adam Smith.
Smith was the first economist. He was a political philosopher who laid out the rules of what is now called economics.
Smith was an academic who lectured in rhetoric and logic, firstly at Edinburgh University where he became an associate of David Hume, the leading thinker of The Enlightenment. Smith became a professor of Logic at Glasgow and from there was persuaded to take a position at Balliol College, Oxford. He remarked that Oxford was an ‘educational desert’ compared to the academic stimulation to be obtained at the Scottish universities and so, at the end of his tenure, he returned to Glasgow.
Smith’s great work was Wealth of Nations, which laid the basis for the study of economics. Smith was not interested in commercial activity as such but he was interested in how people and how societies operated. He did not, like Hume, attempt to draw a blue print for a better society but intended to show how financial dealings were actually functioning.
Wealth of Nations explained that economic well-being was the product of self-interest of individuals operating in a free market. Smith wrote ‘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’.
It followed that government intervention to increase production was therefore unnecessary and indeed harmful. The role of the State was merely to break up monopolies, which inhibited the creation of wealth.
Smith’s initiative was not taken seriously at the time as Parliament clung to the outdated Mercantile Theory. But when The Industrial Revolution set off, Smith’s theory became establishment thinking, giving Britain an overwhelming advantage in the industrial age, and indeed led to the development of The British Empire.
Smith, Adam (edited by Kathryn Sutherland). Wealth of Nations.
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