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Sarah Mae H.

Cayabyab BSBA 1
ADAM SMITH
Adam Smith was an economist and philosopher who wrote what is considered the "bible of
capitalism," The Wealth of Nations, in which he details the first system of political economy.
Early Years
While his exact date of birth isn’t known, Adam Smith’s baptism was recorded on June 5,
1723, in Kirkcaldy, Scotland. He attended the Burgh School, where he studied Latin, mathematics,
history and writing. Smith entered the University of Glasgow when he was 14 and in 1740 went to
Oxford.
Professional Life
In 1748, Adam Smith began giving a series of public lectures at the University of Edinburgh.
Through these lectures, in 1750 he met and became lifelong friends with Scottish philosopher and
economist David Hume. This relationship led to Smith's appointment to the Glasgow University
faculty in 1751.
In 1759 Smith published The Theory of Moral Sentiments, a book whose main contention is that
human morality depends on sympathy between the individual and other members of society. On
the heels of the book, he became the tutor of the future Duke of Buccleuch (1763–1766) and
traveled with him to France, where Smith met with other eminent thinkers of his day, such as
Benjamin Franklin and French economist Turgot.
After toiling for nine years, in 1776 Smith published An Inquiry into the Nature and Causes of the
Wealth of Nations (usually shortened to The Wealth of Nations), which is thought of as the first
work dedicated to the study of political economy. Economics of the time were dominated by the
idea that a country’s wealth was best measured by its store of gold and silver. Smith proposed
that a nation’s wealth should be judged not by this metric but by the total of its production and
commerce—today known as gross domestic product (GDP). He also explored theories of the
division of labor, an idea dating back to Plato, through which specialization would lead to a
qualitative increase in productivity.
Smith’s ideas are a reflection on economics in light of the beginning of the Industrial
Revolution, and he states that free-market economies (i.e., capitalist ones) are the most productive
and beneficial to their societies. He goes on to argue for an economic system based on individual
self-interest led by an “invisible hand,” which would achieve the greatest good for all.
In time, The Wealth of Nations won Smith a far-reaching reputation, and the work, considered a
foundational work of classical economics, is one of the most influential books ever written.
In 1787, Smith was named rector of the University of Glasgow, and he died just three years later,

when left with substantial freedom. and appendices that blend hard research with broad generalities. In the latter case. This. Smith describes what he considers to be the appropriate roles of government. the creation and maintenance of public works that contribute to commerce. Smith's first major criticism of mercantilism is that it conflates value and wealth with precious metals. Books I and II focus on developing the idea of the division of labor. again. The text is characterized by fact-heavy digressions. The Wealth of Nations by Adam Smith Smith's seminal work. with hunting and gathering societies and progresses through agricultural stages to arrive at a state of international commerce. and other “privileges” extended to certain members of the economy at the expense of others. is threatened by monopolies. The wealth of a nation is increased not by hoarding metals. and describing how this division adds to the opulence of a given society by creating enormous surpluses. the maintenance of the “dignity of the . Smith writes largely against the mercantile system that existed at the time of writing. however. The division of labor also fuels technological innovation. which has become central to modern economics. according to Smith. and. The Wealth of Nations. education. Finally. lobbying groups.” The ability to self-regulate and to ensure maximum efficiency.at the age of 67. namely defense. Surpluses. adds to efficiency and grows surpluses. gives a complicated but brilliant account of an economic system based in human nature and deeply rooted social dynamics. may be either traded or re-invested. in the last book of The Wealth of Nations. According to Smith. This is often referred to as the “invisible hand. In making this point. technologies are likely to improve. tables. able to regulate itself. which begins. and allowing workers to brainstorm ways to make these tasks more efficient. Book III considers Great Britain in the context of the the social evolution of society in general. leading to even greater efficiencies. the fall of Rome and the rise of feudalism retarded this progression by creating a system of decreased efficiency. along the way. but. tax preferences. An important theme that persists throughout the work is the idea that the economic system is automatic. but by increasing the productive capacity by expanding the market—by increasing trade. Smith invents the idea of gross domestic product. the real measure of the wealth of a nation is the stream of goods and services that the nation creates. by giving intense focus to certain tasks. which can be exchanged among members. justice. aims to create a new understanding of economics. Book IV goes on to criticize the “mercantile commerce” that characterized much of Smith's Europe. According to Smith. Smith writes. demonstrating his commitment to give evidence for what seem like timeless observations about the nature of economics.

sovereign.”—activities that are to be financed by fair and clear taxation. .