Adam Smith


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Related to Adam Smith: David Ricardo, Karl Marx

Smith, Adam,

1723–90, Scottish economist, educated at Glasgow and Oxford. He became professor of moral philosophy at the Univ. of Glasgow in 1752, and while teaching there wrote his Theory of Moral Sentiments (1759), which gave him the beginnings of an international reputation. He traveled on the Continent from 1764 to 1766 as tutor to the duke of Buccleuch and while in France met some of the physiocratsphysiocrats
, school of French thinkers in the 18th cent. who evolved the first complete system of economics. They were also referred to simply as "the economists" or "the sect." The founder and leader of physiocracy was François Quesnay.
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 and began to write An Inquiry into the Nature and Causes of the Wealth of Nations, finally published in 1776.

In that work, Smith postulated the theory of the division of labor and emphasized that value arises from the labor expended in the process of production. He was led by the rationalist current of the century, as well as by the more direct influence of Hume and others, to believe that in a laissez-faire economy the impulse of self-interest would bring about the public welfare; at the same time he was capable of appreciating that private groups such as manufacturers might at times oppose the public interest. Smith was opposed to monopolies and the concepts of mercantilism in general but admitted restrictions to free trade, such as the Navigation ActsNavigation Acts,
in English history, name given to certain parliamentary legislation, more properly called the British Acts of Trade. The acts were an outgrowth of mercantilism, and followed principles laid down by Tudor and early Stuart trade regulations.
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, as sometimes necessary national economic weapons in the existing state of the world. He also accepted government intervention in the economy that reduced poverty and government regulation in support of workers.

Smith wrote before the Industrial RevolutionIndustrial Revolution,
term usually applied to the social and economic changes that mark the transition from a stable agricultural and commercial society to a modern industrial society relying on complex machinery rather than tools.
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 was fully developed, and some of his theories were voided by its development, but as an analyst of institutions and an influence on later economists he has never been surpassed. His pragmatism, as well as the leaven of ethical content and social insight in his thought, differentiates him from the rigidity of David RicardoRicardo, David,
1772–1823, British economist, of Dutch-Jewish parentage. At the age of 20 he entered business as a stockbroker and was so skillful in the management of his affairs that within five years he had amassed a huge fortune.
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 and the school of early 19th-century utilitarianismutilitarianism
, in ethics, the theory that the rightness or wrongness of an action is determined by its usefulness in bringing about the most happiness of all those affected by it.
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. In 1778, Smith was appointed commissioner of customs for Scotland. His Essays on Philosophical Subjects (1795) appeared posthumously.

Bibliography

See biographies by J. Rae (1895, repr. 1965), I. S. Ross (1995), J. Buchan (2006), and N. Phillipson (2010); studies by E. Ginzberg (1934, repr. 1964), T. D. Campbell (1971), S. Hollander (1973), and E. Rothschild (2001).

Smith, Adam

 

Born June 5, 1723, in Kirkcaldy, Scotland; died July 17, 1790, in Edinburgh. Scottish economist and philosopher. Outstanding representative of classical bourgeois political economy.

The son of a customs official, Smith was educated at the University of Glasgow and at Oxford. From 1751 to 1763 he was a professor at the University of Glasgow. From 1764 to 1766 he lived in France, where he became acquainted with the Physiocrats F. Quesnay and A. R. J. Turgot and with a number of philosophers and scholars, including J. d’Alembert and C. A. Hel-vétius, who greatly influenced the shaping of his economic and philosophical views. From 1778 he was commissioner of customs in Edinburgh, and from 1787, rector of the University of Glasgow.

Smith’s Theory of Moral Sentiments was published in 1759 (Russian translation, 1895). His main work, An Inquiry Into the Nature and Causes of the Wealth of Nations, was published in 1776 (Russian translation, vols. 1-4, 1802–06; new translation, 1962).

Smith was an ideologist of the 18th-century industrial bourgeoisie, which at that time played a progressive role. K. Marx described Smith as the “political economist par excellence of the period of manufacture” (in K. Marx and F. Engels, Soch., 2nd ed., vol. 23, p. 361, footnote), and V. I. Lenin referred to him as the “great ideologist of the progressive bourgeoisie” (Poln. sobr. soch., 5th ed., vol. 2, p. 521).

Smith’s studies transformed political economy into a comparatively well-developed system of economic knowledge. Smith criticized the theory and practice of mercantilism and the vestiges of feudalism that were retarding the development of capitalism. Recognizing self-interest as the fundamental motive for economic activity, he believed that the “natural order” in the economic sphere includes free competition, the dominance of private property, the restriction of every kind of monopoly, freedom of trade, and nonintervention by the state in the economy. The antihistoricism of Smith’s theoretical concepts reflected the practical interests of the industrial bourgeoisie.

In Smith’s economic system the coexistence of oversimplified, distorted views and scientific theses reflected the contradiction in his methodology between the analysis of the internal essence of phenomena and an uncritical concentration on their empirical appearance. However, his work is valuable for its elaboration of the most important categories of the labor theory of value. Smith recognized labor as the substance of value, argued for the commodity character of money, distinguished between exchange value and use value, and came close to understanding the dual character of labor embodied in commodities. His inconsistency is revealed in his definition of value not only as labor expended on the production of a commodity but also as purchased labor.

Smith described the class structure of bourgeois society, distinguishing three basic classes—wage laborers, capitalists, and landowners, with the wage laborers counterposed to the other two classes. He recognized that profit, interest, and rent are deductions from the product of the worker’s labor. At the same time, he believed that profit is a payment to the entrepreneur for risking the expenditure of capital. Smith deserves credit for analyzing the categories of wages and differential rent and for concluding that productive labor under capitalism is labor that creates surplus value. However, he erroneously defined the workers’ wages as payment for labor, tried to describe rent as the result of the “activity of nature,” and limited the concept of productive labor to labor embodied in a material product.

Failing to distinguish between simple and capitalist commodity production, Smith was unable to reveal the mechanism of the formation of surplus value under capitalism. He regarded the creation and distribution of value as identical processes, and he failed to see the modification of value in the cost of production. Consequently, he arrived at the false conclusion that the value of goods consists of incomes—profit, wages, and land rent. Smith almost achieved a correct interpretation of fixed and circulating capital, and he attempted to reveal the factors in the accumulation of capital in production. However, he was unable to reveal the inner character and historical tendency of capitalist accumulation.

Smith’s economic doctrine greatly influenced the development of political economy. His scientific ideas constitute the foundation of classical bourgeois political economy, one of the sources of Marxism. Various apologetic bourgeois theories are outgrowths of oversimplified, distorted elements in Smith’s system.

WORKS

Essays on Philosophical Subjects, new ed. London, 1872.

REFERENCES

Marx, K. Kapital, vol. 2. In K. Marx and F. Engels, Sock, 2nd ed., vol. 24.
Marx, K. “Teorii pribavochnoi stoimosti” (vol. 4 of Kapital), part I, chs. 3-4; part 2, chs. 13-14. Ibid., vol. 26, parts 1–2.
Lenin, V. I. K kharakteristike ekonomicheskogo romantizma. Poln. sobr. soch., 5th ed., vol. 2.
Lenin, V. I. “Tri istochnika i tri sostavnye chasti marksizma.” Ibid., vol. 23.
Anikin, A. V. Adam Smit. Moscow, 1968.
Anikin, A. V. lunost’ nauki. Moscow, 1971.
Stewart, D. Biographical Memoirs of Adam Smith. London, 1811.
Stephen, L. History of English Thought in the 18th Century, vols. 1-2. London, 1876.
Schumpter, J. A. History of Economic Analysis. New York, 1954. Pages 181-94.

A. A. KHANDRUEV [23–1827–]

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