Wednesday, 29 August 2012

Economist of the Week - Adam Smith

It's Wednesday – and if it's Wednesday, then it is Economist of the Week. Schoolonomic launches a new, weekly series dedicated to sharing knowledge about well-known and less-known thinkers in the field of the economic sciences, from historical to (hopefully) contemporary. Besides their contributions to the field, we aim to concentrate on the personal side of their story as well – why did they choose to become economists? What economic environment did they live in?
Our choice of first choice is only natural – we present to you Adam Smith, writer of An Inquiry into the Nature and Causes of the Wealth of Nations.



Early life


Adam Smith was born in the Scottish market town of Kirkcaldy in 1723 – he was a half-orphan, raised by his beloving mother Margaret, and he was an only child, which meant that he lived with his mother until his death (he once wrote that he was a beauty only in his books). He was a clever kid, encouraged to study by her mother, and after surviving an abduction by gypsies at the age of four – who said living in a market town was dull? – he went to study at the famous local Burgh School at the age of 6, in 1729, where he studied what all boys of his age did – Maths, history, Latin and writing.

Studies


Young Adam was such a prodigy that he started to study at the liberal University of Glasgow at the age of 14, in 1737 – he studied moral philosophy, loved the course and the teachers, and he was one of the first ever students to receive a scholarship – founded in 1699, the Snell exhibition allowed him to study at Oxford.
Simply put, Adam Smith hated Oxford. He thought that Glasgow was way better, and the environment – conservative teachers, many are priests of the Church of England – didn't help. His biggest clash was when he read David Hume's Treatise on Human Nature in secret – which was a philosophical bestseller of the time, written by an Enlightenment philosopher and his later friend – and the teachers found out. They took away the book and punished him – not the best way to encourage learning, huh?
Later, in Wealth of Nations, he wrote that Scottish universities were better than English ones, and the reason the Oxford teachers of his time couldn't teach was the fact that they were paid regardless of their ability to attract students.

Teaching career


After Oxford, Smith took up teaching at the University of Edinburgh 1748, at the age of 25. While he was not a good public speaker (he was very absent-minded, and used to mumble to himself, typically what you'd call a 'mad scientist'), his students loved him. In 1750, he met David Hume (remember the incident?) and befriended him, and simultaneously his career began to skyrocket – he switched to Glasgow in 1751, and became Head of Moral Philosophy in 1753.

First bestseller


So how does a philosopher turns into an economist, you wonder? Many people do not know, but Wealth of Nations was not Smith's first major work. What first brought him success was another book – The Theory of Moral Sentiments, published in 1759, a book of moral philosophy summarising his experiences and views as a professor of the subject. In it, he divided moral philosophy into four parts – and two of these parts were what we would today call Economics and Politics. The book made him so famous that wealthy university students switched to Glasgow just to study under him, and in turn it influenced the views of Smith as well – he began to concentrate more on law and economics compared to philosophy in his lessons.
In 1763, his popularity earned him an offer by a British politician to tutor his stepson Henry Scott – with a salary offer double his current income. He accepted mid-year, and he tried to return the tuition fees to his students – but he was so beloved by them that they refused.

Touring tutor


If Oxford was hell, and Glasgow was fine, then tutoring young Henry was the dream job. The two travelled around Europe, visiting places like Toulouse – which Smith didn't like – and Geneva – which he did, having met Voltaire in person – until ending up in Paris.
Paris was the Mecca for Enlightenment thinkers – Smith met such people there as Benjamin Franklin, Turgot, and most importantly, Francois Quesnay, one of the first economists.

Who was...


Quesnay was a physiocrat – which meant that he believed that nations' wealth was derived from land, as opposed to the mainstream thought of mercantilism, which only believed in gold and silver. In 18th century France, absolutist rulers like Louis XIV and Louis XV spent all state money on wars, ruining the country's economy – and Quesnay, seeing this, introduced the terms productive labour and unproductive labour, with the first meaning agriculture. Adam Smith was so impressed with him that he thought of dedicating Wealth of Nations to him – but Quesnay passed away in 1774, stopping him from doing so. 

Writing process


The good days ended in 1766, when Henry's younger brother passed away, forcing him to return to England to secure the family succession. Adam Smith returned to his hometown Kirkcaldy, to live with his mother, and he began working on his biggest work.
Writing the book took long. In 10 years time, not only did Quesnay pass away, but the Industrial Revolution was kicking off, and he mentored the blind prodigy Henry Moyes, who later became a successful scientist. Nonetheless when it was finished in 1776, it was an instant success. 

Wealth of Nations 


Why he is remembered as the founding father of economics is easy – he was the first not to attribute the sources of wealth either to gold, silver, or agriculture, but to the whole output of the economy. He viewed participants of the economy as independent thinkers, each acting to their own good, but in the end creating a careful balance in the economy – the phenomenon later thinkers dubbed as the 'invisible hand' (he himself used the term for a different metaphor). He proved this theory by citing a library of examples, ranging from post-Roman European economics(a.k.a. Why barbarian invasions are bad for you) to political economy analysis (a.k.a. Why mercantilism is bad for you).

The prophecy


Intriguingly, Smith even suggested the British Crown to grant its colonies representation in the British parliament based on their payed tax amount. Were his advice followed, the American Revolution probably wouldn't have taken place. In fact, his book was dubbed – both as praising and condemning – as the Bible of Economics; both in it's complexity and length it's similar to the original, and later thinkers were all very much influenced by it.

Later life


Smith died in 1790, six years after his mother, witnessing the successful American Revolution and the French Revolution in his final years. He became a founding member of the Royal Society of Edinburgh, and was a Rector of the University – his adult life hence framed by academic achievements. On his deathbed, he cursed himself for not achieving more – had he seen the number of reprints his book had over the next 236 years, he sure would have thought otherwise.

Congratulations! You know now everything (important) about Adam Smith, the founding father of the economic sciences. Continue reading us for a similar post next week.

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