Adam Smith Philosophy, Wealth of Nations Theory
Scottish great thinker Adam Smith (1723-1790), was a philosopher of economics, morals and politics. His lectures on ethics and logic were published under Theory of the Moral Sentiments (1759,) but in economic history, Smith is best known for his work on political economics, The Wealth of Nations (1776.) He was a contemporary of philosopher David Hume.
Philosophy of Adam Smith
Adam Smith is famous for his principle that says, “unintended consequences of intended action benefits the society as a while.” He is also famous for his views in the free market economy and on private property. He was a favoured philosopher of Britain’s former prime minister Margaret Thatcher and the Conservative economists.
His doctrine is illustrated as follows: Suppose that Carl Boyle is seeking his own fortune. In pursuing this, he decides to set-up and run his own manufacturing business. He produces some common items of everyday need. Although he seeks only to provide for his own fortune, his business enterprise has a number of unintentional benefits to others. Here are two:
- First, he provides livelihood for the people he employs, which benefits them directly.
- Second, he makes more readily available common items which previously has been more difficult or more expensive to obtain for his customers, therefore easing some aspect of their lives.
As a result, the market economy driving forces make sure that these unintentional benefits occur, for if Boyle’s workers find more profitable employment elsewhere they would either resign working for Boyle or he would have to raise their salaries to keep his employees.
Likewise, if Boyle’s product is not readily available or more expensive compared to competitors, he would either be forced to close his business or to lower his prices to a competitive rate.
This illustrative model assumes the absence of a monopoly, both in the labour and economic markets.
Effect of Adam Smith’s Philosophical Theory
Smith’s “unintended consequences of intended action” held great imaginative power over the 18th and 19th centuries industrial philanthropists that later provided the philosophical groundwork for the ethical theories of Jeremy Bentham and John Stuart Mill.
But any philosophy or principle is not exempt from criticism. One needs only revisit the social history of industrial Britain to witness the dangerous exploitative working practices of the industrial age. The extreme poverty and degrading social conditions of the poor working classes are sufficient to encapsulate Smith’s idealistic model which has had far more serious “unintended” consequences.
What has apparently brought an end to such conditions in the industrialized West is not necessarily an adherence to Smith’s principles, but rather, a shift of the poverty and exploitative working practices from one part of the world to another, that is, the living conditions on the West has improved to the detriment of other countries, mainly, the Third World, in terms of labour required to support the economic philosophy of Smith.
Insight on Adam Smith’s Philosophy
Regardless of one’s political views on Adam Smith, his doctrine The Wealth of Nations is one of the most important and deservedly read works of economic and political philosophy in the history of Western thought. Smith argued that a free trade and laissez-faire economy would stimulate production, therefore, acting in the interest of the public, but he also recognized the necessity for moral and legal restrictions.
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