ADAM SMITH

Father of economics
 LIFE

Moral Philosopher

Professor at Oxford University and University of Glasgow

Published The Theory Of Moral Sentiments and then An

Inquiry into the Nature and Causes of the Wealth of
Nations'
 THE MARKET
Society can depend on unregulated capitalist markets rather
than tradition or authoritarianism

Self interest (guided by profit) motivates people to perform

tasks required by society (what people are willing to pay for)

Competition regulates greed i.e. over chargers lose to those

that charge cheaper, even for wages

Thus pursuit of self interest leads to communal prosperity

Depends on freedom to pursue self interest and compete

 THE INVISIBLE HAND

Supply and demand always uses prices and profits to signal

to producers that society required. Thus producers, in
search of profits, produce what society requires - in the
correct quantity and at a competitive price.

Too little of a good produced for society - high demand for

low supply leads to high profit from high prices so attracts
more eort into production and vice versa until at
equilibrium
 GROWTH

Division of labour (splitting up a task) allows workers to

specialize in niches (leading to productivity, innovation etc.)

Growth comes from the above

Wealth = freedom + trade + division of labour

Freedom - pursuit of self interest

Trade - allows competition and global cooperation for

division of labour; against mercantilism
MARKET IS PROSPERITY

Market will work for societal good if left alone (laissez faire
from French Physiocrats)

Guided by laws of invisible hand rather than iron fist

Capitalism today is unlike his ideal model - with less

competition from monopolies, large unions etc.

Less freedom and trade leads to less prosperity

MORE LAWS OF PROGRESS
Law of accumulation - profits will be spent for expansion
until higher demands for wages makes profit margins thin
and disappear

Law of population - labour is subject to demand; as wages

rise, more people will enter the workforce (e.g. through
birth rates) and vice versa

Increased population increases worker supply so lower

wages and higher profit - laws counter balance for harmony

Thus, progress inevitable and society will reach its reward

 LEGACY

Formalized economic thinking - presented both sides whilst

giving evaluative factors, then argued for his opinion on the
best means for prosperity

Optimism in dynamic progression of society

Long discussions and digressions on prominent economic

themes of his day
 TOP QUOTES
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.

No society can surely be flourishing and happy, of which the

far greater part of the members are poor and miserable. To
feel much for others (is) human nature.

All money is a matter of belief.

On the road from the City of Skepticism, I had to pass

through the Valley of Ambiguity.