Our bluffer's guide to the thinkers you're really supposed to know about continues this week with the daddy of them all, Adam Smith. Born 1723 in Kirkcaldy, Fife, Died 1790 in Edinburgh
"It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest”.
The "father of modern economics", the “world’s first free-market capitalist” and the man on the £20 note (what, you hadn’t noticed?) was always going to be a bit of a handful for the modern mind to grasp. Not least because Smith grew up in a mid-18th century Scotland where science, religion and philosophy merged in an experimental way that we now find deeply unfamiliar. Smith thought of himself primarily as a social philosopher.
But Smith’s books were not only a weird amalgam of science and belief – they were also interminably long. His “Wealth of Nations” (1776), a study of Europe’s industrialising economy, ran to five huge volumes, and there are relatively few experts who can truthfully claim to have read them all properly.
Looking After Number One
That’s just as well, because the essence of Smith’s idea was simple enough. Rather than needing to be actively organised by the state, he said, society would work most efficiently if the politicians kept their interfering hands off and allowed the individual – whether it was a trader or a consumer – to seek out the best and most inventive result by himself.
Of course, that didn’t give anybody carte blanche for unscrupulous or dirty dealing as Smith would hardly have felt it necessary to add. (He had spent enough years teaching religion to take that sort of thing for granted.) And everyone owed it to society to pay taxes and to contribute to the common good. But Smith’s faith in the workings of the ‘invisible hand’, that inborn tendency to unconsciously produce the best results for society, was absolute.
Keeping Politicians In Their Place
Well, almost. Smith didn’t trust the business world quite enough to want it getting involved in political matters. Given the chance, he said, business people would soon try to rig the laws and the markets for their own benefit. And conversely, it was the duty of politicians to keep them out of public policy making. The links and parallels with America’s low-tax, libertarian thinkers are already becoming clear.
Move Over, Henry Ford
Smith was one of the first to describe how division of labour could improve efficiency. If a man set out to make a pin, he said, the 18 steps required would mean that he could produce only a handful every week. But if ten men divided up the same task in assembly-line fashion, you’d get thousands of pins. Yes, this seemingly obvious thought was new thinking in the 18th century.
“An Inquiry Into the Nature and Causes of the Wealth of Nations”, as it was properly called, was rather different in tone to Smith’s other major work, The Theory of Moral Sentiments (1759), which wasn’t laissez-faire at all, but which talked about how human morality depended on "mutual sympathy” between the individual and other members of society. So the one book said that trust was everything; the other said that self-interest was the way to get ahead. Go figure.
A Strange Bloke
Smith may have been a genius, but he allowed himself some odd quirks. He talked incessantly to invisible people, he often walked around with a stupid grin, and he once made a pot of tea by absent-mindedly boiling up bread and butter. (And drank it.) He never married, and he ordered that his papers be destroyed after his death. A pity.