Adam Smith, considered the founder of classical economics and of modern capitalism, was born on June 5, 1723 in Kirkaldy, Scotland. Smith was a member of the literati, or what is now termed the Scottish Enlightenment, a group of philosophers who critiqued and debated each other’s writings and thought. The philosophers of the Scottish Enlightenment shared a commitment to empiricism and often compared historical periods to discover universal norms of human nature and behavior, which they termed “the science of man”. Like other Enlightenment thinkers, members of the Scottish Enlightenment believed that logic, mathematics, and empirical observation could understand and systematize the physical and social world.

Smith studied mathematics and natural sciences at the University of Glasgow from age 14 to 17. After three years at the University of Glasgow, Smith went to study at Balliol College at Oxford for a career in the Church of England. After seven years of study, Smith declined ordination and left Oxford to study literature and history in Scotland. Smith spent two years in Kirkaldy and moved to Edinburgh, where he lectured on rhetoric and literature. Smith was appointed as a Professor of Logic at the University of Glasgow in 1751 and a Professor of Moral Philosophy in 1752, a post he held for 13 years. Smith published his work of moral philosophy, Theory of Moral Sentiments, in 1759. In Moral Sentiments, Smith described the natural principles governing morality and how human beings discover them.

While lecturing at Glasgow, Smith began a friendship and correspondence with the philosopher David Hume. Hume later introduced Smith to French philosophers and men of letters during Smith’s journey abroad fron 1765 to 1766 with the Duke of Buccleuch, whom he tutored. After returning to Scotland from Paris, Smith retired on a pension from the duke and spent ten years at home with his mother and cousin preparing his work An Inquiry into the Nature and Causes of the Wealth of Nations. Wealth of Nations, a five book series, attempted to show the cause of a nation’s prosperity, or lack thereof. Smith considered division and specialization of labor, such as the division of tasks within a factory, as the main cause of national prosperity.

After publishing Wealth of Nations in 1776, Smith moved to London. The Duke of Buccleuch recommended him for the post of Commissioner of Custom in Scotland, a post he held for the final twelve years of his life. Shortly before his death on July 17, 1790, Smith ordered most of his writings burned, leaving only an Essay on the Imitative Arts, an Essay on certain English and Italian verses, an Essay on the External Senses, a History of Astronomy, a History of Ancient Physics, and a History of Ancient Logic and Metaphysics in addition to his two published works, Theory of Moral Sentiments and Wealth of Nations.

Smith’s Wealth of Nations has become a fundamental text of liberal economics and has influenced such diverse economic thinkers as Karl Marx and John Maynard Keynes. Wealth of Nations is not strictly a book of economics but rather of political economy, a field that includes philosophy, history, sociology, anthropology, economics, and political science. Smith champions a free market and laissez-faire economic structures as a positive element of the history of human social history rather than as purely economic elements.

Smith contends that human beings’ rational self-interest leads to economic well-being. Human rational self-interest drives personal economic activity: it is why laborers labor to produce goods and earn a wage. This personal self-interest benefits society at large by producing needed goods and services that benefit others. Smith contends that individuals invest their resources, such as land or labor, in such a way as to earn the highest return on the investment. Resources that do not earn a high return will be reallocated to other uses to increase returns. This idea of resource investment and reallocation is considered a central proposition of modern economic theory, which Smith uses to explain differences in wages among more and less difficult, dangerous, or unpleasant trades.

Smith supported free international trade and opposed mercantilism, or an artificially maintained trade surplus. Smith’s “invisible hand” of the free market would find markets for surplus goods and the competition generated by foreign goods would drive down prices, benefiting consumers. The main difference between Smith’s idea of a free market and free international trade and modern ideas, is his support of retaliatory tariffs. A country facing a trading partner’s high tariffs could retaliate with equally high tariffs to compensate for their increased cost and to bring down the other country’s tariffs.

Smith’s most well-known idea is the “invisible hand” of the market. This force is the aggregate of many individuals seeking the good of their own rational self-interest in free and open markets. Human beings always seek to better their own circumstances and in the economic sphere they will purchase items of the best quality at the lowest prices. This activity will force producers to become more efficient in order to lower prices or to reallocate their resources to a more lucrative field. In this way consumers will drive down the market cost of commodities. If consumers drive the market price below the “natural” price at which producers can make a profit, producers will reallocate their resources to more profitable ones until prices rebound. Smith considered the invisible hand of the market and the laissez-faire economic structures that support its function are considered the main agent for social and societal betterment.

1. Adam Smith Biography: A biography of Adam Smith with links to full-text electronic versions of his works.
2. Adam Smith Historical Context: A biography of Smith and an essay on his historical context.
3. Adam Smith Resources: An overview of Adam Smith’s major contributions to economics. Includes links to other websites and articles on Smith and to electronic versions of his works.
4. Adam Smith Philosophy: A peer-reviewed entry on Adam Smith’s life and writings.
5. Adam Smith Biography and Articles: A brief biography and electronic versions of the “Theory of Moral Sentiments” and “Wealth of Nations”.
6. Adam Smith Correspondence: Full-text of Adam Smith’s correspondence, available in HTML or PDF.
7. Adam Smith Biographical Sketch: A biography of Adam Smith.
8. Adam Smith and the “Wealth of Nations”: A concise biography of Smith and an overview of the “Wealth of Nations”.
9. Historical Biography of Adam Smith: A biography of Adam Smith written by Dugald Stewart.
10. Adam Smith and the Invisible Hand: Adam Smith’s theory of the invisible hand of the market.
11. The Wealth of Nations: An electronic version of Adam Smith’s “An Inquiry into the Nature and Causes of the Wealth of Nations”.