Adam Smith

Adam Smith's work has had a lasting impact on the way we think about the economy, politics and society more broadly.

Political economy and economics

Smith can be credited with emphasising the economy as part of social, psychological and political analysis. Although Aristotle and Rousseau wrote about the economy, Smith was one of the first to undertake a systemic view on the dynamics of economies in commercial society and illustrated how it could be studied as a phenomenon.

While his views on the 'best' kind of economy have been misappropriated in a number of ways, it is fair to say that Smith was one of the first theorists to place the economy at the heart of social and societal dynamics.

'Nature' of the Wealth of Nations

This systemic study of the economy developed and introduced key concepts which are now taken for granted.

Commonplace, foundational concepts were introduced and popularised by Adam Smith in the Wealth of Nations. For example, Smith argued that the wealth of a nation was not calculated by how much money you had in the bank but is instead derived by how value is created and then 'flows' through society. This flow or journey is now central to economic thought, but Smith was the first to recognise its importance.

He also contributed the development of the theory of value, distinguishing between "exchange" (usually expressed as price) and "use" (a more subjective assessment). Smith famously used the diamond-water paradox to explain this differentiation. Diamonds command a higher price than water, but water sustains life. By distinguishing different forms of value, Smith invites us to reflect on the multiple measures of value that of course connect to broader concepts of wellbeing.

Capitalism

Smith is often viewed as the father of modern economics and the free market. To some, Smith is somewhat of a contradiction. He argues against stifling government intervention but also advocates for publicly funded education for all; he proposes a "commercial society," which should be guided through the moral conscience of the individual, recognising a self-interest, but also in an interdependency and relationality.

Yet, it is important that we consider Smith’s economic perspective through the appropriate context. The things which preoccupied Smith, are not always the same things that preoccupy modern society or today's economy.

Smith’s commitment to grounding his ideas in evidence means that he rejected simplifications and one-size-fits-all answers. He points to circumstances in which competition is beneficial to society (such preventing merchants and corporations from using politics to protect their profits) and other scenarios where they create problems for society (simplification of tasks dulling the intellect of many workers). He defies categorisation and does not offer a single system, something which has long frustrated some economists.

Self interest 

Adam Smith introduced the concept that the economy is driven through the motivation of self-interested individuals.

While he argued individuals should have the freedom to care for themselves and their families, he makes it clear that advancing yourself, at the expense or active harm of others, is not moral, justifiable, or good for the economy. Smith uses the metaphor of a race to wealth to explore the concept. The individual has every right to do their best and push themselves to the physical limit to win the race, running as fast as their legs can carry them. However, if the individual sabotages their fellow runners, they have violated the rules of the race and are not playing fair (the 'Impartial Spectator' would not approve).

This can be best understood through his careful writing surrounding the important and subtle distinction between self-love and self-interest (or selfishness).

Widespread influence

Adam Smith's work has influenced key thinkers from across the contemporary political spectrum, from Karl Marx to Edmund Burke.

Perhaps the most enduring value of Smith’s work is the ongoing engagement and debate that it inspires. Smith does not offer us all the answers or a provide single system with which to understand everything. Instead, he encourages us to use his work as a springboard, to find our own answers and develop our own perspectives.