Source: "Adam Smith." Britannica School. Encyclopædia Britannica, Inc., 2014. Web. 28 Mar. 2014. <http://school.eb.com/levels/high/article/109541>.
One question in particular interested Smith in The Theory of Moral Sentiments. This was a problem that had attracted Smith’s teacher Hutcheson and a number of Scottish philosophers before him. The question was the source of the ability to form moral judgments, including judgments on one’s own behaviour, in the face of the seemingly overriding passions for self-preservation and self-interest. Smith’s answer, at considerable length, is the presence within each of us of an “inner man” who plays the role of the “impartial spectator,” approving or condemning our own and others’ actions with a voice impossible to disregard. (The theory may sound less naive if the question is reformulated to ask how instinctual drives are socialized through the superego).
The thesis of the impartial spectator, however, conceals a more important aspect of the book. Smith saw humans as creatures driven by passions and at the same time self-regulated by their ability to reason and—no less important—by their capacity for sympathy. This duality serves both to pit individuals against one another and to provide them with the rational and moral faculties to create institutions by which the internecine struggle can be mitigated and even turned to the common good. He wrote in his Moral Sentiments the famous observation that he was to repeat later in The Wealth of Nations: that self-seeking men are often “led by an invisible hand…without knowing it, without intending it, [to] advance the interest of the society.”
One question in particular interested Smith in The Theory of Moral Sentiments. This was a problem that had attracted Smith’s teacher Hutcheson and a number of Scottish philosophers before him. The question was the source of the ability to form moral judgments, including judgments on one’s own behaviour, in the face of the seemingly overriding passions for self-preservation and self-interest. Smith’s answer, at considerable length, is the presence within each of us of an “inner man” who plays the role of the “impartial spectator,” approving or condemning our own and others’ actions with a voice impossible to disregard. (The theory may sound less naive if the question is reformulated to ask how instinctual drives are socialized through the superego).
The thesis of the impartial spectator, however, conceals a more important aspect of the book. Smith saw humans as creatures driven by passions and at the same time self-regulated by their ability to reason and—no less important—by their capacity for sympathy. This duality serves both to pit individuals against one another and to provide them with the rational and moral faculties to create institutions by which the internecine struggle can be mitigated and even turned to the common good. He wrote in his Moral Sentiments the famous observation that he was to repeat later in The Wealth of Nations: that self-seeking men are often “led by an invisible hand…without knowing it, without intending it, [to] advance the interest of the society.”
Source: "Adam Smith." Britannica School. Encyclopædia Britannica, Inc., 2014. Web. 28 Mar. 2014. <http://school.eb.com/levels/high/article/109541>.
In the age of the huntsman, “there is scarce any property…; so there is seldom any established magistrate or any regular administration of justice.” With the advent of flocks there emerges a more complex form of social organization, comprising not only “formidable” armies but the central institution of private property with its indispensable buttress of law and order as well. It is the very essence of Smith’s thought that he recognized this institution, whose social usefulness he never doubted, as an instrument for the protection of privilege, rather than one to be justified in terms of natural law: “Civil government,” he wrote, “so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” Finally, Smith describes the evolution through feudalism into a stage of society requiring new institutions, such as market-determined rather than guild-determined wages and free rather than government-constrained enterprise. This later became known as laissez-faire capitalism; Smith called it the system of perfect liberty.
In the age of the huntsman, “there is scarce any property…; so there is seldom any established magistrate or any regular administration of justice.” With the advent of flocks there emerges a more complex form of social organization, comprising not only “formidable” armies but the central institution of private property with its indispensable buttress of law and order as well. It is the very essence of Smith’s thought that he recognized this institution, whose social usefulness he never doubted, as an instrument for the protection of privilege, rather than one to be justified in terms of natural law: “Civil government,” he wrote, “so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” Finally, Smith describes the evolution through feudalism into a stage of society requiring new institutions, such as market-determined rather than guild-determined wages and free rather than government-constrained enterprise. This later became known as laissez-faire capitalism; Smith called it the system of perfect liberty.
Source: Columbia University, Press. "Adam Smith." Columbia Electronic Encyclopedia, 6Th Edition (2013): 1. History Reference Center. Web. 28 Mar. 2014.
Smith postulated the theory of the division of labor and emphasized that value arises from the labor expended in the process of production. He was led by the rationalist current of the century, as well as by the more direct influence of Hume and others, to believe that in a laissez-faire economy the impulse of self-interest would bring about the public welfare; at the same time he was capable of appreciating that private groups such as manufacturers might at times oppose the public interest. Smith was opposed to monopolies and the concepts of mercantilism in general but admitted restrictions to free trade, such as the Navigation Acts, as sometimes necessary national economic weapons in the existing state of the world. He also accepted government intervention in the economy that reduced poverty and government regulation in support of workers.
Smith postulated the theory of the division of labor and emphasized that value arises from the labor expended in the process of production. He was led by the rationalist current of the century, as well as by the more direct influence of Hume and others, to believe that in a laissez-faire economy the impulse of self-interest would bring about the public welfare; at the same time he was capable of appreciating that private groups such as manufacturers might at times oppose the public interest. Smith was opposed to monopolies and the concepts of mercantilism in general but admitted restrictions to free trade, such as the Navigation Acts, as sometimes necessary national economic weapons in the existing state of the world. He also accepted government intervention in the economy that reduced poverty and government regulation in support of workers.
Source: Adam Smith, Wealth of Nations, Book IV (1776)
As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
Source: "Adam Smith." The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. 28 March 2014. <http://www.econlib.org/library/Enc/bios/Smith.html>.
Smith used this insight on equality of returns to explain why wage rates differed. Wage rates would be higher, he argued, for trades that were more difficult to learn, because people would not be willing to learn them if they were not compensated by a higher wage. His thought gave rise to the modern notion of human capital. Similarly, wage rates would also be higher for those who engaged in dirty or unsafe occupations (see Job Safety), such as coal mining and butchering; and for those, like the hangman, who performed odious jobs. In short, differences in work were compensated by differences in pay. Modern economists call Smith’s insight the theory of compensating wage differentials.
Smith used this insight on equality of returns to explain why wage rates differed. Wage rates would be higher, he argued, for trades that were more difficult to learn, because people would not be willing to learn them if they were not compensated by a higher wage. His thought gave rise to the modern notion of human capital. Similarly, wage rates would also be higher for those who engaged in dirty or unsafe occupations (see Job Safety), such as coal mining and butchering; and for those, like the hangman, who performed odious jobs. In short, differences in work were compensated by differences in pay. Modern economists call Smith’s insight the theory of compensating wage differentials.
Source: Adam Smith, Wealth of Nations, Book IV (1776)
A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home-consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose only, in the two last wars, more than a hundred and seventy millions [in pounds] has been contracted over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit, which, it ever could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods, which at an average have been annually exported to the colonies.
A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home-consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose only, in the two last wars, more than a hundred and seventy millions [in pounds] has been contracted over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit, which, it ever could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods, which at an average have been annually exported to the colonies.
Source: Adam Smith
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer ... the mercantile system ... seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.