The Real Adam Smith: Ideas That Changed The World - Full Video

Author: VisionEconomics , Last Modified, 2017-05-08

Category: economics Keywords: The-Real-Adam-Smith:-Ideas-That-Changed-The-World-Full Video

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The Real Adam Smith: Ideas That Changed The World - Full Video

Adam Smith as the economist who thought that whenever a person is able to work in his own way

Economic history thinks of Adam Smith as the economist who thought that whenever a person is able to work in his own way, an invisible hand will ensure that he is quite unintentionally working for the benefit of society at large. "Nor is it always the worse for the society that it was no part of it," Smith commented. "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."

Adam Smith had no faith whatever in the ability of governments to increase national prosperity by rigging the market

This is voice of a philosopher who thought that the interests of merchants would never be the same as that of the public, and who had no faith whatever in the ability of governments to increase national prosperity by rigging the market. It is the voice of someone who thought that the bedrock of economic life and national prosperity in a commercial economy were workers, productive landowners and small businessmen living and trading in local markets they knew and understood. It is the Smith who thought that all that governments needed to do to promote economic growth was to provide security, easy taxes and open markets "all the rest being brought about by the natural course of things".

Beneficence guaranteed by the invisible hand of divine providence

It was inevitable that the clergy should have leapt in at this point to claim that Smith was talking up a system of free trade whose beneficence was being guaranteed by the invisible hand of divine providence rather than by the state. It was equally inevitable that radicals of the right and left should have started to think of Smith as someone who distrusted government and wished to diminish its functions. None of this will really do.

Whatever his private religious beliefs – and Smith was deeply circumspect on such matters – Smith shared his friend David Hume's view that neither philosophy nor science had provided the slightest reason for believing in the existence of a benevolent deity. What is more, Smith was scrupulous in ensuring that at no point had his philosophy been built on Christian or even, as some have claimed, Stoic, assumptions.

Adam Smiths' economic thinking assumes communities of self-interested individuals

As for government, all of Smith's economic thinking assumed that his communities of self-interested individuals, doing their own thing in their own ways, were all living in civil societies with laws and governments that could provide security and enforce contracts, and would have cultures that made it possible for buyers and sellers to "higgle and bargain and persuade" as Smith puts it.

The preconditions needed to encourage us to trade are provided not by providence but by government – government and the security it brings. To be sure, governments can become despotic and erratic, corrupt and bloated; their institutions can all too easily be hijacked by landed magnates, merchants or even, on occasions, the people. They are always far too ready to fight ruinously expensive wars and have, periodically, a tendency to hatch misguided schemes or "projects" as Smith called them, for increasing the wealth of the country or for creating ludicrous utopias, which would inevitably plunge the state into chaos. Governments make it possible for the invisible hand to do its work.

Smith is a masterly critic of the governments of his day

One of the things that makes The Wealth of Nations a good, if lengthy read is that Smith is a masterly critic of the governments of his day and a superb commentator on the problems of reorganising the ruinous state of their public finances. For no one had a better understanding of the necessity of government for civilising and enriching a state than Smith. His job, as a philosopher, was to teach governments to think of themselves as the custodians of the invisible hand.

In fact Smith's invisible hand reached much deeper into the fabric of society than the economy. In Smith's wider philosophy, it is an unspoken metaphor for opening up the history of a species that has had to learn to co-operate and exchange its members' goods, services and sentiments if it is to survive, a species whose members have tried to make their lives more "convenient" whenever they have felt secure enough to do so.

Smith spent what he describes as the happiest and most productive years of his life as a professor of moral philosophy teaching his students to reflect on the pressures of need on the minds and manners of individuals and on the institutions and histories of the states and civilisations to which they belonged. As Smith told it, it is the story of the making of a sociably self-interested species composed of beings who have quite unintentionally acquired their sense of identity, their understanding of sociability in the struggle for survival and contentment. It is a species that owes its humanity to the invisible hand.

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