Adam Smith

Alfred Marshall
Arthur Cecil Piquo
David Ricardo
Jagdish N. Bhagwati
James Buchanan
James Tobin
John Kenneth Galbraith
John Maynard Keynes
John Stuart Mill
Joseph Shumpeter
Joseph Stigler

Karl Marx
Ludwig Von Mises
Milton Friedman
Paul A. Samuelson
Robert E. Lucas
Robert Solow
Ronald Coase
Thomas R. Malthus
Thorstein Veblen
William Stanley Jevon

Story of Adam Smith (1723-1790)

In 1759, Adam Smith published his first book, The Theory of Moral Sentiments. In it, he delineated a principle of human nature that he believed to be universal and unchanging. He also outlined a psychology of moral feelings and moral behavior based on sympathy. "It is our conception of the cause of the situation and not the actual situation that we witness that arouses emotion. Sympathy is the major factor for the existence of social groups (Zusne, p. 398)." Smith believed that humans were creatures compelled by passions. He also believed humans were self-regulated by their facilities of reason and sympathy. Within each human being is an "inner" person or "impartial spectator" who accepts or censures our actions and those of others. The Theory of Moral Sentiments laid the psychological foundation on which his major work, The Wealth of Nations, was later constructed. "The utilitarian principle ('the greatest happiness of the greatest number') was first formulated by Smith (Zusne, p. 398)."

In The Wealth of Nations, Adam Smith, the intellectual father of capitalism, observed over 200 years ago that the competitive market, as if by an “invisible hand,” transforms self-interest into a force for public good. Smith explained how competition maximizes productivity and social welfare by assuring the optimal allocation of capital and labor in the overall economy. Yet, always a pragmatist, he recognized that capitalists could corrupt the system: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Some Quotes by Smith (1776) on the ‘The invisible hand’:

Every individual...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 cases, led by an invisible hand to promote an end which was no part of his intention.

The Wealth of Nations, Book IV Chapter II