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Adam Smith: The Wealth of Nations or Human Nature? - Coggle Diagram
Adam Smith: The Wealth of Nations or Human Nature?
Adam Smith (1723-1790): Life and Reputation
Adam Smith
Born in Kirkcaldy
Studied at Glasgow University (1737-40)
Given the opportunity to give public lectures on rhetoric and jurisprudence in Edinburgh (1748-51)
Professor at Glasgow
Theory of Moral Sentiments
(1759)
Why humans are genuinely interested in other humans and their wellbeing
How humans are motivated by benevolence
Why do humans sometimes make genuine moral decisions
Inquiry into the Nature and Causes of the Wealth of Nations
(1776)
Founder of Modern Economics
Associated with:
The belief in free markets and minimal role from government
Idea of an 'invisible hand' which regulates economic activity
Advocacy of economic self-interest
Historical Thinker
One of Smith's key concerns was with explaining the historical change and development of societies
Included economic development, but his starting point was with human nature (which did not exist as a distinct and independent discipline in his time)
Concerned with patterns of historical change
Das Adam-Smith Problem
Formulated by German economic historians c19th
Argued that different views of human nature underpinned the TMS and WN
Now widely dismissed
There's no break between the two works, some different in subject matter, but same view of human nature in both
Smith's main concern is with understanding human nature and how human nature can explain development of societies over time
This includes societies' material resources and wealth, but is not limited to this
Adam Smith's Thought: History, Human Nature, and the Division of Labour
Smith's 'Conjectural'/'Stadial' History of Human Society
Adam Smith,
Lectures on Jurisprudence
, 'Report of 1762-3'
'There are 4 distinct states which mankind pass through:
'First, the Age of Hunters
'Second, the Age of Shepards/nomadic societies
'Third, the Age of Agriculture
'Fourth, the Age of Commerce'
Commercial Society and the Division of Labour
Commercial society generates more wealth for everyone than previous stages
The poor in commercial societies enjoy more comfort and prosperity than the wealthier in earlier, less advanced stages of society
WHY?
Division of labour
Specialisation requires commercial exchange to acquire everything to meet your needs / engine of productivity growth
The first division of labour is between agriculturists and manufacturers
Leads to increase in agricultural productivity
This is followed by division of labour within these two sectors, but especially in manufacturing
E.g. the pin factory
Adam Smith,
the Death of Nations
, book 1, chapter 1
One single worker will be able to produce less pins in one day than a collection of people producing pins in several stages
The division of labour is much more efficient
The Division of Labour, Trade, and Markets
The division of labour is equally important in social organisation
Within societies, commercial exchange relations, to Smith, us the engine explaining the great wealth of his own age
The division of labour works on an international scale
Different countries specialise in different things
International trade
The Human Propensity 'to Truck and Barter'
What underpins this process?
Classic economic explanation
It is beneficial for everyone
Smith's explanation
Humans are hardwired to 'truck and barter' - it is in human nature (
Adam Smith
Wealth of Nations
, book 1, chapter 2
)
Productivity Gains and the Extent of Markets
Specialisation which leads to greater productivity depends on the size of the market (e.g. it is very limited in the Highlands)
Smith is aware of geography in the degree of ex=conomic development
Markets, Division of Labour, and Communication
The extent of a market influences the degree of specialisation possible, and therefore economic development takes off in towns near the sear on navigable rivers
Ships can carry 50x the amount of goods than a waggon in the same amount of time (
Adam Smith,
The Wealth of Nations
, book 1, chapter 3
)
The 'Natural Progress of Opulence'
The natural path of development begins with agriculture, followed by the separate manufacturing sector, and finally long0distance trade
Smith believed the natural 'progress of opulence' is likely to occur in North American colonies, whereas European historical legacy had made the 'progress of opulence ... unnatural and retrograde'
WHY?
Land became basis for political power after the fall of the Roman Empire
Primogeniture held back agricultural improvement and was only overturned by the desire of wealthy landowners for goods
Adam Smith and the History of (European) Economic Development
How useful is Smith's model for understanding European economic development?
Powerful model, but there are limitations:
Largely pre- or proto- industrial
Reflects growth in manufacturing output before the onset of the Industrial Revolution
no reference, for example, to fossil fuels as main energy source
Can account for path of European economic development in c19th only to limited extent, also because of massive overseas migration of Europeans which took off in c19th
The Great Divergence,
Kenneth Pomeranz