Three types of ways of making money by adam smith

An Inquiry into the Nature and Causes of the Wealth of Nationsgenerally referred to by its shortened title The Wealth of Nationsis the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published inthe book offers one three types of ways of making money by adam smith the world’s first collected descriptions of what builds nations’ wealthand xdam today a fundamental work in classical economics. By reflecting upon the economics at the beginning of the Industrial Revolutionthe book touches upon such broad topics as the division of labourproductivityand free markets. Hamilton based much of this report on the ideas of Jean-Baptiste Colbertand it was, in part, Colbert’s ideas that Smith responded to, and criticised, monney The Wealth of Nations. The Wealth of Nations was the product of seventeen years of typess and earlier threee, as well as an observation of conversation among economists of the time concerning economic and societal conditions during the beginning of the Industrial Revolution, and it took Smith some ten years to produce. Five editions of The Wealth of Nations were published during Smith’s lifetime: in, [9]and To better understand the evolution of the work under Makin hand, a team led by Edwin Cannan collated the first five editions. The differences were published along with an edited sixth edition in The differences between the second and third editions, however, are major. The fourth edition, published inhad only slight differences from the third edition, and Smith himself says in the Advertisement at the beginning of the book, «I have made no alterations of any kind. Of the Division of Labour : Division of labour has caused a greater increase in wajs than any other factor.

W ith The Wealth of Nations Adam Smith installed himself as the leading expositor of economic thought. Adam Smith was born in a small village in Kirkcaldy, Scotland, where his widowed mother raised. At age fourteen, as was the usual practice, he entered the University of Glasgow on scholarship. He later attended Balliol College at Oxford, graduating with an extensive knowledge of European literature and an enduring contempt for English schools. He returned home, and after delivering a series of well-received lectures was made first chair of logicthen chair of moral philosophyat Glasgow University. He left academia in to tutor the young duke of Buccleuch. With the life pension he had earned in the service of the duke, Smith retired to his birthplace of Kirkcaldy to write The Wealth of Nations. It was published inthe same year the American Declaration of Independence was signed and in which his close friend David Hume died. In he was appointed commissioner of customs. In this job he helped enforce laws against smuggling. Adam Smith never married. He died in Edinburgh on July 19, It may surprise those who would discount Smith as an advocate of ruthless individualism that his first major work concentrates on ethics and charity.

Smith did not view sympathy and self-interest as antithetical; they were complementary. Charity, while a virtuous act, cannot alone provide the essentials for living. Self-interest is the mechanism that can remedy this shortcoming. Someone earning money by his own labor benefits. Unknowingly, he also benefits society, because to earn income on his labor in a competitive market, he must produce something others value. Smith saw the main cause of prosperity as increasing division of labor.

Production and exchange

The increase and riches of commercial and manufacturing towns contributed to the improvement and cultivation of the countries to which they belonged in three different ways. First, by affording a great and ready market for the rude produce of the country, they gave encouragement to its cultivation and further improvement. This benefit was not even confined to the countries in which they were situated, but extended more or less to all those with which they had any dealings. To all of them they afforded a market for some part either of their rude or manufactured produce, and consequently gave some encouragement to the industry and improvement of all. Their own country, however, on account of its neighbourhood, necessarily derived the greatest benefit from this market. Its rude produce being charged with less carriage, the traders could pay the growers a better price for it, and yet afford it as cheap to the consumers as that of more distant countries. Secondly, the wealth acquired by the inhabitants of cities was frequently employed in purchasing such lands as were to be sold, of which a great part would frequently be uncultivated. Merchants are commonly ambitious of becoming country gentlemen, and when they do, they are generally the best of all improvers. A merchant is accustomed to employ his money chiefly in profitable projects, whereas a mere country gentleman is accustomed to employ it chiefly in expense. The one often sees his money go from him and return to him again with a profit; the other, when once he parts with it, very seldom expects to see any more of it. Those different habits naturally affect their temper and disposition in every sort of business. A merchant is commonly a bold, a country gentleman a timid undertaker.

The book’s broad themes

The first theme in The Wealth of Nations is that regulations on commerce are ill-founded and counter-productive. The prevailing view was that gold and silver was wealth, and that countries should boost exports and resist imports in order to maximize this metal wealth. Today, we would call it gross national product. Another central theme is that this productive capacity rests on the division of labour and the accumulation of capital that it makes possible. Huge efficiencies can be gained by breaking production down into many small tasks, each undertaken by specialist hands. This leaves producers with a surplus that they can exchange with others, or use to invest in new and even more efficient labour-saving machinery. The more that is invested in better productive processes, the more wealth will be created in the future. But if people are going to build up their capital, they must be confident that it will be secure from theft. The countries that prosper are those that grow their capital, manage it well, and protect it. A fourth theme is that this system is automatic. Where things are scarce, people are prepared to pay more for them: there is more profit in supplying them, so producers invest more capital to produce them.

Selected Works

The latter, often abbreviated as The Wealth of Nationsis considered his magnum opus and the first modern work of economics. In his work, Adam Smith introduced his theory of absolute advantage. Smith studied social philosophy at the University of Glasgow and at Balliol College, Oxfordwhere he was one of the first students to benefit from scholarships set up by fellow Scot John Snell. After graduating, he delivered a successful series of public lectures at the University of Edinburgh[9] leading him to collaborate with David Hume during the Scottish Enlightenment.

Smith obtained a professorship at Glasgow, teaching moral philosophy and during this time, wrote and published The Theory of Moral Sentiments. In his later life, he took a tutoring position that allowed him to travel throughout Europe, where he met other intellectual leaders of his day. Smith laid the foundations of classical free market economic theory. The Wealth of Nations was a precursor to the modern academic discipline of economics.

In this and other works, he developed the concept of division of labour and expounded upon how rational self-interest and competition can lead to economic prosperity.

Smith was controversial in his own day and his general approach and writing style were often satirised by writers such as Horace Walpole. Smith was born in Kirkcaldyin the Kingdom of FifeScotland. His father, also Adam Smith, was a Scottish Writer to the Signet senior solicitoradvocate and prosecutor judge advocate and also served as comptroller of the customs in Kirkcaldy. Two months before Smith was born, his father died, leaving his mother a widow.

Although few events in Smith’s early childhood are known, the Scottish journalist John RaeSmith’s biographer, recorded that Smith was abducted by Romas at the age of three and released when others went to rescue. Smith entered the University of Glasgow when he was 14 and studied moral philosophy under Francis Hutcheson. InSmith was the graduate scholar presented to undertake postgraduate studies at Balliol College, Oxfordunder the Snell Exhibition.

Smith considered the teaching at Glasgow to be far superior to that at Oxford, which he found intellectually stifling. In Book V of The Wealth of NationsSmith comments on the low quality of instruction and the meager intellectual activity at English universitieswhen compared to their Scottish counterparts. He attributes this both to the rich endowments of the colleges at Oxford and Cambridgewhich made the income of professors independent of their ability to attract students, and to the fact that distinguished men of letters could make an even more comfortable living as ministers of the Church of England.

Smith’s discontent at Oxford might be in part due to the absence of his beloved teacher in Glasgow, Francis Hutcheson, who was well regarded as one of the most prominent lecturers at the University of Glasgow in his day and earned the approbation of students, colleagues, and even ordinary residents with the fervor and earnestness of his orations which he sometimes opened to the public.

His lectures endeavoured not merely to teach philosophy, but also to make his students embody that philosophy in their lives, appropriately acquiring the epithet, the preacher of philosophy. Unlike Smith, Hutcheson was not a system builder; rather, his magnetic personality and method of lecturing so influenced his students and caused the greatest of those to reverentially refer to him as «the never to be forgotten Hutcheson»—a title that Smith in all his correspondence used to describe only two people, his good friend David Hume and influential mentor Francis Hutcheson.

Smith began delivering public lectures in at the University of Edinburgh[26] sponsored by the Philosophical Society of Edinburgh under the patronage of Lord Kames.

On this latter topic, he first expounded his economic philosophy of «the obvious and simple system of natural liberty «. While Smith was not adept at public speakinghis lectures met with success.

InSmith met the philosopher David Hume, who was his senior by more than a decade. In their writings covering history, politics, philosophy, economics, and religion, Smith and Hume shared closer intellectual and personal bonds than with other important figures of the Scottish Enlightenment. InSmith earned a professorship at Glasgow University teaching logic courses, and inhe was elected a member of the Philosophical Society of Edinburgh, having been introduced to the society by Lord Kames.

When the head of Moral Philosophy in Glasgow died the next year, Smith took over the position. This work was concerned with how human morality depends on sympathy between agent and spectator, or the individual and other members of society. Smith defined «mutual sympathy» as the basis of moral sentiments. He based his explanation, not on a special «moral sense» as the Third Lord Shaftesbury and Hutcheson had done, nor on utility as Hume did, but on mutual sympathy, a term best captured in modern parlance by the 20th-century concept of empathythe capacity to recognise feelings that are being experienced by another.

Following the publication of The Theory of Moral SentimentsSmith became so popular that many wealthy students left their schools in other countries to enroll at Glasgow to learn under Smith. Smith resigned from his professorship in to take the tutoring position.

He subsequently attempted to return the fees he had collected from his students because he had resigned partway through the term, but his students refused. Smith’s tutoring job entailed touring Europe with Scott, during which time he educated Scott on a variety of subjects, such as etiquette and manners.

According to his own account, he found Toulouse to be somewhat boring, having written to Hume that he «had begun to write a book to pass away the time». From Geneva, the party moved to Paris. Let do and let pass, the world goes on by itself! The excessive consumption of goods and services deemed to have no economic contribution was considered a source of unproductive labour, with France’s agriculture the only economic sector maintaining the wealth of the nation. InHenry Scott’s younger brother died in Paris, and Smith’s tour as a tutor ended shortly.

Smith secured the patronage of David Hume and Thomas Reid in the young man’s education. The Wealth of Nations was published in and was an instant success, selling out its first edition in only six months. InSmith was appointed to a post as commissioner of customs in Scotland and went to live with his mother who died in [45] in Panmure House in Edinburgh’s Canongate. Smith died in the northern wing of Panmure House in Edinburgh on 17 July after a painful illness.

His body was buried in the Canongate Kirkyard. Smith’s literary executors were two friends from the Scottish academic world: the physicist and chemist Joseph Black and the pioneering geologist James Hutton.

Cunningham and David Anne Mrs. On the death in of her husband, the Reverend W. Cunningham of Prestonpans, Mrs. Cunningham sold some of the books. After his death, the remaining books were sold. On the death of Mrs.

Bannerman inher portion of the library went intact to the New College of the Free Church in Edinburgh and the collection was transferred to the University of Edinburgh Main Library in Not much is known about Smith’s personal views beyond what can be deduced from his published articles.

His personal papers were destroyed after his death at his request. Smith was described by several of his contemporaries and biographers as comically absent-minded, with peculiar habits of speech and gait, and a smile of «inexpressible benignity». James Boswellwho was a student of Smith’s at Glasgow University, and later knew him at the Literary Clubsays that Smith thought that speaking about his ideas in conversation might reduce the sale of his books, so his conversation was unimpressive.

According to Boswell, he once told Sir Joshua Reynoldsthat «he made it a rule when in company never to talk of what he understood». Smith has been alternatively described as someone who «had a large nose, bulging eyes, a protruding lower lip, a nervous twitch, and a speech impediment» and one whose «countenance was manly and agreeable». Considerable scholarly debate has occurred about the nature of Smith’s religious views.

Smith’s father had shown a strong interest in Christianity and belonged to the moderate wing of the Church of Scotland. Anglo-American economist Ronald Coase has challenged the view that Smith was a deistbased on the fact that Smith’s writings never explicitly invoke God as an explanation of the harmonies of the natural or the human worlds.

Philosophy afterwards endeavoured to account for them, from more familiar causes, or from such as mankind were better acquainted with than the agency of the gods».

Some other authors argue that Smith’s social and economic philosophy is inherently theological and that his entire model of social order is logically dependent on the notion of God’s action in nature. Smith was also a close friend of David Hume, who was commonly characterised in his own time as an atheist.

In the work, Smith critically examines the moral thinking of his time, and suggests that conscience arises from dynamic and interactive social relationships through which people seek «mutual sympathy of sentiments.

Smith proposes a theory of sympathy, in which the act of observing others and seeing the judgements they form of both others and oneself makes people aware of themselves and how others perceive their behaviour. The feedback we receive from perceiving or imagining others’ judgements creates an incentive to achieve «mutual sympathy of sentiments» with them and leads people to develop habits, and then principles, of behaviour, which come to constitute one’s conscience.

Some scholars have perceived a conflict between The Theory of Moral Sentiments and The Wealth of Nations ; the former emphasises sympathy for others, while the latter focuses on the role of self-interest. They claim that in The Theory of Moral SentimentsSmith develops a theory of psychology in which individuals seek the approval of the «impartial spectator» as a result of a natural desire to have outside observers sympathise with their sentiments.

Rather than viewing The Theory of Moral Sentiments and The Wealth of Nations as presenting incompatible views of human nature, some Smith scholars regard the works as emphasising different aspects of human nature that vary depending on the situation. Otteson argues that both books are Newtonian in their methodology and deploy a similar «market model» for explaining the creation and development of large-scale human social orders, including morality, economics, as well as language.

Disagreement exists between classical and neoclassical economists about the central message of Smith’s most influential work: An Inquiry into the Nature and Causes of the Wealth of Nations Smith used the term » the invisible hand » in «History of Astronomy» [84] referring to «the invisible hand of Jupiter», and once in each of his The Theory of Moral Sentiments [85] and The Wealth of Nations [86] This last statement about «an invisible hand» has been interpreted in numerous ways.

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.

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 cases, 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. Those who regard that statement as Smith’s central message also quote frequently Smith’s dictum: [87]. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

However, in The Theory of Moral Sentiments he had a more sceptical approach to self-interest as driver of behaviour:. How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

Smith’s statement about the benefits of «an invisible hand» may be meant to answer [ citation needed ] Mandeville’s contention that «Private Vices Self-interested competition in the free market, he argued, would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services.

Nevertheless, he was wary of businessmen and warned of their «conspiracy against the public or in some other contrivance to raise prices». Smith states that the interest of manufacturers and merchants «in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.

It is the great multiplication of the production of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people.

Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs.

He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of society. The Wealth of Nations, I. The neoclassical interest in Smith’s statement about «an invisible hand» originates in the possibility of seeing it as a precursor of neoclassical economics and its concept of general equilibrium — Samuelson’s «Economics» refers six times to Smith’s «invisible hand».

To emphasise this connection, Samuelson [92] quotes Smith’s «invisible hand» statement substituting «general interest» for «public interest».

1.4 Money! (Wealth of Nations Explained)

Free Markets and Antitrust Law. As the American Revolution began, a Scottish philosopher started his own economic revolution. InAdam Smith published The Wealth of Nationsprobably the most influential book on market economics ever written.

An encyclopedia of philosophy articles written by professional philosophers.

Born inAdam Smith was the son of a customs official in Kirkcaldy, Scotland. At 14, he entered the University of Glasgow. After graduating, he attended Oxford in England and studied philosophy. Three types of ways of making money by adam smith became a professor of philosophy at Glasgow in He actively took part in Glasgow debating societies and often argued for free trade. His book looked at human nature and ethics. At the beginning of the book, he stated that all people had the capacity to care about. He pointed out that no matter how selfish a man might be. But Smith also believed that people often acted in their self-interest, especially in economic matters.