Economic Focus Adam Smith and Capitalism EDWIN CANNAN From An Inquiry into the Nature and Causes of the Wealth of Nations 1976

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Adam Smith, often known as the father of modern economics, was born in Kirkcaldy, Fife, E Scotland, UK. He studied at Glasgow and Oxford, and became professor of logic at Glasgow (1751), but took up the chair of moral philosophy the following year. In 1776 he moved to London, where he published An Inquiry into the Nature and Causes of the Wealth of Nations (1776), the first major work of political economy and a book which drastically changed the way that people looked at economics. 

Smith's work was critical of the economic system known as mercantilism,and attempted to explain the economy using the premise that natural law governed economic activity. The Wealth of Nations examined in detail the consequences of economic freedom, such as division of labor, the function of markets, and the implications of a laissez-faire free market economy, and eventually gave rise to the current economic system known as capitalism.

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Directions:  Read the following passages.  Once you finish, write ONE SENTENCE for each passage that briefly summarizes the basic concept of each excerpt from Adam Smith.

• Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.

• It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expence, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expence, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.

• 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 interest.

• The natural effort of every individual to better his own condition is so powerful that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.

• …a workman not educated to this business (pin manufacturing) nor acquainted with the use of the machinery employed in it, could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades.  One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head…

• 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 not 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.

• To widen the market and to narrow the competition is always the interest of the dealers ... 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 to be adopted, till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

• In every great monarchy of Europe the sale of the crown lands would produce a very large sum of money, which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown...When the crown lands had become private property, they would, in the course of a few years, become well-improved and well-cultivated...the revenue which the crown derives from the duties of customs and excise, would necessarily increase with the revenue and consumption of the people.

• 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.

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