BUCKLE said of The Wealth of Nations that it is “the most valuable contribution ever made by a single individual to determine the true principles of government.” M. Culloch thought The Wealth of Nations had “exercised a power and beneficent influence on the public opinion and legislation of the civilised world, which has never been attained by any other work.” Lord Mahon stated that “The Wealth of Nations not only founded, but also almost completed political economy”; and Jean Baptiste Say said, “Read Adam Smith as he deserves to be read and you will perceive that before him no political economy existed.” On the other hand, John Ruskin is responsible for the allusion to Adam Smith as “the half-bred and half-witted Scotchman who taught the deliberate blasphemy: Thou shalt hate the Lord, thy God, damn his laws and covet his neighbour s goods.”
That these various statements involve gross exaggerations needs scarcely to be pointed out. But it remains true none the less that The Wealth of Nations has become one of the classics of literature in general, as well as of the literature of economics in particular. Before proceeding to consider the reasons for this it may be wise to say a word about the author himself.
Adam Smith was born in 1 723 in the small town of Kirkcaldy,
Scotland, as the son of a minor government official. At the
age of three he was stolen by gypsies, but was fortunately
before long restored to his parents. At the age of fourteen
he was sent to college at Glasgow, and when seventeen entered
Balliol College, Oxford, as an exhibitioner. He remained at
the university six years, devoting himself to philosophy and
literature. After his graduation he dwelt for a period at home
in the prosecution of his studies, and in 1748 was appointed to
a lectureship on literature at Edinburgh, a position which
he secured through the influence of his friend, Lord Kames.
In 1751 he was made Professor of Literature at Glasgow, and
from 1752 on, he occupied the chair of Moral Philosophy.
It was during the ensuing decade that he worked out his
v
vi The Wealth of Nations
general philosophic scheme, and published his famous work on
the Theory of Moral Sentiments. Moral philosophy in those
days comprised a wide range of subjects, and as taught by
Adam Smith included four parts Natural Theology, Ethics,
Justice or Jurisprudence, and Political Economy. The
lectures on the last two subjects which were delivered by him
in the University of Glasgow in 1763 have fortunately been
preserved in a set of student s notes, which were republished
in 1896 under the title, Lectures on Justice, Police, Revenue, and
Arms. At the close of 1763, Adam Smith accepted an invita
tion from the young Duke of Buccleuch to act as his tutor and
companion on a trip to the continent. They spent a year and
a half in the south of France and Toulouse, then a short time
at Geneva, and finally another year at Paris. It was at
Toulouse that Adam Smith, in order, as he tells us, to occupy
his leisure, began the recasting of his classroom lectures on
Political Economy, and commenced to write a comprehensive
work on the subject. While in Paris he was thrown into
intimate contact with that small group of prominent thinkers
and writers known as the Economistes or the Physiocrats, who
were agitating public opinion on economic topics, especially
the court physician, Quesnay, the elder Mirabeau, and the
famous Turgot. He also formed intimate friendships with
some of the most distinguished philosophers and literary men
of the day. Returning to Scotland in 1767 he settled down
quietly at Kirkcaldy, devoting himself to the completion of
his great book. In 1773 he found it necessary, in order to
carry on some more detailed investigations, to repair to London.
He remained there until the spring of 1776, when The Wealth
of Nations finally appeared. Two years later he accepted the
position of Commissioner of Customs in Scotland, and he
thereupon lived an uneventful existence, devoted to his official
duties, and issuing, from time to time, new editions of his
great work, until he died in 1 790.
In order to understand the great popularity of The Wealth
of Nations, it is necessary to consider, first, the inherent
merits of the work, and secondly, its relation to the political
and economic struggles of the day.
So far as the external characteristics of the work are con
cerned, it must be noted that The Wealth of Nations is both
remarkably lucid and exceptionally interesting. It was, of
course, not the first book on political economy, but it is only
necessary to compare it with its chief predecessor, Steuart s
Introduction vii
Political Economy, published in 1767, to be struck by the
immense difference. Steuart s book was a meritorious com
pilation, but without form, without charm, and without
interest. It attracted few readers, and exerted no perceptible
influence. The Wealth of Nations, on the other hand, was
admirably expressed, and written in a strain that is at once
philosophic and popular. Far more important, however, than
these external characteristics, was the fact that Adam Smith
had something new to say. He delved beneath the surface
of things, and attempted to give a comprehensive analysis of
the fundamental institutions of industrial society. He dis
played a subtle grasp of principles, and was able to separate
the significant from the unimportant. But more than that, he
aroused public attention by the challenge which he directed
against the economic policy of the day. His conclusions were
not in harmony with those of the politician, and he set men
thinking. Other writers may have had in part the same ideas,
but no one had been able hitherto to weave these separate
thoughts into a connected whole, or to present the conclusions
in so masterly and authoritative a manner. On the other hand,
the book appeared in the nick of time, at a period, namely,
when vast changes were taking place in both the industrial
and the commercial conditions in England, and when it might
be expected, therefore, that the ideas contained in The Wealth
of Nations would gradually find a respectful hearing. To
comprehend this situation, however, we must go a little further
afield.
Vine two fundamental ideas of The Wealth of Nations are
those of self-interest and natural liberty. It was by utilising
and applying these doctrines to his analysis of economic
institutions that Adam Smith achieved his great success. "It
is not from the benevolence of the butcher, the brewer, or the
baker," he tells us, " that we expect our dinner, but from
their regard of their own interest. We address ourselves not
to their humanity, but to their self-love, and never talk to
them of our own necessities, but of their advantage."
It is this idea which permeates the whole of Smith s work.
It must indeed not be imagined that Adam Smith conceived
of men as actuated exclusively by this motive. On the
contrary, in his Theory of Moral Sentiments he posits the
doctrine of sympathy as the real bond between human beings
in their ethical relations. But what he was concerned with in
The Wealth of Nations was an analysis of the economic situation
viii The Wealth of Nations
and a consideration of the motives and conditions that make
for wealth, rather than for the wider conception of welfare
in general. His success in dealing with the economic analysis
consists in the fact that he carried through consistently the
influence of this economic motive on life in general. He did
not delude himself with the belief that this was the whole of
life, and he was far from deserving the jibes of Ruskin, to
which allusion has been made in the opening paragraph. He
took economic life as he found it, and he explained more clearly
and more consistently than any of his predecessors the influence
of the factor of self-interest in the business world.
His second great doctrine was that of natural liberty. The
Europe of his day had long been dominated by the so-called
mercantile system a system which in its origin responded
to the demands of the new national life, and which laid great
stress on the power of government to affect economic conditions.
Useful and justifiable, however, as the system had in many
respects been, it had become, during the eighteenth century,
outworn and antiquated, and the emphasis had been gradually
put upon restrictive rather than constructive measures, so
that it culminated in a most elaborate policy of national ex-
clusiveness. Inquisitorial customs houses and tariff wars were
multiplied. Industry was fairly throttled by minute regula
tions of details, and in some countries volumes were filled with
complicated, unintelligible, and contradictory regulations of
manufactures. The confusion was heightened by the excesses
of the monopolistic companies, and especially on the continent
by the degeneration of the craft guilds, which now, far from
being welcome accessories to the municipal administration,
had become oppressive, exclusive bodies, with a hereditary
caste-like organisation.
What wonder, then, that a sect of men should arise who
sought refuge from this intolerable pandemonium of perpetual
interference in the soothing doctrine of absolute liberty ? The
times were ripe for a reaction a reaction in every sphere of
life, political, religious, economic. In politics this was ushered
in by Rousseau, in philosophy by Voltaire and the encyclo
pedists, in economics by the advent of the Physiocrats. The
great significance of the Physiocrats, as their name denotes,
is the belief in the natural order of liberty; their tenets of
the "net produce" (produit net) and the single tax (impot
unique) being subordinate doctrines, which grew out of their
endeavour to rehabilitate agriculture, and to bring the dis-
Introduction ix
solute classes back to a sense of primitive simplicity. Just
as the mercantilists had laid stress on the national element,
applying the principles of domestic economy to political life,
so, on the other hand, the Physiocrats represented the universal,
the cosmopolitan, the international view. In that confused
progeny of stoic philosophy and Roman law, as nurtured by the
continental jurists and philosophers, and known as the law
of nature, Rousseau found the life-blood of his contrat social,
the support of his revolutionary theories. And the same
misconception led Quesnay to formulate the laws of industrial
society as eternal and immutable truths, which it was the
function of man to expound, but which it would be utterly
impossible or, if possible, utterly ruinous to change or
tamper with. Laissez faire, laissez passer is the key which
unlocks all economic puzzles. The " be quiet " system, as
Bentham calls it, is the sole panacea for human ills, the only
hope of social regeneration. Give free play to the natural laws
of liberty and equality, and prosperity will soon shine in all
its refulgence on the expanse of national life.
It is well known that Adam Smith owed much to the Physio
crats, and that he was for a time a disciple of Quesnay. But
these particular ideas of liberty were not derived from his
French friends. They were in the air in England, as well as
on the continent, and were shared by several of his English
predecessors. Although the abuses were in some respects not
so great in England as on the continent, England, like France,
was in the toils of the Colonial system, and the dispute between
the mother country and the American colonies was fast coming
to a head. It is more than a mere coincidence that The Wealth
of Nations should have appeared in the same year that the
Declaration of Independence was signed. On all sides the con
ditions of English life also were fast outgrowing the swaddling
clothes of official omniscience and governmental sciolism.
In the town where Smith laboured there were numerous
protests by individuals and by societies against the policy of
the government. It is not surprising, then, that, after a careful
resume of the shortcomings of the prevalent commercial
policy, Adam Smith should have concluded with this celebrated
passage: " All systems, either of preference or restraint, there
fore, being thus completely taken away, the obvious and simple
system of natural liberty establishes itself of its own accord.
Every man, as soon as he does not violate the laws of justice,
is left perfectly free to pursue his own interests in his own
x The Wealth of Nations
way, and to bring both his industry and his capital into com
petition with those of any other man or order of men."
It is true, indeed, that Adam Smith was too broad-minded
to maintain this doctrine without any qualifications, for he
possessed a far truer historical spirit than many of his suc
cessors. He upholds, for instance, the Navigation Act of
Cromwell ; he defends the necessity of export duties in certain
cases; he even maintains that the interests of individuals
" in any particular branch of trade or manufacture are always
in some respects different from, and even opposite to, the
interests of the public." Yet the general teaching of Adam
Smith was to emphasise the need of greater liberty, and it was
this teaching that made his book famous.
It may be asked, indeed: Was Adam Smith original ? The
answer is not a difficult one. It is, for instance, absurd to
state that Adam Smith was the first political economist.
People have speculated on economic questions for centuries,
and even in classic antiquity we find economic theories. Adam
Smith owed much both to his English and to his French pre
decessors. To mention only a few points; his arguments
against the Bullionists may be found in Mun; his conception
of labour as a measure of value in Petty ; his theory of self-
interest in Mandeville, in Hume, and in Tucker; his doctrine
of the advantages of a low rate of interest in Child and Massie;
his theory of natural law in Locke and Hutcheson; his views
on the currency in Newton ; his doctrines of credit in Davenant.
Even his famous four rules of taxation, for which he is justly
admired, and which, according to Mr. Francis Hirst, in his book
on Adam Smith, were " new and startling," are in reality to
be found almost word for word in some of his French prede
cessors. A German scholar has amused himself by printing
twenty pages oi the deadly parallel, setting the passages from
The Wealth of Nations opposite those of the earlier eighteenth-
century writers. Above all, Adam Smith owes much to the
Physiocrats. We now know exactly the extent of his obliga
tions, for we are able to compare the economic views contained
in his lecture course of 1763 with those of The Wealth of
Nations in 1776. Adam Smith learned from the Physiocrats
several important things. In the first place, he borrowed
from them the emphasis laid upon consumption, or the interests
of the consumers, whereas the earlier writers had emphasised
primarily the interests of the producers. Secondly, the entire
theory of distribution, with a division of the produce into
Introduction xi
rent, wages, and interest, is based upon the Physiocratic
analysis. Thirdly, the theory of the nature and movement
of stock or capital is taken from the French writers. And
finally, while Adam Smith did not accept the Physiocratic
doctrine of the sole productivity of land, he was induced
by them to make his not entirely fortunate distinction between
productive and unproductive labour in general.
Great as were Adam Smith s obligations to his predecessors,
both English and French, his originality is none the less to
be maintained. He was far more than a slavish follower of
his predecessors. He took, indeed, many thoughts which he
found in other writers, but he individualised their passing
remarks ; he placed them in such a connection that they became
invested with a new significance; he clothed them in such a
garb that they must henceforth be regarded as his own progeny.
And this, after all, was a work of genius, for it is given to no
man to be completely original. Every one is the product of
the times, of the Zeitgeist and the ideals of the period are
unconsciously reflected in the individual. So it was with the
opinions of Adam Smith. What in the writings of his pre
decessors was either scattered or inconsequential became in
his own great work a well-knit whole of remarkable effective
ness.
The real interpretation of Adam Smith has yet to be written.
Reduced to the simplest terms, however, it may be said that
Adam Smith was the first great theorist of that stage of
capitalist enterprise which we call the domestic system. The
economists of earlier times were unable to give an analysis of
economic life which is at all satisfactory to us, because the
economic institutions then were different. Under the guild
system of industry there was no differentiation comparable
to that of the later period between capital and labour, and
the forms of profit had not yet disclosed themselves. The
eighteenth century was the period when capital was working
itself into business enterprise in such a way as to make its
influence felt on all sides, and the analysis of the older writers
based upon a system of economic institutions that had passed
away was no longer adequate. The Physiocrats in France and
Adam Smith in England were the first to attempt an analysis
of the new order, and this it is which gives them their import
ance. The Physiocrats, however, were blinded by the undue
significance which they attached to agricultural conditions,
whereas England, with its growing industrial and commercial
xii The Wealth of Nations
development, naturally preserved Adam Smith from these
errors. Smith s thoughts were formed on the very threshold
of the industrial revolution. In 1758 James Brindley built
the first canal between Liverpool and Manchester. In 1769
the barber Arkwright rediscovered Wyatt s method of roller-
spinning. In 1770 Hargreaves perfected the spinning jenny.
In 1776 Crompton patented his mule founded on the water
frame, and in 1765 Watt discovered the use of steam as a
motive power. England was fast losing her agricultural
characteristics and getting to be an industrial country. From
being an exporter of wheat she was becoming an importer
of wheat. Capitalist enterprise was in its first stage, and Adam
Smith was its earliest interpreter.
In the second place, Adam Smith had his eyes opened to the
shortcomings of the restrictive colonial policy by the discontent
in America. There had always been critics of the commercial
policy of England in its relations with the continental countries,
but these critics were largely confined to the Tory side. Adam
Smith s significance in the history of political thought lies in
the fact, as Ashley has shown us, that he brought these more
liberal ideas over from the camp of the Tories to that of the
Whigs. The experiences that followed the independence of
America induced the Whig leaders before long to accept
Smith s analysis, and gradually to embody its conclusions into
legislation. Adam Smith, like all great men, succeeded in
formulating what was soon to become the public opinion.
Not only was he the first to analyse the new system of industry
known as the domestic system, but he was also the first effec
tively to call attention to the changed commercial conditions
which rendered a continuance of the old colonial policy both
unnecessary and inadvisable. It was ultimately because Adam
Smith foresaw a little more clearly than his contemporaries
that he soon was to exercise so tremendous an influence.
This approach to an interpretation of Adam Smith also
enables us to understand in what respects The Wealth of
Nations responds to present-day needs. In a certain sense
indeed The Wealth of Nations is imperishable. Adam Smith
emphasised the ideas of liberty for the individual and of
cosmopolitanism in the relations among states. Those ideas
always retain their magic sway over the human mind. But
in some respects economic conditions have again changed
from those that existed when he wrote. What was necessary
in his day was primarily a work of destruction. Adam Smith,
Introduction xiii
like the Physiocrats, was indefatigable in his opposition to the
abuses of the powerful, to the privileges of the few. In the
place of restriction, he demanded freedom. In the place of
nationalism, he demanded cosmopolitanism. In the place
of paternal government, he demanded individualism. Before
building up the new, it is necessary to pull down the old.
The experience of the last half century has shown us, however,
that a mere destructive policy does not suffice, and that it is
necessary to frame a newer, conception of liberty with a more
constructive note in it. Again, Adam Smith s doctrine of
natural law in economics created, especially in the hands of
his followers, a more or less rigid and absolute economic
system. Recent investigation has called attention to the
changing conditions of time and place, and has emphasised the
principles of relativity rather than of absolutism. As a conse
quence, we no longer apply in all their rigour the extreme conclu
sions of The Wealth of Nations. Furthermore, the modern world
has seen a partial recrudescence of the spirit of nationalism,
and many thinkers to-day hold to the opinion that the much-
desired cosmopolitanism of the future can best be attained
through the medium of a well-directed and moderate economic
national life. Above all, the industrial world of to-day is in
many respects different from that of Adam Smith. Adam
Smith wrote on the eve of the industrial revolution, but he
did not see its accomplishment, which has produced in modern
times the factory system with the domination of the machine.
Adam Smith is the theorist of the domestic system; he does
not give us an analysis of the factory system. Hence we must
not seek in his pages for a real solution of some of the great
problems which are vexing the modern industrial world. Far
from completing political economy, he barely touched upon
what have become some of our most important difficulties.
When all is said and done, however, The Wealth of Nations
will for a long time retain the unique position which it has
secured in economic literature. It is indeed a landmark in
the history of human thought and of government. It came
at a time when there was urgent need of the message which
the author had to proclaim. It contributed not a little to
strengthen the hand of reformers and strugglers for freedom
the world over. It called attention, in an imperishable way,
to what must always remain some of the fundamental factors
in economic adjustment, and it was so free from partisan bias,
and so full of imperturbable good-humour, that it won the
xiv Select Bibliography
respect an3 the admiration even of those who differed with
its conclusions. Although Adam Smith is neither the founder
nor the completer of political economy, The Wealth of Nations
will long retain its position of proud pre-eminence in the
history of human thought in general and of economic thought
in particular.
EDWIN R. A. SELIGMAN.
COLUMBIA UNIVERSITY, NEW YORK.
SELECT BIBLIOGRAPHY
Articles upon Johnson s Dictionary, and the general state of literature of
Europe (Edinburgh Review], 1755; reprint, 1818; The Theory of Moral
Sentiments, 1759; and edition, 1761, with addition of Dissertation on the
Origin of Languages; 6th edition, with further additions and corrections,
1790, and later editions; with biographical and critical memoir by Dugald
Stewart (Bohn s Standard Library), 1846; An Inquiry into the Nature and
Causes of the Wealth of Nations, 1776, 1778; 3rd edition, with additions
and corrections (these published also separately), 1784; 4th edition, 1786;
5th edition, 1789, with additions, 1793; 6th edition, 1791; edited by W.
Playfair with life (nth edition), 1805; by D. Buchanan, 1814; by J. R.
M Cullpch, with life, 1823, 1850, and later editions; by E. G. Wakefield,
with life by D. Stewart, etc., 1835-9; by Thorold Rogers, 1869; by
J. S. Nicholson, 1884, 1901; reprint from 6th edition (Bohri s Standard
Library), 1887; Lubbock s Hundred Books, vol. 31, 1892; World s Classics,
1901; edited by E. Carman, 1904; new and condensed edition, G. H.
Macpherson and J. K. Kelly, 1903; Essays on Philosophical Subjects,
edited by J. Black and J. Huttort (with Dugald Stewart s Life) (including
Essay on Imitative Arts, on Affinity between Music, Dancing, and Poetry,
and on Affinity between certain Enghsh and Italian Verses, etc.), 1795;
Lectures on Justice, Police, Revenue, and Arms . . . reported by a student
in 1793, edited by Edwin Cannan, 1896.
Smith was part editor of the Edinburgh Review, 1755, etc., and of the
Edinburgh Magazine and Review, 1773, etc.
WORKS: 5 vols., 1812 (with Life by D. Stewart).
LIFE: Dugald Stewart (read before the Royal Society of Edinburgh,
1793), prefixed to several editions of works, and published with other
Memoirs, 1811; W. Playfair, prefixed to edition of Wealth of Nations, 1806;
J. R. M Culloch (Wealth of Nations], 1828; Thorold Rogers (Wealth oj
Nations), 1869; J. A. Farrer, 1881; R. B. Haldane (Great Writers Series),
1887; John Rae, 1895 ; H. C. Macpherson (Famous Scots Series), 1899; F. W.
Hirst (English Men of Letters), 1904; W. Cunningham, Richard Cobden and
Adam Smith, 1904; W. R. Scott s British Academy Lecture, Adam Smith,
1923, and his later works, Adam Smith as Student and Professor, 1937;
Studies Relating to Adam Smith During the Last Fifty Years, 1941; P. D.
Leake, Capital: Adam Smith: Carl Marx, 1933; E. Ginzberg, The House of
Adam Smith, 1934; C. F. Arrowood, Theory of Education in the Political
Philosophy of Adam Smith, 1945; Sir A Gray, Adam Smith, 1948.
