An Inquiry to the Nature and Causes of the Influence of Adam Smith

An Inquiry to the Nature and Causes of the Influence of Adam Smith

Many people, when asked what pops into their mind with the word economics, they mostly say “capitalism”. Indeed the field deals a lot with capitalism. In fact, the three great names mentioned in Heilbroner and Thurow (1982, 17)—Adam Smith, Karl Marx, and John Maynard Keynes—have capitalism as the base of their different ideologies; and it is in how they view capitalism that within economics, several school of thought sprouted, enabling the further development of the field.

The influence that Smith, Marx, and Keynes are incalculable: each inducing their own set of followers that continue polishing up their works long after they are gone, each idea continuing on as legacies, influencing political decisions all throughout the world. But for now, let us content ourselves with examining the influence of Adam Smith, the father of economics himself.

In the opening statement of Adam Smith’s celebrated work, An Inquiry into the Nature and Causes of the Wealth of Nations (Smith, Skinner, 1986), he wrote:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it” (Smith, 1986).

Back in Smith’s day, this statement, along with the ideas contained in the Wealth of Nations, raised many eyebrows. The book, a first-of-its-kind defense for the free-market and a direct attack to mercantilism, argues that the selfish motives of individuals does not necessarily lead to detriments; in fact it could actually benefit the society.

It is based from this belief that he further postulated that the free market, though looking like unrestrained and chaotic, will be eventually guided to the right direction by the “Invisible Hand”, which in turn is guided by individual human motives that are most commonly selfishness and greed. It being termed as a free-market, Smith abhorred any kind of intervention coming from the government, believing that for the market to function efficiently, it should be left to work on its own—thus, the idea of laissez-faire (www.econlib.org). Smith also was a firm believer that it is labor, and not land that is essential in increasing production and thus highlights the importance (but also warns against the peril) of division of labor.

Just how influential Smith’s ideas are can be readily seen in the field of Economics through the years and especially in this day and age: free markets have been made the ultimate goal of many a government of today; specialization has never been more stressed as a major strategy in production; capitalism is fast becoming the only model for economies today; and mercantilism have long disappeared in favor of Smith’s proposed free trade (although the degree of freedom in trade in some countries is a matter worth questioning).

Selfishness and greed, although still contested by some groups, are still viewed in a much more positive light, and is justified in the field of economics so long as they serve the society’s over-all benefit. Several followers have also polished on the economist’s basic ideas, extending them to meet the different quirks that come up through time.

Smith has been a household name for any person with at least average knowledge on economics; in fact he is ranked 30th in Michael Hart’s list of the most influential persons in history (1992). Also his portrait appears on the twenty pound note in UK. (Talk about influence that you cannot buy!)

Greed that fosters growth and division that promotes efficiency. Once taken aside but now are lived and breathed and experienced worldwide. And as long as there are supporters who hang on to the basic tenets of the famous Adam Smith, the great economist’s legacy shall forever live on and endure.

References

Hart, M. (1992). The 100: A ranking of the most influential persons in history. Carol Publishing

Group.

Henderson, D. (2002). Biography of Adam Smith. Retrieved March 3, 2008, from

Heilbroner, RL., Thurow, LC. (1982). “Three Great Economists”. Economics explained.

Prentice-Hall. p.17.

Smith, A., Skinner, A (Ed). (1986). An inquiry to the nature and causes of the wealth of nations.

Penguin Classics.