Wednesday, May 25, 2022

Adam Smith, “Laissez Faire, Laissez Passer”

Adam Smith was a Scottish economist and philosopher of the 18th century, born in Kirkcaldy (Scotland) on June 5, 1723. He is one of the main authors of what is called classical economics.

Because his family was quite well off, he was able to enter the University of Glasgow in 1737. There he was influenced by Francis Hutcheson, a renowned professor of moral philosophy.

In 1740 he obtained a scholarship to study at Balliol College. His time at both universities had a great influence on his work as an economist.

After completing his studies, he returned to his native land in 1746. There he tried his hand as an assistant professor until in 1751 the University of Glasgow offered him the chair of Moral Philosophy.

He remained in the post for 12 years, during which time he published his first book called “The Theory of Moral Sentiments”. It was a success that enhanced his reputation and served as the basis for his second and best known work.

In 1763 he was hired by Charles Townshend to tutor his stepson. The three years that he remained in charge of his pupil, provided him with a considerable extension of his knowledge.

On the one hand, he met many French physiocrats, which would explain why his theories emanate from Physiocracy (and take the motto “Laissez faire, laissez passer”).

On the other hand, he established relationships with many philosophers and enlightened thinkers (Diderot, D’Alembert, David Hume) who had a decisive influence on his understanding of society and the world around him.

Adam Smith’s economic theory

After his wanderings in Europe, Smith returned to Kirkcaldy and began to develop his own economic theory. He drew on the ideas of Quesnay and Turgot, two of the leading exponents of Physiocracy.

It took him ten years to finish his most important work: “Inquiry into the Nature and Causes of the Wealth of Nations”. It was published in 1776 and is the basic pillar of the doctrine of economic liberalism.

In this work he defends the work and activity of man as the source of all wealth. Both concepts are enhanced by the division of labor, according to Smith. He attributed the mechanism of regulation of the economy to personal interest, as well as to the free operation of supply and demand.

He was a strong advocate of capitalism in its most liberal form and laid down the basic principles of taxation.

However, Smith’s optimism about social welfare did not appear in terms of the distribution of wealth, since income and profit reduced wages and the upper classes oppressed the lower classes.

This led after a few years to the appearance of alternative currents to the classical capitalist economy of liberal doctrine, such as socialism or communism.

From 1778, he served as director of customs in Edinburgh. As a token of gratitude for a lifetime dedicated to teaching, he was appointed honorary rector of the University of Glasgow in 1787.

He died on July 17, 1790 in Edinburgh, being considered one of the best economists of his time and enjoying academic support and respect.