The Wealth of Nations Study Guide

Adam Smith was born and lived much of his life in the small town of Kirkcaldy, Fife, which lies across the Firth of Forth from Edinburgh. Smith’s father, a prominent government lawyer, died shortly before his birth. After secondary school, a classical education at the University of Glasgow, and postgraduate studies at Oxford, Smith began lecturing on rhetoric in Edinburgh. In the 1750s, the happiest period of his life, he became a Professor of Logic and then the Chair in Moral Philosophy at the University of Glasgow. He published The Theory of Moral Sentiments in 1759, which earned him international recognition. After reading this book, politician Charles Townshend hired Smith to tutor his stepson, the 17-year-old Duke of Buccleuch, during a grand tour of Europe. Smith educated the Duke and prepared him for polite society during three years in Toulouse, Paris, and Geneva, but their trip was cut short before they could reach Italy or Germany. Smith moved home to Kirkcaldy and spend the next decade living on a pension from the Duke while taking care of his elderly mother, leading various intellectual societies, and writing The Wealth of Nations (which he published in 1776). In 1778 he  moved to Edinburgh to serve as Scotland’s Commissioner of Customs. He later became Lord Rector of the University of Edinburgh and cofounded the city’s Royal Society. He died in Edinburgh in 1790, shortly after ordering his literary executors to burn most of his unpublished manuscripts.

Adam Smith’s theory of political economy is based on a massive amount of economic history. Smith spends hundreds of pages analyzing economic conditions in different societies, with a focus on England, Scotland, Britain’s colonies, and France from the late Middle Ages until his own time in the late 18th century. But he also considers everything from Naples’s poorly-structured sales tax and China’s geographic advantages for domestic trade to power structures in Turkish herding clans and the short-lived Swedish colony in New Jersey. This comparative analysis helps him illustrate how different societies have specialized in producing different goods and how some also developed the complex institutions needed to base their economies on free and fair market exchange. Smith considers ancient societies’ institutions at length: he praises the ancient Greek education system and the Roman army, and he argues that China, ancient Egypt, and ancient India are the only societies to have ever truly achieve their full economic potential. Smith pays special attention to how European exploration and colonialism created an integrated global trade network. He argues that this trade will increase the availability of goods and services while reducing prices for nearly everyone in the long term. But he sharply criticizes European governments for entrusting power over the rest of the world to cruel, greedy, and monopolistic people like Christopher Columbus, Spain’s conquistadors, the slave traders and planters of Britain and France, and the directors of the East India Company. Smith envisioned a system where each country governed itself, collectively invested in improving its own economy, and traded freely with the rest of the world. This is why England succeeded, and why Smith thought its North American colonies would soon outgrow it. England’s domestic political and economic structure was more equal than almost anywhere else in Europe, which enabled complex manufacturing and commerce to develop. In contrast, landed nobility ruled most of Europe repressively, protecting their own monopoly power at the expense of economic development for the masses. Most notably, France’s extravagant aristocracy and deep inequality repressed its economy. Holland and Switzerland were a notable exception, as their resistance to centralized power during the Protestant Reformation helped them establish more egalitarian commercial laws and fiscally responsible approaches to government. Smith’s ideas have remained foundational to economic thinking even though he published The Wealth of Nations at the very beginning of the industrial revolution, as the American Revolution had just begun, and the French Revolution was brewing.

Besides The Wealth of Nations, Adam Smith’s other major work was the Theory of Moral Sentiments, which he first published in 1759 and then updated five times, finishing the sixth and final edition in 1788. The only other books he published were the Lectures on Jurisprudence (1763) and the posthumous Essays on Philosophical Subjects (1795), but another set of his lectures were discovered in 1958 and published as the Lectures on Rhetoric and Belles Lettres. Many of Smith’s closest friends and confidants were fellow intellectuals—including David Hume, whose A Treatise of Human Nature (1739–40) is arguably the central work in the Scottish Enlightenment, and the French physiocrat François Quesnay, who outlined his system of political economy in the Tableau économique (1758). Smith’s work deeply influenced all subsequent economic theory, but his two most notable and immediate influences were on David Ricardo’s Principles of Political Economy and Taxation (1817) and Karl Marx’s three-volume Capital (1867, 1885, 1894). Immanuel Kant, the Enlightenment’s central figure, was a close reader of Adam Smith; Kant’s ethical theory in the Groundwork of the Metaphysics of Morals (1785) shows clear influence from Smith’s ethical and political thought. Smith’s most significant promoter and biographer was his fellow Edinburgh professor Dugald Stewart, who published his Account of the Life and Writings of Adam Smith in 1793, just three years after Smith’s death. But biographers have continued to take an interest in Smith, as evidenced by John Rae’s 1895 Life of Adam Smith, Ian Simpson Ross’s 1995 The Life of Adam Smith, and James Buchan’s 2006 The Authentic Adam Smith: His Life and Ideas. Interest in Smith has been so intense that James Bonar even published A Catalogue of the Library of Adam Smith in 1894. A Critical Bibliography of Adam Smith (ed. Keith Tribe and Hiroshi Mizuta, 2002) explores his international reputation. Other contemporary work on Smith’s life, ideas, and legacy includes the anthology Propriety and Prosperity: New Studies on the Philosophy of Adam Smith (2014), Kaushik Basu’s Beyond the Invisible Hand: Groundwork for a New Economics (2016), and Glory M. Liu’s Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism (2022).