1. CIA 4U Analyzing Current Economic Issues
Adam Smith
CIA 4U
Analyzing Current Economic Issues

2. “The Father of Modern Economics & Founder of Capitalism”

3. Overview
Biography
Economic Times
Ideas that Advanced Economic Thought

4. Biography Born: ? Place of Birth: Kirkcaldy, Fife, Scotland.
Exact date is unknown, but was baptized on June 5,
Place of Birth:
Kirkcaldy, Fife, Scotland.

5. Biography Family Father was the controller of the customs at Kirkcaldy
Strong interest in Christianity
Belonged to Church of Scotland (national church)
Died 6 months previous to Adam’s baptism
Mother raised him until age of 14
*At age 4, kidnapped by Gypsies, but was rescued by uncle and returned to Mother

6. Biography University Age of 14, proceeded to University of Glasgow
Studied ‘Moral Philosophy’
concepts such as right, wrong,
good, evil, and responsibility
Developed strong passion for
liberty, reason, and free speech
Influenced heavily by Francis
Hutcheson (famous philosopher)

7. Biography
Attended Balliol College, Oxford upon winning a scholarship.
“Gave little if any help towards his lifework”

8. Biography 1748 Began delivering public lectures in Edinburgh
Influenced by Henry Home (Lord Kames)

9. Biography
Edinburgh
Lectures dealt primarily with rhetoric or ‘belles-lettres’
literary works, especially fiction, poetry, drama, or essays, valued for their aesthetic qualities and originality of style and tone
Later took up subject of “The Progress of Opulence”
Progress of being wealthy, rich, or affluent

10. Biography
Edinburgh
First thought of the economic philosophy of “the obvious and simple system of natural liberty” (Main thesis of his ‘Inquiry into the Nature and Causes of the Wealth of Nations’)

11. Biography 1750 Met David Hume, who became one of his closest friends
Scottish philosopher, economist, and historian
One of the World’s most important philosophers
Humean Philosophy - human knowledge comes to us through our senses
“We cannot be certain a thing, such as God, a soul, or a self, exists unless we can point out the impression from which the idea of the thing is derived.”

12. Biography
1750
Beginning of his role in the emergence of the Scottish Enlightenment
“Scottish thinkers began questioning assumptions previously taken for granted; and with Scotland's traditional connections to France, then in the throes of the Enlightenment, the Scots began developing a uniquely practical branch of humanism to the extent that Voltaire said "We look to Scotland for all our ideas of civilisation."

13. Biography
1750
Went to England with intention of a career in Church of England (footsteps of his father)
Lost his belief and returned to Scotland as a Deist
reject supernatural events (prophecy, miracles) and divine revelation, along with holy books and revealed religions that assert the existence of such things.
hold that correct religious beliefs must be founded on human reason and observed features of the natural world, and that these sources lead to belief in the existence of one God or supreme being.

14. Biography
Appointed Proffessor of Logic at the University of Glasgow
Transferred to the Chair of Moral Philosophy
Lectured on fields of ethics, rhetoric, jurisprudence, political economy, and “police and revenue”

15. Biography
1759
Published ‘Theory of Moral Sentiments’ which embodied his lectures
Established his reputation, became Dean of the Univeristy, and became Glasgow’s most illustrious citizen.
Work concerned with how human communication depends on sympathy between agent and spectator (individual and other members of society)
His own capacity for fluent, persuasive argument (rhetoric) was evident
Very different from other thinkers of the time who stated communication was based on morals or utility

16. Biography
Began to give more attention to jurisprudence and economics, and less to theories of morals

17. Biography
End of
lucrative offer from Charles Townshend to tutor his stepson, the Duke of Buccleuch
Traveled with pupil, mostly in France, and around Europe
Came to know intellectual leaders,
and learn and respect many of their
works

18. Biography
1764
Became acquainted with a new school of economic though whose leaders were known as ‘physiocrats’
laws created by humans are artificial and unneccessary
interfere with natural laws, ie. individuals pursuit of self-interest, which would ultimately benefit all society.
Became known as ‘Laissez-Faire’ – leave to do, or leave things alone so that matters can work out naturally.

19. Biography 1766-1776 Returned to Kirkcaldy
Devoted his time to creating his two-volume, master work “An Inquiry into the Nature and Causes of the Wealth of Nations” (aka. “The Wealth of Nations”)
Published his work in 1776 where it became very, well-received and popular amongst the society of the day.
Recognized as the foundation of ‘Modern Economic Theory’

20. Biography
1778
His work made him famous, as it was the first to outline in detail the characteristics and benefits of a complete economic system – the free-market economy
Appointed to Commissioner of Customs of Scotland
Lived with his mother in Edinburgh

21. Biography 1790 Died after a painful illness on July 17
Buried in the Canongate Kirkyard, Royal Mile, in Edinburgh
Became known after his death of his numerous acts of charity
Left behind many notes and unpublished material, but gave instructions to destroy anything that was not fit for publication.

22. The Times Mercantilism Prevailing economic system
State control of economic production and trade, with goal of exporting as many goods as possible for sale abroad while, at the same time, importing as few foreign goods as possible.
When successful, gold flows in while very little flows out.

23. The Times Mercantilism
Gold & Silver reserves were thought to constitute the real wealth of a nation.
A country’s government had to adopt a protectionist policy to safeguard its gold and silver reserves by limiting entry of foreign goods.
Imposed stiff taxes/tariffs on imported goods, to make them more expensive than the goods produced in the country

24. The Times Mercantilism
Each of the society’s class felt increasingly handcuffed by government regulations and taxes.
Negative effect on:
Trade; and
Prices

25. The Times Laissez-Faire
Provided a strong argument for replacing state control of economy on natural laws to regulate activity
This led to the French Revolution
The American Revolution to the British was also a direct result of this thinking – Declaration of Independence in 1776
Too much interference from government that had a long history was now being rejected.

26. The Times Enclosure Movement
Smith’s ideas developed in response to rapid economic changes observed in Britain
Broke up the large plots of land that towns had held in common since the Middle Ages
Redistributed them in small
plots to individuals
These individuals ran these
farms for profit rather than
subsistence

27. The Times Enclosure Movement
Inventions made it possible for factory owners to increase both their scale of operations and profits
Made workers perform more specialized tasks using variety of machines
Technological innovation created the ‘Industrial Revolution’

28. Ideas that Advanced Economic Thought
Self Interest
Human beings motivated by this
The desire to better our condition in life
Profit motive is thus the major stimulus for economic growth and prosperity
Greater production is not because of generous producers, but desire for profit

29. Ideas that Advanced Economic Thought
Self Interest
Trick is to ensure that desire for profit does not overwhelm sense of obligation to society
Free market – many producers in competition, none of whom can raise their prices too high
Self-interest and competition work in unison
Government regulation not necessary – invisible hand at work (natural control)

30. Ideas that Advanced Economic Thought
Ongoing Progress & Prosperity
Division of Labour
specialization of workers in a complex and mechanized production process.
Law of Accumulation
accumulated profits invested in additional capital goods increase total production and efficiency as a whole.
Law of Population
increase in production means more workers, and must attract workers through higher wages, which leads to better living conditions, reduced mortality rates, and a natural increase in the population.