Adam Smith was an 18th century Scottish philosopher and economist who is considered the father of modern economics. Some of his major works include The Theory of Moral Sentiments published in 1759 and An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776. In The Wealth of Nations, Smith argued that free market capitalism based on self-interest and competition would stimulate economic progress better than systems based on government planning or mercantilism. He is renowned for his idea of the "invisible hand" whereby individual self-interest can benefit society through the functioning of the free market.

1. Scottish Moral Philosopher & Economist
(Baptized June 5, 1723 Kirkcaldy, Scotland.—died July 17, 1790, Edinburgh)
Pir Qasim Shah MS Management Science – Management Thoughts for Dr. Gohar

2. Introduction
Early life
Glasgow
The Theory of Moral Sentiments
Travels on the Continent
The Wealth of Nations
Society and the “invisible hand”
Economic growth

3. Social Philosopher and Political Economist
Major Works:
o The Theory of Moral Sentiments (1759)
o An inquiry into the nature and causes
of wealth of nations (1776)
Foundation Stone of Political and Social
Evolution
Lectures on :
Philosophy, Government, Law &
Economics

4. Elementary Schooling in Kirkcaldy
At the age of 4 he was carried off by gypsies
At the age of 14 Entered University of Glasgow
Influenced by Francis Hutcheson (Scot-Irish
philosopher and major exponent of the theory
of the existence of a moral sense through
which man can achieve right action)
Got a Scholarship (i.e Snell Exhibition) of
Oxford University

5. Started delivering public lectures in Edinburg
after returning from Oxford
Subjects: Rhetoric, History, Economics etc.
Appointed as a professor of Logic at Glasgow
when he was 27
In 1752 he was transferred to “moral
philosophy” (a combination of natural
theology, ethics, jurisprudence and political
economy)

6. Happiest and honorable period of Smith’s life
Lectures and University Affairs
Appointed as a Dean in 1758
Evenings were spent in Society of Glasgow
Company with Aristocrats, Scientists,
Government Officials & other intellectuals:
Joseph Black Pioneer of Chemistry
James Watt Famous for Steam Engine
Robert Foulis Publisher

7. Didactic, Exhortative, Analytic in Nature*
It lays the psychological foundations for later
work
Describes the principles of “human nature”
It was taken as a universal & unchanging
datum from which social institutions &
behavior could be deduced
Long debates about the conflicts between the
TMC & later works of Adam Smith
* Didactic: Intended to teach with moral instructions, Exhortative:
Motivational, Analytic: Using logical reasoning

8. Question in TMC that attracted attention of
Philosophers:
“The “source” of the “ability” to
form “moral judgments”; including
the judgments on one’s “own
behavior”, in the face of the
seemingly “overriding passions” for
“self-preservation & self-interest””

9. Smith’s Answer: “The presence
of an “Inner man” who plays the
role of “impartial spectator”,
“approving or condemning” “our
own & others’ actions” with a
voice “impossible to disregard.”

10. How “instinctual drives” are “socialized” through
the “superego”?
Better Understood by:
Sigmund’s Personality Iceburg

11. Started tutoring to the stepson of “Charles
Townshend” (duke & role in American
Revolution)
Remuneration £300 p.a. + travelling expenses
and £300 pension
Meeting Voltaire (Greatest of all French
Writers)
Started writing “Wealth of Nations”
Returned to London after the death of Duke’s
brother and worked in Royal Society

12. • Four Stages of Society:
1. Hunters
2. Nomadic Agriculture
3. Feudal Farming
4. Commercial
Interdependence
• Laissez-faire Capitalism

13. The Philosophy of Smith in Book is:
Focused on “human nature”
Driven by the “desire for self-betterment”
Guided by “Faculties of Reason”

14. • Arguments:
• How a system of perfect liberty,
(operating under the drives and constraints of
human nature) and intelligently designed
institutions, will give rise to an orderly society?
• Study:
• Explanation of “Laws” that “Regulated” the
“Division of Entire Wealth” and “Distribution of
Goods & Services amongst, Laborers, Landlords
and Manufacturers”

15. • An “institutional mechanism” that acts to
“reconcile” the “disruptive possibilities”
inherent in the blind obedience in the
passion alone. (i.e. competition)
• “A desire that comes with us from the womb
and never leaves us until we go into the
grave”
• Unintended outcome of competitive struggle
for self-betterment
• The said force pushes the prices to a so called
“natural” level that correspond to the cost of
production

16.  Capital flows from less profitable to more profitable
businesses or areas or occupations
 Competitive mechanism continuously forces the
prices to stay at the natural levels despite short-run
aberrations
 Wages, Rents and Profits (Factors of cost of
Production) are also subject to the same self interest
and competition
 Smith provided a rationale for these natural prices
and also revealed an orderliness in the distribution of
income (i.e. wages for workers, rents for landlords
and profits for manufacturers)

17.  Division of Labor Output Efficiency
 Examples of a Pin Factory
 Accumulation of Capital/Stock for wages, costs,
machine & tools
 Division of Labor makes individuals stupid
 Division of labor, Labor Supply, Wages & Mortality
Rates are closely related
 Against Monopolies, Mercantilists and Accumulation
of Wealth

18. Excess Labour Supply
Brings down Wages to Natural Price
Fall in Accumulation
Consequences of Natural Mechanism
Hiring Additional Labour
Requires More Wages then their Natural Price
Accumulation of Stock
Requires More Labour

19. • Wealth of Nations would grow if individuals
grow laissez-faire
• System of “Natural Liberty” not mercantilism
or monopolies
• Merchants & Manufacturers are neither are;
nor ought to be the rulers of mankind 
• Intellectual degradation resulting in
commercial division of labour

20. • Wealth of Nations received recognition
• Appointed as a commissioner of Customs
Duty for Scotland
• Well off in the final years of life
• Spent time in Edinburg with occasional
visits to Glasgow & London
• Died at the age of 67
• Buried in church yard Cannon Gate with a
monument “Adam Smith Author of Wealth
of Nations”

21. Thank You
Q/A Session