Classical Economists

"He now and then revisited London. The last time he was there, he had engaged to dine with Lord Melville, then Mr Dundas, at Wimbledon; Mr Pitt, Mr Grenville, Mr Addington, afterwards Lord Sidmouth, and some other of his lordship's friends were there. Dr Smith happened to come late, and the company had sat down to dinner. The moment, however, he came into the room, the company all rose up; he made an apology for being late, and entreated them to sit down. "No," said the gentlemen, "we will stand till you are seated, for we are all your scholars.""

"It is worth remembering that Adam Smith, the founder of classical economics, was first and foremost a philosopher. He strove to be a moralist and in doing so, became an economist. When he published The Theory of Moral Sentiments in 1759, modern capitalism was just getting under way. Smith was entranced by the sweeping changes wrought by this new force, but it wasn’t just the numbers that interested him. It was the human effect, the fact that economic forces were vastly changing the way a person thought and behaved in a given situation. What might lead one person to cheat or steal while another didn’t? How would one person’s seemingly innocuous choice, good or bad, affect a great number of people down the line? In Smith’s era, cause and effect had begun to wildly accelerate; incentives were magnified tenfold. The gravity and shock of these changes were as overwhelming to the citizens of his time as the gravity and shock of modern life may seem to us today."

"In Victorian times - at the apex of the repression of the Great Mother - a Scottish schoolmaster named Adam Smith noticed a lot of greed and scarcity around him and assumed that was how all "civilized" societies worked. Smith, as you know, created modern economics, which can be defined as a way of allocating scarce resources through the mechanism of individual, personal greed... If a society is afraid of scarcity, it will actually create an environment in which it manifests well-grounded reasons to live in fear of scarcity. It is a self-fulfilling prophecy!"

"Partisans of the free market invoke Adam Smith in order to lend the authority of his name to the case they themselves want to make: for the complete removal of the state from economic enterprise; for the economic sovereignty of the market; and for leaving all questions of production and distribution to the magic of the invisible hand... But...the reason Adam Smith wanted an end to government intervention in the market was that in his time (in contrast to today) it was only thanks to state intervention that what he called "the mean rapacity, the monopolising spirit of merchants and manufacturers" was able to dominate the economy, to the great detriment of the society as a whole."

"What the Wealth of Nations is all about is the difference between one kind of market system in commercial society and another. It is about the difference between, on the one hand, a market system dominated by merchants and manufacturers who are able to bend the government to their will in order to obtain legislation which makes what is in their private interest the law of the land, and, on the other, a truly open and competitive—"natural"—market system in which everyone who is industrious and/or has any capital has a fair chance. The withdrawal of the state is not, for Smith, the removal of government from its role as owner, entrepreneur, economic planner or re-distributor—roles readily conceivable to all who know of socialism but wholly inconceivable to Adam Smith—but its removal from the role of regulator of private enterprise, a role in which it had long been used to promote the interests of the merchants and the manufacturers over those of all others."

"He said that the maintenance of public works was a duty of government; and his list of such works included all that at that time could have been possibly socialized—roads, canals, bridges, harbours, etc. Private enterprise could not be expected to erect or maintain these services, and this was a limited sort of socialism... [H]is concessions to Protectionism went very far. The doctrine of defence as prior to opulence was not stated only in respect of the Navigation Act: "if any particular manufacture was necessary for the defence of the society it might not always be prudent to depend upon our neighbours for the supply; and, if such manufacture could not otherwise be supported at home, it might not be unreasonable that all the other branches of industry should be taxed in order to support it". This goes a long way with modern Protectionism."

"The one case in which he referred to the "invisible hand" was that in which private persons preferred the home trade to the foreign trade, and he held that such preference was in the national interest, since it replaced two domestic capitals while the foreign trade replaced only one. The argument of the two capitals was a bad one, since it is the amount of capital that matters, not its subdivision; but the invisible sanction was given to a Protectionist idea, not for defence but for employment. It is not surprising that Smith was often quoted in Parliament in support of Protection. His background, like ours today, was private enterprise; but any dogma of non-intervention by government has to make heavy weather in The Wealth of Nations."

"While discussing what it is that makes the “pleasures of wealth and greatness ... strike the imagination as something grand and beautiful,” [Adam Smith] remarks that “in the languor of disease and the weariness of old age” we cease to be so impressed, for we then take note of the fact that the acquisition of wealth and greatness leaves their possessors “always as much, and sometimes more exposed than before, to anxiety, to fear, and to sorrow, to diseases, to danger, and to death” (The Theory of Moral Sentiments IV, chapter I). But to allow our attention to dwell on this is, on Smith’s view, misguided. To do so is to embrace a “splenetic philosophy,” the effect of “sickness or low spirits” upon an imagination “which in pain and sorrow seems to be confined,” so that we are no longer “charmed with the beauty of that accommodation which reigns in the palaces and economy of the great.” The imagination of those “in better health or in better humor” fosters what may, Smith concedes, be no more than seductive illusions about the pleasures of wealth and greatness, but they are economically beneficial illusions. “It is this deception which rouses and keeps in continual motion the industry of mankind.” So even someone as perceptive as Smith, when he does pause to recognize the perspectives of ill health and old age, finds reason at once to put them on one side. And in so doing Smith speaks for moral philosophy in general."

"What strikes one here above all is the crudely empirical conception of profit derived from the outlook of the ordinary capitalist, which wholly contradicts the better esoteric understanding of Adam Smith."

"Economic theory as derived from Adam Smith assumes first that homo economicus acts with perfect optimality on complete information, and second that when many of the species homo economicus do that, their actions add up to the best possible outcome for everybody. Neither of these assumptions stands up long against the evidence."

"It appears... that a work similar in its object and general conception to that of Adam Smith, but adapted to the more extended knowledge and improved ideas of the present age, is the kind of contribution which Political Economy at present requires. The Wealth of Nations is in many parts obsolete, and in all, imperfect. Political Economy... has grown up almost from infancy since the time of Adam Smith; and the philosophy of society... has advanced many steps beyond the point at which he left it."

"Most economists now recognize climate change as a market failure, but only a few understand it as part of the larger pattern of environmental destruction that scientists have labelled the 'Great Acceleration'. Capitalism as currently practised has imperilled the existence of millions of planetary species, as well as the health and well-being of billions of humans. It also threatens the prosperity that it was intended to create. Challenging 250 years of dominant economic thinking, the climate crisis has shown that the unrestrained pursuit of self-interest does not serve the common good. It has shown, in the words of economist Joseph Stiglitz, that Adam Smith's invisible hand - the idea that free markets lead to efficiency as if consciously guided - is invisible because it is not there'. And it has proved, in the words of Pope Francis, that 'technological products are not neutral, for they create a framework which ends up conditioning lifestyles and shaping social possibilities along the lines dictated by the interests of certain powerful groups'."

"[T]hat constant accumulation of capital, that continual tendency to increase, the operation of which is universally seen in a greater or less proportion, whenever it is not obstructed by some...mistaken and mischievous policy. ... Simple and obvious as this principle is... I doubt whether it has ever been fully developed and sufficiently explained, but in the writings of an author of our own time, now unfortunately no more (I mean the author of the celebrated treatise on the Wealth of Nations), whose extensive knowledge of detail, and depth of philosophical research, will, I believe, furnish the best solution of every question connected with the history of commerce, or with the system of political economy."

"Adam Smith was the first academic economist; and his career is not very different from that of many economists in the last hundred and fifty years."

"Adam Smith discovered a remarkable property of a competitive market economy. Under perfect competition and with no market failures, markets will squeeze as many useful goods and services out of the available resources as is possible. But where monopolies or pollution or similar market failures become pervasive, the remarkable efficiency properties of the invisible hand may be destroyed."

"To have never done any thing but make the eighteenth part of a pin, is a sorry account for a human being to give of his existence."

"The global reach of Smith's moral and political reasoning is quite a distinctive feature of his thought, but it is strongly supplemented by his belief that all human beings are born with similar potential and, most importantly for policymaking, that the inequalities in the world reflect socially generated, rather than natural, disparities. There is a vision here that has a remarkably current ring. The continuing global relevance of Smith's ideas is quite astonishing, and it is a tribute to the power of his mind that this global vision is so forcefully presented by someone who, a quarter of a millennium ago, lived most of his life in considerable seclusion in a tiny coastal Scottish town. Smith's analyses and explorations are of critical importance for any society in the world in which issues of morals, politics and economics receive attention. The Theory of Moral Sentiments is a global manifesto of profound significance to the interdependent world in which we live."

"Smith distinguishes with great sophistication the different kinds of reasons people have in taking an interest in the lives of others, separating out sympathy, generosity, public spirit and other motivations. Even though he acknowledged the role of mental attitudes and predispositions, he went on to discuss how reasoning, which is at the heart of rationality, must have a big role in preventing us from being – consciously or unconsciously – too self-centred, or thoughtlessly uncaring."

"Smith had no illusion that this would be easy to do, nor did he suffer from the delusion that such an exercise would, in any sense, be perfect. But he did have the conviction that the exercise could still be very useful, and the best should not be made into an enemy of the good."

"I owe to a journey I made with Mr Smith from Edinburgh to London, the difference between light and darkness through the best part of my life. The novelty of his principles, added to my youth and prejudices, made me unable to comprehend them at the time, but he urged them with so much benevolence, as well as eloquence, that they took a certain hold, which, though it did not develop itself so as to arrive at full conviction for some few years after, I can fairly say, has constituted, ever since, the happiness of my life, as well as any little consideration I may have enjoyed in it."

"Everything that psychology has learned about the processes of human choice is consistent with the view expressed by Adam Smith. People do have reasons for what they do, but these reasons depend very much on how people frame or represent the situations in which they find themselves, and upon the information they have or obtain about the variables that they take into account. Their rationality is a procedural rationality; there is no claim that they grasp the encironment accurately or comprehensively. To predict their behavior in specific instances, we must ourselves know what they are attending to, and what information they have."

"[T]he great and leading object of Mr. Smith's speculations is to illustrate the provision made by nature in the principles of the human mind, and in the circumstances of man's external situation, for a gradual and progressive augmentation in the means of national wealth; and to demonstrate, that the most effectual plan for advancing a people to greatness, is to maintain that order of things which nature has pointed out; by allowing every man, as long as he observes the rules of justice, to pursue his own interest in his own way, and to bring both his industry and his capital into the freest competition with those of his fellow-citizens. Every system of policy which endeavours, either by extraordinary encouragements, to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it; or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality, subversive of the great purpose which it means to promote."

"What the circumstances are, which, in modern Europe, have contributed to disturb this order of nature, and, in particular, to encourage the industry of towns, at the expense of that of the country, Mr. Smith has investigated with great ingenuity; and in such a manner, as to throw much new light on the history of that state of society which prevails in this quarter of the globe. His observations on this subject tend to show, that these circumstances were, in their first origin, the natural and the unavoidable result of the peculiar situation of mankind during a certain period; and that they took their rise, not from any general scheme of policy, but from the private interests and prejudices of particular orders of men."

"One dominant view in the eighteenth century, which was particularly persuasive among French economists, was that the government should actively promote trade and industry. Advocates of this view were called mercantilists. It was partly in response to the mercantilists that Adam Smith (who is often viewed as the founder of modern economics) wrote The Wealth of Nations (1776), in which he argued for a limited role for government. Smith attempted to show how competition and the profit motive would lead individuals—in pursuing their own private interests—to serve the public interest. The profit motive would lead individuals, competing against one another, to supply the goods other individuals wanted. Only firms that produced what was wanted and at as low a price as possible would survive. Smith argued that the economy was led, as if by an invisible hand, to produce what was desired—and in the best possible way. Adam Smith’s ideas had a powerful influence both on governments and on economists."

"Today, classical political economy is often identified by contemporary economists with the quantity theory of money and the so-called “doctrine of free trade,” but historically there was in fact a large and variable set of positions on both within the classical orbit. And, in contrast to Marx's characterization of its scope and origins, the beginnings of a systematic classical political economy have been associated first and foremost with the work of the eighteenth-century Scottish philosopher, Adam Smith. In terms of illuminating our understanding of the significance of classical political economy for the history of political thought, its origins are identified with the time period roughly between 1750 and 1867, and with a group of economic thinkers drawing upon and revising Smith's Wealth of Nations as a basis for analyzing the production, distribution, and exchange of commodities in the market of commercial society, and later within industrial capitalism."

"Thus, the original core components of classical political economy enumerated in Smith's Wealth of Nations, and transformed in the economic theorizing of later classicals – that is, until John Maynard Keynes chose in The General Theory of Employment, Interest and Money (1936) to alter retrospectively the referent of this denotation to include any “orthodox” (non-Marxist) economist who was a quantity theorist – comprised a set of conceptual tools for analyzing and understanding the operation of market and later capitalist production and exchange."

"In generating the first ever systematic account of the market mechanism in commercial society, Smith's political economy drew not only on his critical reflections of the unsytematic nature of earlier economic writing, but equally on his didactic revisions of earlier natural law and natural jurisprudence traditions as well as the empirically suggestive but unsystematic historical inductive method of tracing the progress of civil society previously introduced by thinkers such as the great Montesquieu. These revisions can be linked directly to Smith's political thinking. It may be questioned whether Adam Smith can be said to have developed a political theory. Certainly, it has been and yet remains a subject of debate. Unquestionably, however, Smith isolated important political concerns and made political conceptual contributions which he linked systematically to his theory of commercial society and the conduct of the market."

"In short, the mercantilists were preoccupied with the transfer of wealth, whether by export surpluses, imperialism, or slavery— all of which benefit some at the expense of others. Adam Smith was concerned with the creation of wealth, which is not a zero-sum process. Smith rejected government intervention in the economy to help merchants— the source of the name “mercantilism”— and instead advocated free markets along the lines of the French economists, the Physiocrats, who had coined the term laissez faire. ... The most fundamental difference between Adam Smith and the mercantilists was that Smith did not regard gold as being wealth. The very title of his book— The Wealth of Nations— raised the fundamental question of what wealth consisted of. Smith argued that wealth consisted of the goods and services which determined the standard of living of the people— the whole people, who to Smith constituted the nation. Smith rejected both imperialism and slavery— on economic grounds as well as moral grounds, ... Although Adam Smith is today often regarded as a “conservative” figure, he in fact attacked some of the dominant ideas and interests of his own times. Moreover, the idea of a spontaneously self-equilibrating system— the market economy— first developed by the Physiocrats and later made part of the tradition of classical economics by Adam Smith, represented a radically new departure, not only in analysis of social causation but also in seeing a reduced role for political, intellectual, or other elites as guides or controllers of the masses."

"Few intellectual victories have been more overwhelming than that which the proponents of the new political economy won in the matter of the regulation of the internal corn trade... The "unlimited, unrestrained freedom of the corn trade" was...the demand of Adam Smith. The new economy entailed a de-moralizing of the theory of trade and consumption no less far-reaching than the more widely-debated dissolution of restrictions upon usury... [T]he new political economy was disinfested of intrusive moral imperatives... The prejudices against forestallers Smith dismissed curtly as superstitions on a level with witchcraft... In some respects Smith's model conformed more closely to eighteenth-century realities than did the paternalist; and in symmetry and scope of intellectual construction it was superior. But one should not overlook the specious air of empirical validation which the model carries. Whereas the first appeals to a moral norm—what ought to be men's reciprocal duties—the second appears to say: "this is the way things work, or would work if the State did not interfere". And yet if one considers these sections of The Wealth of Nations they impress less as an essay in empirical enquiry than as a superb, self-validating essay in logic."

"He was a great thinker,—and that was much; but he also made men recognize him as a great thinker, because he was a great master of style,—which was more."

"Here is the picture of this Old Master: a quiet, awkward, forceful Scotchman, whose philosophy has entered everywhere into the life of politics and become a world-force in thought; an impracticable Commissioner of Customs, who has left for the instruction of statesmen the best theory of taxation; an unbusiness-like professor, who established the science of business; a man of books, who is universally honored by men of action; plain, eccentric, learned, inspired. The things that strike us most about him are, his boldness of conception and wideness of outlook, his breadth and comprehensiveness of treatment, and his carefully clarified and beautified style."

"Smith "wrote that the ultimate goal of business is not to make a profit. Profit is just the means. The goal is general welfare.""

"To desire you to read my book over and mark all the corrections you would wish me to make...would oblige me greatly: I know how much I shall be benefitted and I shall at the same time preserve the pretious right of private judgement for the sake of which our forefathers kicked out the Pope and the Pretender. I believe you to be much more infalliable than the Pope, but as I am a Protestant my conscience makes me scruple to submit to any unscriptural authority."

"The Union was a measure from which infinite Good has been derived to this country."

"Poor David Hume is dying very fast, but with great cheerfulness and good humour and with more real resignation to the necessary course of things then any whining Christian ever dyed with pretended resignation to the will of God."

"I perfectly agree with your Lordship too, that to crush the Industry of so great and so fine a province of the empire, in order to favour the monopoly of some particular towns in Scotland or England, is equally unjust and impolitic. The general opulence and improvement of Ireland might certainly, under proper management, afford much greater resources to the Government, than can ever be drawn from a few mercantile or manufacturing towns."

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

"These considerations did not make us overlook the folly of premature attempts to dispense with the inducements of private interest in social affairs, while no substitute for them has been or can be provided: but we regarded all existing institutions and social arrangements as being (in a phrase I once heard from Austin) "merely provisional," and we welcomed with the greatest pleasure and interest all socialistic experiments by select individuals (such as the Co-operative Societies), which, whether they succeeded or failed, could not but operate as a most useful education of those who took part in them, by cultivating their capacity of acting upon motives pointing directly to the general good, or making them aware of the defects which render them and others incapable of doing so."

"[I]t might even be questioned if the various causes of deterioration which had been at work in the meanwhile, had not more than counterbalanced the tendencies to improvement. I had learnt from experience that many false opinions may be exchanged for true ones, without in the least altering the habits of mind of which false opinions are the result. The English public, for example, are quite as raw and undiscerning on subjects of political economy since the nation has been converted to free-trade, as they were before; and are still further from having acquired better habits of thought and feeling, or being in any way better fortified against error, on subjects of a more elevated character. For, though they have thrown off certain errors, the general discipline of their minds, intellectually and morally, is not altered. I am now convinced, that no great improvements in the lot of mankind are possible, until a great change takes place in the fundamental constitution of their modes of thought."

"[E]xperience has taught me that those who give their time to the absorbing claims of what is called society, not having leisure to keep up a large acquaintance with the organs of opinion, remain much more ignorant of the general state either of the public mind, or of the active and instructed part of it, than a recluse who reads the newspapers need be."

"The practical reformer has continually to demand that changes be made in things which are supported by powerful and widely-spread feelings, or to question the apparent necessity and indefeasibleness of established facts; and it is often an indispensable part of his argument to show, how these powerful feelings had their origin, and how those facts came to seem necessary and indefeasible. There is therefore a natural hostility between him and a philosophy which discourages the explanation of feelings and moral facts by circumstances and association, and prefers to treat them as ultimate elements of human nature; a philosophy which is addicted to holding up favorite doctrines as intuitive truths, and deems intuition to be the voice of Nature and of God, speaking with an authority higher than that of our reason. In particular, I have long felt that the prevailing tendency to regard all the marked distinctions of human character as innate, and in the main indelible, and to ignore the irresistible proofs that by far the greater part of those differences, whether between individuals, races, or sexes, are such as not only might but naturally would be produced by differences in circumstances, is one of the chief hindrances to the rational treatment of great social questions, and one of the greatest stumbling blocks to human improvement."

"I well knew that to propose something which would be called extreme, was the true way not to impede but to facilitate a more moderate experiment."

"It is the character of the British people, or at least of the higher and middle classes who pass muster for the British people, that to induce them to approve of any change, it is necessary that they should look upon it as a middle course: they think every proposal extreme and violent unless they hear of some other proposal going still farther, upon which their antipathy to extreme views may discharge itself. So it proved in the present instance; my proposal was condemned, but any scheme for Irish Land reform, short of mine, came to be thought moderate by comparison."

"Conformity to nature has no connection whatever with right and wrong. The idea can never be fitly introduced into ethical discussions at all, except, occasionally and partially, into the question of degrees of culpability. To illustrate this point, let us consider the phrase by which the greatest intensity of condemnatory feeling is conveyed in connection with the idea of nature - the word "unnatural." That a thing is unnatural, in any precise meaning which can be attached to the word, is no argument for its being blamable; since the most criminal actions are to a being like man not more unnatural than most of the virtues."

"It's not too much to say that every indication of Design in the Kosmos is evidence against the Omnipotence of the Designer. For what is meant by Design? Contrivance: the adaptation of means to an end. But the necessity for contrivance — the need of employing means — is a consequence of the limitation of power. Who would have recourse to means if to attain his end his mere word was sufficient? The very idea of means implies that the means have an efficacy which the direct action of the being who employs them has not. ..."

"Wisdom and contrivance are shown in overcoming difficulties, so there is no place for them in a Being for whom no difficulties exist"

"If it be said, that an Omnipotent Creator, though under no necessity of employing contrivances such as man must use, thought fit to use them in order to leave traces that would enable man to recognize his creative hand, the answer is that this equally implies a limit to his omnipotence. For if he wanted men to know that they themselves and the world are his work, he, being omnipotent, had only to will that they should be aware of it."

"I have learned to seek my happiness by limiting my desires, rather than in attempting to satisfy them."

"A society that will trade a little liberty for a little order will lose both, and deserve neither."

"Mill's great merit was the defence of the minority, [and of the rights of minorities]."