Adam Smith

(1723-1790)

Sociological Theory
Department of Sociology and Anthropology
UMD

A. THE WEALTH OF NATIONS (1776)

BEST DESCRIPTION OF ECONOMIC LIBERALISM
OPPOSED MERCANTILIST WRITING WHICH EMPHASIZED:
- PRECIOUS METALS IS MEASURE OF WEALTH
- GAINED THROUGH MINING AND TRADE
- EXPORTS OVER IMPORTS
- IMPORTANCE OF COLONIES
- COLONIES SHOULD NOT MANUFACTURE ITEMS
- COLONIES ARE ENTERPRISES OF THE HOME COUNTRY
STATE INVOLVEMENT IS NECESSARY (TO CONTROL WAGES, FIX PRICES ETC.)

B. HE ATTACKED THIS THOUGHT

HUMAN HAPPINESS AND THE WEALTH OF THE NATION IS DERIVED FROM ECONOMIC LIBERTY
STATE SHOULD PROTECT CITIZENS, EDUCATE, ADMINISTER LAW AND JUSTICE, TAKE CARE OF PUBLIC WORKS, BUT, KEEP IT'S NOSE OUT OF ECONOMIC LIFE!!
LAISSEZ-FAIRE ECONOMICS
THE SOURCE OF ALL WEALTH IS LABOR, LABOR IS THE TRUE MEASURE OF VALUE (LOCKE, MARX)
"Labour was the first price, the original purchase money that was paid for all things. It was not by gold or by silver, but by labour, ..." (page 87 ebook version)
Comparing by exchange with other commodities or money, although more apparent to us, won't work,
"...so a commodity which is itself continually varying in its own value, can never be an accurate measure of the value of other commodities. Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits ; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity ; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared." (page 93 ebook version)

C. ECONOMIC LIFE DETERMINES SOCIAL LIFE, THE SOCIAL SYSTEM

D. THE THEORY OF MORAL SENTIMENTS

BASIS FOR SOLIDARITY IN SOCIETY, DUE TO PSYCHOLOGICAL ABILITY TO "CHANGE PLACES" WITH OTHERS MENTALLY - EMPATHY

E. LAWS OF THE MARKET

PEOPLE ACT OUT OF SELF-INTEREST

EXCHANGE FOR PROFIT IS FUNDAMENTAL CHARACTERISTIC OF HUMANS,

MONEY MINDED,
SELF INTERESTED, and
PROPENSITY TO TRUCK, BARTER AND EXCHANGE ONE THING FOR ANOTHER

LABOR THEORY OF VALUE
- COMMODITY'S VALUE IS MEASURED BY THE AMOUNT OF LABOR
- INVESTED, EQUAL EXCHANGE
- PROFIT APPEARS TO BE ADDED ON, RISK
- WHERE DOES PRICE COME FROM?
- INVISIBLE HAND OF THE MARKET
- SELF-REGULATING MARKET PRODUCES SOCIAL HARMONY
- PROPER QUANTITY OF COMMODITIES RESULTS FROM SUPPLY AND DEMAND,
- CREATES MOVEMENT IN COMMODITIES MARKET
- "Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man's own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour therefore, is the real measure of the exchangeable value of all commodities." (page 86 ebook version lrf)

The University of Minnesota is an equal opportunity educator and employer.