The Scottish Enlightenment and the Challenges of Commercial Society: Adam Smith’s Wealth of Nations

Abstract

RESEARCH OBJECTIVE: The aim of this paper is to examine the economic advice that Adam Smith provides for individuals and relate that to the judgements that he makes about national economies. It argues that Smith’s interest in unintended consequences leads him to consider both levels of economic activity in a particular way. While these aspects of his thought have been discussed in the literature, they have not been analysed together. THE RESEARCH PROBLEM AND METHODS: As a book the Wealth of Nations had two interrelated purposes: it was a scientific attempt to understand political economy, and it was also a critical intervention into British policy based upon the evidence of that inquiry. This paper looks at the connection between these two aspects of the book. In particular it examines how Smith moves from an explanation of the evolution and operation of commercial society that depends on unintended consequences (such as the famous ‘invisible hand’) to a set of suggestions for macro level policy to be undertaken by the government and micro level advice for individuals. The paper proceeds by close textual analysis of key passages from Smith’s work. THE PROCESS OF ARGUMENTATION: the paper traces how Smith’s scientific approach generalises from historical evidence to identify and study the core principles of the division of labour and trade. From here he identifies a set of necessary conditions for the successful operation of a commercial society: The rule of law, political stability, and certain public works and regulations. But Smith also offers some observations on successful economic strategies that should be adopted by individuals. RESEARCH RESULTS: The paper shows that Smith communicates his advice to individuals through character sketches of the book’s ‘hero’ the prudent man, and the book’s ‘villains’ the prodigal and the projector. The contrast between these examples serves a didactic purpose for Smith. CONCLUSION, INNOVATION AND RECOMMENDATION: The paper concludes by taking a look at Smith’s advice to individuals for pursuing economic success through character sketches. It contributes to the literature by stressing Smith’s interest in the connection between macro-level national economic phenomena and micro-level individual economic strategy, and by showing how his book offers advice to both nations and individuals. This is an underexplored dimension of Smith’s account that is examined in detail in a way not present in the scholarly literature.