Adam Smithand theWealth of Nations

L I B E R T Y F U N D P R E S E N T S

Adam Smithand theWealth of NationsTe a c h e r’s Guide for the Film

“I have never known muchgood done by those who affectedto trade for the public good.”

— Adam Sm i t h

“I have never known muchgood done by those who affectedto trade for the public good.”

— Adam Sm i t h

A BOUT ADAM SMI T H

Adam Smith was born in Kirkcaldy, Scotland. At fourteen (not anearly age for that time), he entered Glasgow University. Three yearsl a t e r, he was awarded a scholarship to Oxford University. It was his

experience during this stay atO x f o rd that was the basis forthe critical remarks about uni-versities found in The We a l t hof Nations.

Smith was appointed Pro f e s s o rof Logic at Glasgow in 1751,and shortly afterw a rd s ,P rofessor of Moral Philosophy.He lectured on theology,ethics, jurisprudence andpolitical economy.

In 1759, his first book—Th eT h e o ry of Moral Sentiments—established his re p u t a t i o n .He sought to understandhuman behavior principally int e rms of sympathy, pro p r i e t y,v i rtue and duty. He sought to

understand what it was that led us to care about the welfare of others.

With the publication of The Theory of Moral Sentiments, he gave lessattention to his theories of morals, and more to jurisprudence andpolitical economy.

In 1763, he made the decision to give up his university post, becom-ing a tutor to the young Duke of Buccleuch. The boy and his mentortraveled mainly in France, where Smith came to know many of theintellectual leaders of the country. While on this trip, he began at reatise on economics, completing it ten years later. It was publishedas The Wealth of Nations, and on this work rests the continuingacknowledgement of Smith as the father of economics.

He died in 1790.

A BOUT THE FIL M

“Adam Smith and The Wealth of Nations” traces the life, care e r, andbasic beliefs of one of history ’s greatest thinkers.

Beginning with his frugal Scotch background, the film examines theevents and influences that made Smith the father of economics. Butbest of all, the movie looks at Adam Smith’s ideas. Provocative ideas,that culminated in the book we called The Wealth of Nations. It wasa work that revolutionized the world of economics. Many say it re v o-lutionized the world itself.

“Adam Smith and The Wealth of Nations” outlines many of the man’smost interesting and controversial theories. For instance, Smithbelieved that a system of natural liberty allowed the self-interest ofthe individual to be harnessed for the good of society. How?T h rough what he called the “division of labor and the accumulationof capital.” He argued that the free market is an ingenious mecha-nism which regulates itself through supply and demand.

A man of great intellect and wit. Smith was a major force in modernh i s t o ry. This film shows why.

GE TT ING REA DY

Let your group know when andwhy they’ll be seeing “AdamSmith and The Wealth ofNations.” It would be a goodidea for students to pre p a re forit, so announce the showing inplenty of time. You might askstudents to bring in newspaperitems, current ads or pert i n e n ta rticles, as well as inform a t i o non current economic theories.

You may wish to ask an economist in the community to addre s syour adult group. Just be sure to pre p a re your audience, so they’llbe able to get more out of the film at discussion time.

❝The discipline ofcolleges and unive r-sities is in genera lc o n t r i ved, not forthe benefit of thestudent, but for theease of the master.❞

— Adam Sm i t h

IN T RODUCING THE FIL M

You will want to introduce the film. It is important to your audienceto know what they will be seeing…and why. You might tell theg roup to look for diff e rent points of interest, and topics to coverafter the showing. You may want to point out that Adam Smith isc o n s i d e red the father of economics…but there have been otherequally influential economists. See if your audience can name any ofthem, or explain their theories. Be sure to let your viewers knowthat there will be a question and answer period after the showing.

H e re is an example of the kind of introduction you might finde ff e c t i v e :

“The film we are about to see, presented by Liberty Fund, Inc., iscalled ‘Adam Smith and The Wealth of Nations.’ It is an intriguinglook at the man who is considered the father of economics. Let’stake a look at some of his ideas.”

T HE WEA LTH OF NAT IONS

The Wealth of Nations is a monumental work. Covering all aspectsof economic life, it has both breadth and depth.

Adam Smith discusses such subjects as the minute specialization oflabor in the manufacture of pins, “…the late disturbances in the

American colonies”, the waste-fulness of the student’s life atO x f o rd, and the statistics on theh e rring catch since 1771 (thebook was published in 1776).After reading the entire 900pages, a reader comes away witha living picture of Britain in the1 7 7 0 s .

But more important, the re a d e rcomes away with Smith’s pur-pose: not to advance the inter-ests of any class, but to pro m o t ethe wealth of the entire nation.

❝Consumption is thesole end and purposeof all pro d u c t i o n❞

— Adam Sm i t h

And wealth, as he saw it, consisted of goods which all people couldconsume. This was a democratic—and for that time, radical—prin-ciple that Smith adhered to with remarkable consistency.

The Wealth of Nations is no textbook. Smith was writing to hispeers; he produced a document that he expected to be used in theconduct of governments. The Wealth of Nations presents a persua-sive argument for a new approach to economic policy.

T HE PRINCIPL ES

Over the years, Adam Smith’sprinciples have been discussedand detailed, and pondered andrehashed in countless texts. Ye tfew—if any—of these bookse x p l o re these principles with theskill and complex detail found inthe The Wealth of Nations.

The principles themselves? Theya re relatively simple. Smithassumed that, in economic life,the main motivating force gov-e rning man’s actions was self-i n t e rest. He argued that, with theright institutional framework,men following their own self-i n t e rest would serve the generalg o o d .

This institutional framework didnot call for extensive govern m e n tregulation. The best program is to leave the economic pro c e s salone. This has come to be known by a number of labels: free enter-prise, economic liberalism, non-interv e n t i o n .

All of this in now familiar enough. Largely through Smith’s book,these principles helped to guide the then rapidly expanding eco-nomic activity.

❝To Prohibit the gre a tpeople (the Am e r i c a ncolonies), . . . fro me m p l oying their stock(capital) and industry inthe way they judge mosta d vantageous to them-s e l ves, is a manifest vio-lation of the most sacre drights of mankind.❞

— Adam Sm i t h

L EA DING A DISCUSSION

One of the most helpful parts of any film showing is the discussionthat follows. You may want to use these discussion points and pro j-ects as the basis for your talk.

A . How did the “mercantile system” work, and what was the philos-ophy behind it?

B . How did the “mercantile system” differ from the economic sys-tem Adam Smith advocated?

C . What was the role of government in Smith’s philosophy?D . Smith believed the only source of wealth was production re s u l t i n g

f rom labor and re s o u rces. Have we changed that theory any? Is itstill much the same? Why?

E . How does the division of labor bring about an increase in pro-duction? How is it affected by the extent of the market?

F. How does the operation of a pricing system regulate a marketeconomy? Why did Adam Smith consider that the operation ofthe market promises the general good? Why was Adam Smithopposed to extensive government regulation? Do you considerhis views relevant today?

G . What influence do you think the economic theories of AdamSmith had on the American colonies and the American re v o l u-tion? Do you think his views could have helped to justify the re v-olution? Or to prevent it? Why or why not?

H . Can you identify any of Smith’s ideas at work in our pre s e n ts o c i e t y ?

I . As a study project, re s e a rch the life of Adam Smith to find themen, ideas, and the political and economic philosophies thatinfluenced the theories found in The Wealth of Nations.

J . The “Classical School” of economic thought originated with TheWealth of Nations, and included the writings of such Englisheconomists as Ricardo, Malthus, Mill, as well as the French econ-omist, Say. Examine the ideas of these men, and compare them tothe other schools of economic thought such as Merc a n t i l i s m ,Cameralism, Marxism and that of the Physiocrats.

K . “I have never known much good done by those who affected totrade in the public interest.” Discuss.

SEL ECT ED MAT ERI A LS :

On the History of Economics:Economic Theory in Retrospect. Mark Blaug.

A History of Economic Thought. 3 rd Edition. Eric Roll, Pre n t i c e - H a l l ,no date.

The Unbound Prometheus. David Landes. Cambridge University Pre s s ,1 9 6 9 .

The Industrial Revolution in the Eighteenth Century. Paul Mantoux,H a rc o u rt Brace, 1928.

An Economic History of England: The 18th Century. T.S. Ashton,Methuen, 1955.

Cambridge Economic History of Euro p e , two volumes. CambridgeUniversity Press, 1952.

F rom the Adam Smith Library. Reprints of Modern Classics. Augustus M.K e l l e y. Publishers, New Yo r k .

Books on the Life of Adam Smith:The Life of Adam Smith. John Rae, 1895

Adam Smith and the Scotland of His Day. C.R. Fay, 1956.

Adam Smith, as Student and Pro f e s s o r. William R. Scott, 1937.

Biographical Memoirs of Adam Smith. Dugald Steward. 1793.

M o d e rn Comment of Adam Smith’s Wo r k :The Spirit of ’76 and Other Essays. Carl Becker, J.M. Clark,William E. Dood, 1927.

Adam Smith 1776-1926. J.M. Clark, Paul H. Douglas, Jacob H. Hollander,Glenn R. Morro w, Melchior Palyi and Jacob Vi n e r, 1928.

Adam Smith: The Man and His Works. E.G. West, 1969.