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Supply and Demand set Market Price

The Invisible Hand of the Market

The Natural Balance in the Supply of Labor

Benefits of Improved Conditions of Labor

Inequalities Produced by Restrictive Practices

Failure of Wage Controls

Landowners as an Interest Group

Wage Earners as an Interest Group

Employers as an Interest Group

Politics of Monopoly

Burden of English Monopolies in America

Benefit of Saving

Penalties of Private Prodigality and Misconduct

Penalties of Public Prodigality and Misconduct

Importance of Educating the People

Remedies for Sectarian Folly






Adam Smith (1723-1790) was born in Kirkcaldy, Scotland, where he was educated until he entered the University of Glasgow at the age of fourteen. There he was influenced by the Professor of Moral Philosophy, Francis Hutcheson, who advocated the moral goal of the greatest happiness for the greatest number of people. He probably suggested Smith’s move to Oxford, where Smith continued his study of moral philosophy and also read politics and French and Italian literature. He developed a very low estimate of the tenured professors there, which later led him to advocate applying market practices to education. In 1751 he became Professor of Moral Philosophy at the University of Glasgow. During his time in Scotland, Smith became a lifetime friend of David Hume. Smith published a Theory of Moral Sentiments, based on some of the courses he taught, in 1759.


In this book, Smith emphasized the importance of sympathy—fellow feeling with the emotions experienced by another person: "Whatever is the passion which arises from any object in the person principally concerned, an analogous emotion springs up at the thought of his situation in the breast of every attentive spectator." He saw this sympathy as the basis for the judgment we make of other people’s feelings and of the actions that stem from them. For Smith, judgment of our own behavior can only be impartial if we look on it as though it were the behavior of someone else. He stresses the importance of recognizing the propriety or merit of particular forms of behavior in a similar way to Confucius.


The book was very successful and impressed the stepfather of the duke of Buccleuch so much that he invited Smith to become the tutor of the duke and his brother. His tutoring ended in 1766 after the assassination in Paris of the duke’s younger brother, during an extended European tour led by Smith. In France he had enjoyed the society of Quesney, D’Alembert, Helvetius, and Rochefoucauld, among others.


Smith returned to live with his mother at Kirkcaldy, where he produced his major work, An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776. The close knowledge of colonial affairs in that work is said to have come from his conversations with Benjamin Franklin. Smith proposed a form of imperial federation in response to the complaints of American colonists. After spending two years in London, where he was friends with Gibbon, Burke, and Reynolds, he became Commissioner of Customs for Scotland in 1778.


Smith’s fame rests on his economic theories propounded in the Wealth of Nations and his recommendations to governments. The work is believed to influenced the budgets introduced into the British Parliament in 1778 and 1779. It also provided a survey of manufacturing and trade, and a history of economics. It is probably the broad reach of the work, with its great accumulation of detail on economic conditions around the world, together with its synthesis of an economic theory of an invisible hand guiding free markets, that has made it a classic. But underlying the facts and theory are a strong moral attitude and a sympathy for people, some of which is captured in the extracts that follow.



Supply and Demand Set Market Price


1    When the price of any commodity is neither more nor less than what is sufficient to pay for the rent of the land, for the wages of the labor, and for the profit on the investment employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is sold for what may be called its natural price.

    The commodity is then sold precisely for what it is worth, or for what it really costs the person who brings it to market; for though in common language what is called the prime cost of any commodity does not include the profit of the person who is to sell it again, yet if he sells it at a price that does not allow him the ordinary rate of profit in his neighborhood, he is evidently a loser by the trade. Because, by employing his investment in some other way he might have made that profit. His profit, besides, is his revenue, the proper fund of his subsistence. . .

    Though the price, therefore, that leaves him this profit, is not always the lowest at which a dealer may sometimes sell his goods, it is the lowest at which he is likely to sell them for any considerable time. This is true at least where there is perfect liberty, or where he may change his trade as often as he pleases.


2    The actual price at which any commodity is commonly sold is called its market price. It may either be above, or below, or exactly the same as its natural price. . .

When the quantity of any commodity brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profit (which must be paid in order to bring it to market) cannot be supplied with the quantity they want. Some, rather than not get what they want, will be willing to pay more. A competition will immediately begin among them, and the market price will rise above the natural price, according to the extent that either the size of the deficiency or the wealth and wanton luxury of the competitors happens to promote the intensity of the competition. . .

When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be sought in order to bring it to market. Some part must be sold to those who are willing to pay less, and the low price they give must reduce the price of the whole. The market price will sink more or less below the natural price, according as the size of the excess increases more or less the competition of the sellers, or according as it happens to be more or less important to them to get rid of the commodity immediately. . .


3    When the quantity brought to market is just sufficient to supply the effectual demand and no more, the market price naturally comes to be either exactly, or as nearly as can be judged, the same as the natural price. The whole quantity upon hand can be disposed of for this price, and cannot be disposed of for more. The competition of the different dealers obliges them all to accept this price, but does not oblige them to accept less. . .

The whole quantity of industry annually employed in order to bring any commodity to market adjusts itself naturally in this manner to the effectual demand. It naturally aims at bringing always that precise quantity to market that may be sufficient to supply, and no more than supply, the demand.



The Invisible Hand of the Market


4    But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual production of its industry, or rather is precisely the same thing with that exchangeable value. Every individual endeavors as much as he can both to employ his capital in the support of domestic industry and to direct that industry so that its product may be of the greatest value. Every individual , therefore, necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain. And he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is indeed an affectation not very common among merchants. Very few words need be employed in dissuading them from it.

    The type of domestic industry that his capital can be employed in, and the product likely to be of the greatest value, every individual, it is evident, can in his local situation judge much better than any statesman or lawgiver can do for him. The statesman who would attempt to direct private people in what manner they ought to employ their capital would not only load himself with a most unnecessary attention, but would assume an authority that could safely be trusted not only to no single person but to no council or senate whatever. Such authority would nowhere be so dangerous as in the hands of a man who had enough folly and presumption to fancy himself fit to exercise it. . .



The Natural Balance in the Supply of Labor


5    During the course of the present century, the real recompense of labor (the real quantity of the necessities and conveniences of life that it can procure for the laborer) has increased perhaps in a still greater proportion than its money price. Not only has grain become somewhat cheaper, but many other things, from which the industrious poor derive an agreeable and wholesome variety of food, have become a great deal cheaper. . .

    Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconvenience to society? The answer seems at first sight abundantly plain. Servants, laborers, and workmen of different kinds make up by far the greater part of every great political society. What improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy if the far greater part of the members are poor and miserable. Besides, it is but equitable that they who feed, clothe and lodge the whole body of the people, should have such a share of the products of their own labor as to be themselves tolerably well fed, clothed and lodged. . .


6    Every species of animal naturally multiplies in proportion to the means of their subsistence, and no species can ever multiply beyond it. But in civilized society it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species; and it can do so in no other way than by destroying a great part of the children that their fruitful marriages produce.

    The liberal reward of labor, by enabling them to provide better for their children, and consequently to bring up a greater number, naturally tends to widen and extend those limits. It deserves to be remarked, too, that it necessarily does this as nearly as possible in the proportion that the demand for labor requires. If this demand is continually increasing, the reward of labor must necessarily encourage the marriage and multiplication of laborers in such a manner as may enable them to supply that continually increasing demand by a continually increasing population. If the reward should at any time be less than required for this purpose, the deficiency of hands would soon raise it. If it should at any time be more, their excessive multiplication would soon lower it to this necessary rate. The market would be so much under-stocked with labor in the one case, and so much over-stocked in the other, that it would soon force back its price to that proper rate which the circumstances of society required. It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men; quickens it when it goes on too slowly, and stops it when it advances too fast.



Benefits of Improved Conditions of Labor


7    If masters would always listen to the dictates of reason and humanity, they would frequently have occasion to moderate, rather than to increase, the burden of many of their workmen. It will be found, I believe, in every sort of trade, that the man who works moderately enough as to be able to work constantly not only preserves his health the longest, but in the course of the year executes the greatest quantity of work.. . .

    The increase in the wages of labor necessarily increases the price of many commodities, by increasing that part of it which resolves itself into wages. This tends to diminish their consumption both at home and abroad. The same cause, however, which raises the wages of labor, the increase of investment, tends to increase its productive powers, and to make a smaller quantity of labor produce a greater quantity of work. The owner of the investment that employs a great number of laborers, necessarily endeavors, for his own advantage, to make such a proper division and distribution of employment that they may be able to produce the greatest quantity of work possible. For the same reason, he endeavors to supply them with the best machinery that either he or they can think of.



Inequalities Produced by Restrictive Practices


8    The five following are the principal circumstances which, so far as I have been able to observe, make up for a small monetary gain in some employments, and counterbalance a great one in others. First, the agreeableness or disagreeableness of the employments themselves. Secondly, the easiness and cheapness, or the difficulty and expense of learning them. Thirdly, the constancy or inconstancy of employment in them. Fourthly, the small or great trust that must be reposed in those who exercise them. And, fifthly, the probability or improbability of success in them. . . .

    The five circumstances above mentioned, though they cause considerable inequalities in the wages of labor and profits of an investment, cause none in the whole of the advantages and disadvantages, real or imaginary, of the different employments of either. The nature of those circumstances is such that they make up for a small monetary gain in some, and counter-balance a great one in others. . .

    But the policy of Europe, by not leaving things at perfect liberty, occasions other inequalities of much greater importance.

    It does this chiefly in the three following ways. First, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them; secondly, by increasing employment in others beyond what it naturally would be; and, thirdly, by obstructing the free circulation of labor and investment, both from employment to employment and from place to place.


9    The pretence that corporations [set up by tradesmen to restrict entry into a trade] are necessary for the better government of the trade, is without any foundation. The real and effectual discipline which is exercised over a workman, is not that of his corporation, but that of his customers. It is the fear of losing their custom that restrains his frauds and corrects his negligence. . .the policy of Europe, by restraining the competition in some employments to a smaller number than would otherwise be disposed to enter into them, occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labor and investment.

    Secondly, the policy of Europe, by increasing the competition in some employments beyond what it naturally would be, occasions another inequality of an opposite kind in the whole of the advantages and disadvantages of the different employments of labor and investment.



Failure of Wage Controls


10    It has been considered as of such importance that a proper number of young people should be educated for certain professions that—sometimes the public, and sometimes the piety of private founders—have established many pensions, scholarships, exhibitions, bursaries, etc. for this purpose. These draw many more people into those trades than could otherwise pretend to follow them. In all Christian countries, I believe, the education of the greater part of churchmen is paid for in this manner. Very few of them are educated altogether at their own expense. The long, tedious, and expensive education, therefore, of those who pay for themselves will not always procure them a suitable reward, the church being crowded with people who, in order to get employment, are willing to accept of a much smaller recompense than what such an education would otherwise entitle them to. And in this manner the competition of the poor takes away the reward of the rich. . . The wages of [a mason or journeyman mason], therefore, supposing them to be constantly employed, have been much superior to those of the curate. . .

. . .Whenever the law has attempted to regulate the wages of workmen, it has always been to lower them rather than to raise them. But the law has upon many occasions attempted to raise the wages of curates, and for the dignity of the church, to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept. And in both cases the law seems to have been equally ineffectual, and has never either been able to raise the wages of curates, or to sink those of laborers to the degree that was intended. Because it has never been able to hinder either the one from being willing to accept less than the legal allowance, on account of the indigence of their situation and the multitude of their competitors, or to hinder the other from receiving more, on account of the contrary competition of those who expected to derive either profit or pleasure from employing them.



Landowners as an Interest Group


11    The whole annual production of the land and labor of every country, or what comes to the same thing, the whole price of that annual production, naturally divides itself, it has already been observed, into three parts: the rent of land, the wages of labor, and the profits of investments. These constitute an income to three different orders of people: to those who live by rent, to those who live by wages, and to those who live by profit. These are the three great, original and constituent orders of every civilized society, from whose income that of every other order is ultimately derived.

    The interest of the first of those three great orders, it appears from what has been just now said, is strictly and inseparably connected with the general interest of the society. Whatever either promotes or obstructs the one, necessarily promotes or obstructs the other. When the public deliberates concerning any regulation of commerce or police, the proprietors of land never can mislead it with a view to promote the interest of their own particular order; at least, if they have any tolerable knowledge of that interest.

    They are, indeed, too often defective in this tolerable knowledge. They are the only one of the three orders whose revenue costs them neither labor nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. That indolence, which is the natural effect of the ease and security of their situation, renders them too often not only ignorant but incapable of that application of mind necessary to foresee and understand the consequences of any public regulation.



Wage Earners as an Interest Group


12    The interest of the second order, that of those who live by wages, is as strictly connected with the interest of the society as that of the first. The wages of the laborer, it has already been shown, are never so high as when the demand for labor is continually rising, or when the quantity employed is every year increasing considerably. When this real wealth of the society becomes stationary, his wages are soon reduced to what is barely enough to enable him to bring up a family, or to continue the race of laborers. When the society declines, they fall even below this. The order of proprietors may, perhaps, gain more by the prosperity of the society, than do laborers; but there is no order that suffers so cruelly from its decline. But though the interest of the laborer is strictly connected with that of the society, he is incapable either of comprehending that interest, or of understanding its connection with his own. His condition leaves him no time to receive the necessary information, and his education and habits are commonly such as to render him unfit to judge, even if he is fully informed. In public deliberations, therefore, his voice is little heard and less regarded, except upon some particular occasions, when his protestations are animated—set on and supported by his employers, not for his but their own particular purposes.



Employers as an Interest Group


13    His employers constitute the third order, that of those who live by profit. It is the investment that is employed for the sake of profit that puts into motion the greater part of the useful labor of every society. The plans and projects of the investors [which includes ‘dealers’] regulate and direct all the most important operations of labor, and profit is the end proposed by all those plans and projects. . .

     To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it. This can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy for their own benefit an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce that comes from this interest group, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.



The Politics of Monopoly


14    Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.


15    Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe than the impertinent jealousy of merchants and manufacturers. The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit a remedy. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are nor ought to be the rulers of mankind, though it cannot perhaps be corrected may very easily be prevented from disturbing the tranquility of anybody but themselves.

    That it was the spirit of monopoly which originally both invented and propagated this doctrine cannot be doubted; and they who first taught it were by no means such fools as they who believed it. In every country it always is and must be the interest of the great body of the people to buy whatever they want from those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it. Nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.


16    To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the numbers of forces in the way that master manufacturers set themselves against every law likely to increase the number of their rivals in the home-market; were the former to animate their soldiers in the same manner as the latter enflame their workmen to attack with violence and outrage the proposer of any such regulation, to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The Member of Parliament who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.



The Burden of English Monopolies in America


17    But in the system of laws which has been established for the management of our American and West Indian colonies, the interest of the home-consumer has been sacrificed to that of the producer with a more extravagant profusion than in all our other commercial regulations. A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price that this monopoly might afford our producers, the home-consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose alone, more than two hundred millions have been spent in the two last wars, and a new debt of more than a hundred and seventy millions has been contracted over and above all that expended for the same purpose in former wars. The interest on this debt alone is not only greater than the whole extra profit that it ever could be pretended was made by the monopoly of the colony trade, but greater than the whole value of that trade, or greater than the whole value of the goods that on average have been annually exported to the colonies.

    It cannot be very difficult to determine who have been the contrivers of this whole mercantile system. It is not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to. And among this latter class, our merchants and manufacturers have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it.



The Benefit of Saving


18    Capital is increased by parsimony, and diminished by prodigality and misconduct. 


19    . . . the principle which prompts to save is the desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval which separates those two moments, there is scarce perhaps a single instant in which any man is so perfectly and completely satisfied with his situation as to be without any wish of alteration or improvement of any kind. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the most vulgar and the most obvious means. And the most likely way of augmenting their fortune is to save and accumulate some part of what they acquire, either regularly and annually, or upon some extraordinary occasions. . . .


20    Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest (that is, for a share of the profits). As the capital of an individual can be increased only by what he saves from his annual income or his annual gains, so the capital of a society, which is the same as that of all the individuals who compose it, can be increased only in the same manner.

    Parsimony, and not industry, is the immediate cause of the increase of capital. Industry, indeed, provides the capital that parsimony accumulates. But whatever industry might generate, if parsimony did not save and store up, the capital would never increase.


21. . . That portion of his income that a rich man annually spends is in most cases consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, because for the sake of the profit it is immediately employed as a capital, is consumed in the same manner and nearly in the same time too, but by a different set of people: by laborers, manufacturers, and artificers, who reproduce with a profit the value of their annual consumption. . .

    By what a frugal man annually saves, he not only affords maintenance to an additional number of productive hands, for that or the ensuing year, but like the founder of a public workhouse he establishes as it were a perpetual fund for the maintenance of an equal number in all times to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right or deed of bequest. It is always guarded, however, by a very powerful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can ever afterwards be employed to maintain any but productive hands without an evident loss to the person who thus perverts it from its proper destination.



The Penalties of Private Prodigality and Misconduct


22    The prodigal perverts it in this manner. By not confining his expense within his income, he encroaches upon his capital. Like him who perverts the revenues of some pious foundation to profane purposes, he pays the wages of idleness with those funds which the frugality of his forefathers had, as it were, consecrated to the maintenance of industry. By diminishing the funds destined for the employment of productive labor, he necessarily diminishes, so far as it depends upon him, the quantity of that labor that adds a value to the subject upon which it is bestowed, and, consequently, the value of the annual production of the land and labor of the whole country (the real wealth and revenue of its inhabitants). If the prodigality of some were not compensated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the industrious, tends not only to beggar himself, but to impoverish his country.


23    The effects of misconduct are often the same as those of prodigality. Every injudicious and unsuccessful project in agriculture, mines, fisheries, trade, or manufactures tends in the same manner to diminish the funds destined for the maintenance of productive labor. In every such project, though the capital is consumed by productive hands only, yet, because of the injudicious manner in which they are employed, they do not reproduce the full value of their consumption, and there must always be some diminution in what would otherwise have been the productive funds of the society.



The Penalties of Public Prodigality and Misconduct


24    Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole, public revenue is in most countries employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, and great fleets and armies (who in time of peace produce nothing, and in time of war acquire nothing that can compensate the expense of maintaining them, even while the war lasts). Such people, as they themselves produce nothing, are all maintained by the products of other men's labor.


25    . . . In the course of the four French wars, the nation [England] has contracted more than a hundred and forty-five millions of debt, over and above all the other extra annual expenses that they incurred, so that the whole cannot be computed at less than two hundred millions. So great a share of the annual production of the land and labor of the country has, since the Revolution, been employed upon different occasions in maintaining an extraordinary number of unproductive hands. But had not those wars given this particular direction to so large a capital, the greater part of it would naturally have been employed in maintaining productive hands, whose labor would have replaced, with a profit, the whole value of their consumption. The value of the annual production of the land and labor of the country would have been considerably increased by it every year, and every year's increase would have augmented still more that of the following year. More houses would have been built, more lands would have been improved—and those which had been improved before would have been better cultivated—more manufactures would have been established—and those which had been established before would have been more extended. And to what height the real wealth and revenue of the country might, by this time, have been raised, it is not perhaps very easy even to imagine.


26    . . . England, however, as it has never been blessed with a very parsimonious government, so parsimony has at no time been the characteristic virtue of its inhabitants. It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, without any exception, the greatest spendthrifts in a society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.



Importance of Educating the People


27    . . . [The children of the common people] have little time to spare for education. Their parents can scarce afford to maintain them even in infancy. As soon as they are able to work they must apply to some trade by which they can earn their subsistence. That trade, too, is generally so simple and uniform as to give little exercise to the understanding. At the same time, their labor is both so constant and so severe that it leaves them little leisure and less inclination to turn to, or even to think of, anything else.

    But though the common people cannot in any civilized society be so well instructed as people of some rank and fortune, the most essential parts of education—to read, write, and account—can be acquired at so early a period of life that most of those who are to be bred to even the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.


28    The public can facilitate this acquisition by establishing in every parish or district a little school, where children may be taught at a cost so moderate that even a common laborer may afford it—the master being partly, but not wholly, paid by the public. (If he was wholly, or even principally, paid by it, he would soon learn to neglect his business.) In Scotland the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account. In England the establishment of charity schools has had an effect of the same kind, though not so universally, because the establishment is not so universal. If in those little schools the books by which the children are taught to read were a little more instructive than they commonly are, and if they were instructed in the elementary parts of geometry and mechanics, instead of the little smattering of Latin sometimes taught there (which can scarce ever be of any use to them), the education of this rank of people in literacy would perhaps be as complete as it can be. There is scarce a common trade which does not afford some opportunities for applying the principles of geometry and mechanics, and which would not therefore gradually exercise and improve the common people in those principles—the necessary introduction to the most sublime as well as to the most useful sciences.


29    The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which frequently occasion the most dreadful disorders among ignorant nations. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. . . They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition. And they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favorable judgment that the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously.



Remedies for Sectarian Folly


30    In every civilized society, in every society where the distinction of ranks has once been completely established, there have been always two different schemes or systems of morality current at the same time. One of these may be called the strict or austere; the other the liberal, or, if you will, the loose system. The former is generally admired and revered by the common people: the latter is commonly more esteemed and adopted by what are called people of fashion. . . . In the liberal or loose system, luxury, wanton and even disorderly mirth, the pursuit of pleasure to some degree of intemperance, the breach of chastity, at least in one of the two sexes, etc., are generally treated with a good deal of indulgence (provided they are not accompanied with gross indecency and do not lead to falsehood or injustice). They are easily either excused or pardoned altogether. In the austere system, on the contrary, those excesses are regarded with the utmost abhorrence and detestation. The vices of levity are always ruinous to the common people, and a single week's thoughtlessness and dissipation is often sufficient to undo a poor workman for ever, and to drive him through despair upon committing the most enormous crimes.


31    Almost all religious sects have begun among the common people, from whom they have generally drawn their earliest as well as their most numerous proselytes. The austere system of morality has, accordingly, been adopted by those sects almost constantly, or with very few exceptions (for there have been some). It was the system by which they could best recommend themselves to that order of people to whom they first proposed their plan of reformation of what had been previously established. Many of them, perhaps the greater part of them, have even endeavored to gain credit by refining upon this austere system, and by carrying it to some degree of folly and extravagance. This excessive rigor has frequently recommended them more than anything else to the respect and veneration of the common people.


32    There are two very easy and effectual remedies, however, by whose joint operation the state might, without violence, correct whatever was unsocial or disagreeably rigorous in the morals of all the little sects into which the country was divided.

    The first of those remedies is the study of science and philosophy, which the state might render almost universal among all people of middling or more than middling rank and fortune. This could be done, not by giving salaries to teachers in order to make them negligent and idle, but by instituting some sort of probation, even in the higher and more difficult sciences, to be undergone by every person before he was permitted to exercise any liberal profession, or before he could be received as a candidate for any honorable office of trust or profit. If the state imposed upon this order of men the necessity of learning, it would have no occasion to trouble itself to provide them with proper teachers. They would soon find better teachers for themselves than any whom the state could provide for them. Science is the great antidote to the poison of enthusiasm and superstition; and where all the superior ranks of people were secured from it, the inferior ranks could not be much exposed to it.


33    The second of those remedies is the frequency and gaiety of public diversions. The state, by encouraging, that is by giving entire liberty to all those who for their own interest would attempt without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions, would easily dissipate, in the greater part of them, that melancholy and gloomy humor which is almost always the nurse of popular superstition and enthusiasms.





Adapted from An Inquiry into the Nature and Causes of the Wealth of Nations, by Adam Smith, edited by Edwin Cannan. Methuen and company, Limited, London, 1904, available in the full text on-line at the Library of Economics and Liberty.


Authors born between 1700 and 1800 CE

[ Smith ] Paine ] Jefferson ] Condorcet ] Bentham ] Goethe ] Wollstonecraft ] Comte ]



Introduction and adaptation copyright © Rex Pay 2005