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Adam Smith, the Author of The Wealth of Nations: Our Visionary yet Observant Contemporary
Our contention here is that Adam Smith provides us with a rare case of being both an observant scholar of ‘here and now’ and an insightful ‘visionary’ of the processes unfolding in the longue durée. It is this latter attribute that makes him our contemporary after a quarter millennium. Because of the disciplinary specialization that has progressed beyond its natural limits, economists now shy away from many of the greater problems that Smith faced head on in his time. Thanks to then underdeveloped disciplinary specialization, Smith could perform extraordinarily well in two would-be disparate fields such as moral philosophy and economics. This paper focuses on the observational power and visionary insights we find in Smith’s Wealth of Nations that deserve attention and reconsideration. This can help explain the ‘paradox’ about Smith,’ i.e., he was more or less equal to several leading economists of his time in terms of analytical achievement, yet was retrospectively recognized as the father of economics, as also noted by Joseph Schumpeter in History of Economic Analysis. We believe observational acuity and panoramic vision are among the factors that made what we would rather characterize as the ‘Smithian difference’. To give a good idea of what we will focus on, we list below three examples that our paper will cover at length as representative now of three different fields of vision.
We start with the most classic example of ‘division of labor.’ Pivotal for Wealth of Nations was this concept as Smith used it as his gate of entry via Book I and particularly its first three chapters. He placed greater importance on its centrality in his theoretical construct than any economist before or after him. In late 19th century, ‘division of labor’ was shifted from the domain of economics to that of sociology, as the two disciplines were consolidated as conflicting neighbors. Smith foresaw the prospects of division of labor; the very success of the phenomenon in real life reshaped in return the intellectual arena divided up into academic disciplines. Smith observed what was under way in the pin factory, an exceptional one among the many manufactories of his day, where the unusual was coming up to full blossom, and recognized its importance for the coming era. More than that, he made this concept the organizing principle of his analytical apparatus. On the other hand, he missed with a narrow margin the Industrial Revolution just around the corner. But this is beside the point. What counts here is his penchant for selective observation that made him superior to his contemporaries. This observation concerned the borderland, i.e., the twilight zone overlooked by his contemporaries. The explosive consequences of this underlying fault line would soon reshape the disciplinary configuration of modern social sciences. Furthermore, it would demolish the intellectual landscape that made the Smithian viewpoint possible in the first place.
Our second example is from the 7th Chapter of Book IV, to do with political economy and world history with a long-view. Smith performed even better when it came to identifying the implications for the American colonies and New York of the shift of economic center of gravity from Britain to the New World: “The distance of America from the seat of government, besides, the natives of that country might flatter themselves, with some appearance of reason too, would not be of very long continuance. Such has hitherto been the rapid progress of that country in wealth, population and improvement, that in the course of little more than a century, perhaps, the produce of American might exceed that of British taxation. The seat of the empire would then naturally remove itself to that part of the empire which contribute most to the general defense and support of the whole.” This was only to be noticed, and independently of Smith’s pointer, when New York actually replaced London as the capital of world capitalism in the twentieth century. It was given a systemic interpretation and explanation by large-scale, long-term analysts of the caliber of Immanuel Wallerstein and Giovanni Arrighi, to whom Smith was no stranger. Smith’s superior performance in this respect was due to his strong footing in political economy as well as history. If he appeared as a visionary at first sight, it was because he was a learned one, with a solid basis in the yet-undifferentiated domain of classical knowledge.
Our third example is most relevant in our epoch characterized by financial capitalism. It comes from the 2nd Chapter on ‘Money’ of Book II. It demonstrates that Smith was a good observer of the potential instability of the banking sector, and the calculus the economic agents pursue when faced with risk and uncertainty: “The house is crazy, says a weary traveler to himself, and will not stand very long; but it is a chance if it falls to-night, and I will venture, therefore, to sleep in it to-night.” This leads our discussion to the exploration of the most contemporary and fashionable microeconomic yet finance-related theme, to do with probabilistic economic behavior under conditions of calculable risk and radical uncertainty. Whereas our first example has occasionally been noted by historians and scholars, the second and third have so far gone unnoticed. This paper purports to subject all three types to a systematic treatment, only to suggest by so doing how Smith could lend himself to a new interpretation in the 21st century.
| Organization | 2025 International Adam Smith Society Conference |
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