Adam Smith (1723-1790) published The Wealth of Nations in 1776, also the year of the American Revolution. Both the Wealth of Nations and the Declaration of Independence sprang from a context, the so-called “Enlightenment.”
The Enlightenment in turn has a history, traced in the lectures of Alan Charles Kors, on “The Birth of the Modern Mind: The Intellectual History of the 17th and 18th Centuries,” available from The Teaching Company (www.teach12.com).
The story begins in the early 17th century with politician and philosopher Sir Francis Bacon, (1561-1626). Born to a noble family, Bacon rose in the court of Queen Elizabeth and then James I, eventually becoming Lord Chancellor–before being dismissed for taking bribes. Bacon was educated in the mode of thinking that dominated European schools and universities: “Aristotelian scholasticism,” a blend of Greek philosophy and Christian theology. Under scholasticism, knowledge derived first from the writings of prior authorities, second by logical arguments from these authorities, and finally–simply as a means of illustration–experience. Bacon rebelled against scholasticism. Instead of deduction from authority, he argued in his most famous book, The New Organon, we should derive knowledge by induction from observation of the real world. Knowledge should be cumulative, testable and useful in improving the well-being of mankind.
Francis Bacon wasn’t the first to propose something like the “scientific method.” So did his unrelated forbear Roger Bacon (c. 1214-1294), who lectured on Aristotle at Oxford. But times had changed. The printing press, invented in 1440 by Gutenberg in Germany, fostered much broader literacy. The Reformation had swept northern Europe including England, where it was imposed by Elizabeth’s daddy, Henry the Eighth. So while Roger Bacon died in obscurity, Francis Bacon inspired an enthusiastic following. In 1660, his disciples founded the British Royal Society, whose Annals became the most prestigious place to publish not only scientific research but improvements in technology.
Meanwhile, the Roman Catholic Church had unwittingly painted itself into a corner by endorsing Ptolemaic astronomy, in which the sun and planets revolved around the earth. Not because the earth was the most important, but because it was the most imperfect, and therefore furthest from the realm of God in the perfect heavens. Understandably, scholars like Kepler (1571-1630) and Galileo (1564-1642) trained their eyes and their improving instruments on the heavens, observing and measuring the motions. They reached a startling conclusion: not only did the earth and planets revolve around the sun, but they moved according to precise laws that could be represented mathematically!
The dam broke in 1687 when Newton (1643-1727) published (in Latin) his Mathematical Principles of Natural Philosophy, unifying the laws of physics on the earth with the laws of motion of the planets. A tidal wave of scientific discovery and new technology burst over the ever more literate public of western Europe, challenging the established church and engendering the Deistic faith of Thomas Jefferson and others-the idea that God’s work is manifest in nature.
Now imagine Adam Smith growing up in Scotland in the mind-blowing excitement of that era, teaching at the University of Glasgow and writing his first bestseller, The Theory of Moral Sentiments. He spent 1763-66 in France visiting with the leaders of the French Enlightenment, men such as Voltaire, Rousseau, Turgot, Helvetius and D’Alembert, and discussing laissez-faire with the Physiocrats Quesnay and Dupont de Nemours. Back in Scotland, his close friend was the radical moral philosopher, David Hume. Small wonder The Wealth of Nations reflects the Enlightenment outlook: keen and fresh observation, followed by analysis without overemphasis on consistency; compassion for humanity; and always, skepticism and wit. Smith can write, on the one hand,
The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education.
and on the other hand, (GM and HP are you listening?)
The directors of [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.
Today, alas, much of mainstream economics seems to have retreated to scholasticism, abandoning observation, deriving ever more elaborate and obscure formulations from received wisdom.
