The occasion of the 300th birth anniversary of Adam Smith, considered the Father of Economics, puts one in a contemplative mood. As students and practitioners of the discipline, it is appropriate for us to recollect what he wrote and its relevance or irrelevance in understanding today’s world. One of the major ideas attributed to Smith—that the market is the best way to organise economic activity and the government should not interfere—is cliché. Yet, several scholars have spoken out against this—a belief borne out of a misreading or partial reading (or no reading at all) of Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. So, without belabouring this point, there are other aspects of Smith’s writings which may be recollected to understand how they are relevant or irrelevant to us today and in the future.
There is a certain timelessness to the knowledge that Smith created, gleaned, sequenced and presented in his Wealth of Nations. His discussions on the division of labour, price mechanism and capital accumulation form part of his explanation of how markets function. Smith’s account of how these lead to increased productivity is still masterful, and this well-rounded explanation had never been provided by a single scholar before. This explanation, one realises, has always been true and will continue to be true far into the future, because it relies on certain fundamental aspects of human aspirations and ingenuity. His writings on the role of the government and how it can best design taxes and plan public expenditure continue to be relevant today.
The same can probably not be said for the sources of growth that a country has today. The Industrial Revolution had just started brewing around Smith’s time, but he had not noticed it. He did not comment on the possible effects of major technological advancements on growth and on human well-being. His gaze was fixed firmly on the past he had studied and the present he was experiencing. The major technological advances that we are now seeing daily are having some impact on production, economic transactions, and human well-being. We are unable to draw from Smith’s wisdom on these issues because he did not anticipate or contemplate anything more than an enhancement in productivity and expansion of markets based on division of labour.
Smith’s The Theory of Moral Sentiments, though much less spoken of among economists, is nonetheless an important treatise on how people distinguish between good and bad. The “impartial spectator” that he perceived to be within each person guides, he said, the actions of this person such that she or he does not stray far from the norms of propriety for the age. He visualised this “inner man” through his capacity for sympathy, and the ability to create institutions that can protect humans from their own selfishness and guide social good. This was a very important observation.
Unlike the Wealth of Nations, the deeply moral questions that this book was looking to answer had several scholarly contributions before and after Smith’s time. Nonetheless, his work stands out in its balanced and rational treatment of this difficult subject. These same explanations continue to hold equal strength today as they did over two centuries ago, and one has reasons to believe that they will continue to hold in the future. We do, after all, feel pain when a disaster, natural or otherwise, impacts the lives of people we have never met and will never meet. Not extremely often, but we do mobilise ourselves in large groups to argue for political justice for groups that we do not belong to ourselves. These behaviours, though not rational from the purely personal perspective, do make sense when looked at through Smith’s explanation. It is hard to argue that the fast pace of modern life has dramatically changed this fundamental human sentiment. In fact, the ability to gain information in multidimensional detail from far corners of the globe has only made it easier to feel sympathetic towards those far away.
While on the moral question, one issue that Smith does not seem to have directed much attention to is that of gender and other forms of discrimination. The social context that he was part of had well-defined roles for different population groups, and this was accepted. The questioning of these age-old norms started just after Smith’s time, around the 1790s, with the writings of Wollstonecraft, Olympe de Gouges, Harriet Taylor Mill and John Stuart Mill. Feminist literature before this decade is much sparser. So the modern feminist movement is unable to draw from Smith’s writings. In fact, a popular book that highlights feminist issues is titled, Who cooked Adam Smith’s dinner? (Katrine Marçal), indicating that the discipline of economics and its practitioners have been unable to satisfactorily address gender discrimination.
Some other hardly-at-all-talked-about works of Smith include essays on logic, astronomy, history of the evolution of language, jurisprudence and philosophy. If Smith had written only the Wealth of Nations, he would not have been any less worshipped and studied than he is now. But the mind that wrote this one book also wrote several other equally masterful accounts of widely different realms of human imagination and knowledge. The relevance of his works has not diminished over time. Scholars and laypersons alike will continue to read, interpret, learn, reread, reinterpret and relearn from him in each new age.
As J M Keynes, another economist who brought fundamental changes in macroeconomics, famously pointed out, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” Adam Smith was certainly not wrong, and he will certainly not be defunct any time soon.
(Views are personal)
N R Bhanumurthy
Vice-Chancellor, Dr BR Ambedkar School of Economics University, Bengaluru
Sheetal Bharat
Assistant professor, Dr BR Ambedkar School of Economics University, Bengaluru