Adam Smith

Philosophical Naturalism:

• Philosophical naturalism means we should understand the world by looking at real things we can see, test, and measure—like Hume saying knowledge comes from experience, not magic or miracles. It also means morality doesn’t need religion; people can figure out right and wrong by using reason, empathy, and how their actions affect others.

The Scottish Enlightenment and Morality: 

• The Scottish Enlightenment was a time when smart thinkers in Scotland, like Hume and Smith, tried to understand the world using observation, reason, and everyday human experience. 

• Instead of saying morality comes only from religion, they argued we can discover right and wrong by studying how people actually behave and what helps society work well. 

• It was a shift from “morals because God says so” to “morals because they make life better for everyone.”

Hume's Disagreement with Hobbes: 

• Hobbes thought we can know things either by using our senses or by using clear, logical ideas, but Hume said we can’t be totally sure our senses are always right and even logical ideas only work if we define the words perfectly. 

• So Hume believed certainty is much harder to get than Hobbes thought.

Humes Utility (+Row Boat Ex): 

• Morality isn’t based on God’s commands—it’s based on what is useful for people. 

• Like two rowers who must row in the same direction to reach point B, humans follow certain moral rules because they help society work and help us reach our goals. 

• Moral codes develop over time because they work, not because they’re divinely ordered. This idea becomes the foundation for J.S. Mill’s utilitarianism. 

• Politically, Hume says we should obey authority only when doing so is genuinely good or useful for us.

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Laissez Faire

Laissez-faire means the government should interfere as little as possible in the economy, letting people and businesses make their own choices freely.

Wealth of Nations: 

• Adam Smith’s Wealth of Nations says that even though industrial society can be unequal and people don’t always act virtuously, it still isn’t unjust because it greatly increases the total wealth available to everyone. 

• He argues that countries grow richer when people specialize in what they’re best at—this is comparative advantage—and then trade freely, which raises overall prosperity (“a rising tide lifts all boats”). 

• Smith accepts that inequality happens because money lets people skip Locke’s spoilage limits, but he believes the benefits of expanded wealth make the system worthwhile.

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Moral Foundation for Wealth of Nations: 

• Smith’s moral foundation says humans naturally have self-interest, sympathy, a desire for approval, and an “impartial spectator” inside their minds that helps them judge their own actions. 

• Because we want others to see us as good, morality develops through social interaction: we learn right and wrong by imagining how others judge us. 

• Even though our sympathy is strongest for people close to us, our wish to be respected pushes us to act well toward everyone. 

• Together, these natural feelings create a moral society without needing religion or a ruler, forming the ethical base of The Wealth of Nations.

According to Smith what are the 4 things humans are innately created with: 

1. Self-interest - we seek our own advantage.

2. Sympathy - we feel with others.

3. Desire for approval - we want others to see us as virtuous. (virtue signaling)

4. Impartial spectator - we imagine how a neutral observer sees our actions.

Smith and Self Interest: 

• Smith says self-interest isn’t selfishness—it’s just people trying to improve their own lives in smart, reasonable ways. 

• When markets work well, this self-interest accidentally helps everyone by creating useful products, jobs, and cooperation, even if no one is meant to help society. 

• Because people care about sympathy, respect, and their connections with others, self-interest actually strengthens social bonds and makes society more stable.

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The Invisible Hand: 

• The “invisible hand” means that when people try to help themselves—like making money or running a business—they accidentally help society too.

• Even though no one is planning it, their choices guide the economy in a good direction, like an invisible hand organizing things.

• Smith believed that self-interest, when paired with fair rules, can make everyone better off.

Who Invented the invisible hand: 

• Bernard Mandeville in “The Fable of the Bees”, where he argued that private vices lead to public benefits (e.g. dishonesty is good because it creates a need for lawyers, vanity is good because it creates an industry of makeup and fashion, etc)

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Who Were the Physiocrats: 

• The Physiocrats were French thinkers who believed that all real wealth came from nature—especially farming—and that society worked best when landowners, farmers, and merchants lived in natural balance. 

• They wanted to modernize France by removing old barriers like internal tariffs and letting people trade freely (“perfect liberty”). Smith agreed with their push for freer markets and their focus on productivity, but he believed wealth came not just from land, but from all kinds of labour and industry.

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Main Ideology of the Physiocrats: 

• The Physiocrats believed that society was naturally divided into landowners, farmers, and merchants, and that real wealth came mainly from land and agricultural production. 

• They measured a nation’s wealth by the value of its land and the yearly goods produced by labour, much like William the Conqueror’s Domesday Book, which calculated wealth for taxation. 

• Their ideas influenced Smith, who expanded this question—“How do you measure a nation’s wealth?”—into his own broader theory in The Wealth of Nations. 

Division of Labour: 

• Smith says the division of labour—breaking big jobs into many small, specialized tasks—makes people work faster and create way more goods. 

• When there are lots of things to buy, people want more comfort and “innocent luxuries,” which motivates them to work harder instead of becoming lazy. 

• By encouraging consumer goods and factory work, society becomes richer overall because everyone’s specialized efforts add up to huge collective wealth.

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Pin Making Example - Division of Labour -: 

• if one person tried to make a whole pin alone, they might only make a few in a day. 

• But when the job is split into many small steps—one person straightens the wire, another cuts it, another sharpens it—they can make thousands of pins together. 

• This shows how dividing work into specialized tasks massively increases productivity.

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Division of labour theory: 

• When work is split into tiny tasks, people get really good (dexterous) at their part and work faster.

• This also encourages people to invent tools that save time and make work even easier.

• Because of this, things become cheaper to make, so more people want to buy them.

• When more people buy things, companies earn more money (higher profits).

• When companies earn more, they can pay workers better (higher wages).

• So the whole society becomes richer and benefits from the division of labour.

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The Grain Debate: 

• The grain debate was an argument over whether governments should control grain prices to protect farmers or let the market decide prices freely. Supporters of free trade said open markets would lower prices and help everyone, while others argued that without protections, farmers and the poor could suffer.

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The three positions of the grain debate: 

• The Feudal position - The sovereign had an obligation not to let his subjects starve

• The Physiocrats - No, agricultural profits had to be both secure and significant enough to draw money into agricultural investment

• Adam Smith - Agricultural profits had to be both secure and significant enough to draw money into manufacturing

Smith on Taxation: 

• Smith supported taxation because citizens give up a small part of their property to protect the rest through government.

• He said paying taxes shows you have rights and property, not that you are a slave—it proves you are a free citizen under a lawful government.

• Taxes should fund public works, transportation networks, and compulsory education.

• Since the division of labour can make work boring and repetitive, government must support education and cultural activities to keep people engaged and prevent social unrest.

• Taxation is justified when it improves overall well-being and keeps society stable.

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Explain “modern commercial society was unequal and unvirtuous, but it was not unjust”:

• Smith thought modern commercial society was unequal and not always virtuous because it created big differences in wealth and didn’t match the older Greek and Roman ideals of moral excellence. 

• But he didn’t think it was unjust, because injustice means harming people or violating their rights, and commercial society doesn’t necessarily do that. 

• Instead, it has utility—it makes nations far richer overall—so its benefits outweigh its imperfections.

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How does economic productivity in the form of consumer goods would lead to virtuous behaviour: 

• The twist puritans never could have guessed (protestant work ethic vibes)

• Smith argued that having more consumer goods actually makes people more virtuous because wanting nice things motivates them to work harder and behave responsibly. 

• This was surprising compared to the Puritans, who thought luxury led to laziness and moral decline. 

• Because consumer goods spark effort and productivity, Smith believed the manufacturing sector—not farming—was the true engine of economic growth.

• Thus the more work you do the more pious you are.

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Explain “Innocent luxury is not incompatible with virtue, rather it may be a foundation for its realization”: 

• Smith’s idea is that wanting harmless comforts—“innocent luxuries”—actually encourages people to behave virtuously because it motivates them to work harder, be disciplined, and show up reliably. 

• Instead of luxury making people sinful, as the Puritans believed, Smith argues that consumer goods inspire good habits that help both individuals and society. 

• Because these desires push people to work and produce more, Smith sees the manufacturing sector—not farming—as the real engine that drives economic growth.

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