PART III

Lives of Great Economists

Biography of Adam Smith (1723 — 1790)

Adam Smith was born in 1723 in Scotland. His father, who had held the post of "controller of customs" at the Scottish border, died some six months before his birth. His mother, Margaret Douglas, came from a family of substantial landowners. At around the age of 5 Adam Smith was kidnapped by a band of Gypsies, but he was quickly rescued by his uncle and returned to his mother.

At the age of about fifteen, Smith proceeded to the University of Glasgow. In 1740 he entered Balliol College of the University of Oxford. At Balliol College Smith was taught in line with the traditions of Classical scholarship and also seems to have interested himself privately in philosophy. He did not feel he was being educated in line with his own interests; he also fell into the disfavour of the authorities due to his taking a great interest in the "atheistic" philosophical works of David Hume. So, he quit his scholarship and returned to Edinburgh in 1746.

In Edinburgh with the sponsorship of the lawyer and philosopher Lord Kames, he was facilitated in giving a number of public lectures. These lectures brought him to the attention of the intellectual public. In 1751, at age twenty-eight, he became a professor of Logic at Glasgow, and then, the following year, took the Chair of Moral Philosophy.

Smith was a reserved, bookish, and absent-minded individual. Though often awkward in social situations he acquired a great reputation as an interesting and animated lecturer. In his lecturing he followed Francis Hutcheson's example of lecturing in English rather than the traditional scholarly language — Latin.

Glasgow, in these years, was a center of the "Scottish Enlightenment", and in his spare time Smith socialised with James Watt

194

and David Hume and also with many representatives of the merchant class of a rapidly economically expanding city.

In 1759, Smith published his Theory of Moral Sentiments, a work in which he principally sought to reflect about the source of man's ability to make moral judgments given that men are also much inclined to look to their material self-interest and self preservation. In 1763 he withdrew from his posts at the University of Glasgow to take on the highly lucrative role of private tutor to Henry Scott, 3rd Duke of Buccleuch, whom he was to accompany on an eighteen month 'Grand Tour" in Europe. It seems that it was his Theory of Moral Sentiments that had attracted the attention of the Duke's guardians to considering him as a tutor for the Duke.

As tutor to the Duke Adam Smith found some of the time spent in the French provinces hard to fill and actually seems to have begun his masterpiece An Inquiry into the Nature and Causes of the Wealth of Nations, as a way of taking up otherwise idle hours in the summer of 1764. In Geneva, where the Duke's party stayed for two months, Smith met Voltaire. In Paris he met amongst others, the "Physiocrat" economic theorist Quesnay and the French Ministers, Turgot and Necker, as well as his old friend David Hume who held a diplomatic post there.

On his return to London Smith stayed there for some time and met amongst others Edmund Burke, Samuel Johnson and Edward Gibbon. It was during this time that Adam Smith was elected a member of the Royal Society.

He then returned to Scotland where he stayed quietly with his mother at his native town of Kirkcaldy and occupied himself in study and writing. It was in 1776 that he finally saw his Wealth of Nations through the press.

In 1777 he was named Lord Rector of the University of Edinburgh and in 1778 was appointed as commissioner of customs in Scotland. This post was well paid and Smith volunteered to quit the pension he was being paid by the Duke of Buccleuch. The Duke however preferred that he should continue in receipt of the pension.

195

On July 17th, 1790, Adam Smith died at Edinburgh; he was buried in the Canongate churchyard.

Powerful movements that led to the emergence of Modern Capitalism are substantially based on Smith's work. Therefore, he deserves to be regarded as one of the most dramatically influential philosophers or philosophic writers of modern times.

Biography of David Ricardo (1772 — 1823)

David Ricardo is often credited with systematizing economics. He was one of the most influential of the classical economist. He was also a successful businessman, financier and speculator, and saved a considerable fortune. When he died, his estate was worth over $100 million in today's dollars.

Born in London, Ricardo was the third of seventeen children in a Jewish family from Portugal that emigrated from the Netherlands to England just prior to his birth. At age 14 Ricardo joined his father at the London stock Exchange. Ricardo rejected the orthodox Jewish beliefs of his family and ran away with a Quaker, Priscilla Anne Wilkinson when he was 21. His father was so unhappy with this that he abandoned Ricardo and never spoke to him again.

At age twenty-seven, after reading Adam Smith's The Wealth of Nations, Ricardo became excited about economics. He wrote his first economics article at the age of thirty-seven and then spent only fourteen years-his last ones-as a professional economist.

Ricardo first gained notice among economists over the "bullion controversy." In 1809 he wrote that England's inflation was the result of the Bank of England's propensity to issue excess bank notes. In short, Ricardo was an early believer in the quantity theory of money or what is known today as monetarism.

Ricardo's most famous work is his Iron Law of Wages. In this book Ricardo states that the wages of 19th century British workers should not be increased, though it was encouraged greatly by the masses. This was due to

196

his observation of the direct link evident between money and population. An increase in income of workers equals an increase in children, resulting in a larger workforce. Such an increase means that employers will be forced to lower wages as their working population grows exponentially. Also, the surplus of workers and lower wages will combine to create a greater state of poverty that existed before wages were originally raised. Ultimately, he favoured employers far more than workers.

One of Ricardo's chief contributions, arrived at without mathematical tools, is his theory of rents. Ricardo explained that when more land is cultivated, farmers will have to start using less productive land. But because a bushel of corn from less productive land sells for the same price as a bushel from highly productive land, tenant farmers would be willing to pay more to rent the highly productive land. As a result, the landowners, not the tenant farmers, are the ones who gain from productive land. This finding has withstood the test of time. Economists use Ricardian reasoning today to explain why agricultural price supports do not help farmers but do make owners of farmland wealthier. Economists use similar reasoning to explain why the beneficiaries of laws that restrict the number of taxis are not cab drivers but rather those who owned the limited number of taxi medallions (licenses) when the restriction was first imposed.

Ricardo's work with the stock exchange made him quite wealthy, which allowed him to retire from business in 1814 at the age of 42. He then purchased and moved to Gatcombe Park, an estate in Gloucestershire. In 1819, Ricardo purchased a seat in the British Parliament as a representative of Portarlington. He held the post until the year of his death in 1823.

Biography of J. S. Mill (1806 — 1873)

John Stuart Mill, an English philosopher and political economist, was the most influential liberal thinker of the 19th century. He was an advocate of utilitarianism, the ethical theory first proposed by his godfather Jeremy Bentham.

197