Adam Smith and Thomas Paine: Liberal Thought

1.1 Where and when did he live?

Adam Smith was born in 1723 in Kirkcaldy, Scotland. He lived during a period of great learning. It is known as the Scottish Enlightenment.

1.2 What did he write?

Smith published two books in his lifetime. The first was the Theory of Moral Sentiments in 1759. The second was the Inquiry into the Nature and Causes of the Wealth of Nations in 1776. People usually call it the Wealth of Nations.

2.1 What did Smith actually say?

Smith wrote about a trader who invests his money to earn a profit. The trader intends only his own gain. Yet he is led by an invisible hand to promote an end which was no part of his intention.

So one person chasing private gain can end up helping society. Smith put it this way. By pursuing his own interest, a person frequently promotes that of society more effectually than when he really intends to promote it.

2.2 Where does the phrase appear?

The famous phrase is in Book IV, Chapter II of the Wealth of Nations. A common summary is that each person serving their own ends is led, as if by an invisible hand, to serve others’ ends too.

3.1 What was the mercantile system?

Mercantilism was the older view of trade. It held that a country grows rich through a favourable balance of trade. Smith described the system as one that proposes to enrich the whole country by means of the balance of trade.

3.2 What was Smith’s complaint?

Smith said such expedients force the trade of a country into a channel much less advantageous than the one it would naturally take. In plain words, rules made trade less useful.

Scholars add that Smith wanted the state to end its policies of favouring industry over agriculture. These were common in his time.

3.3 Why does it matter for exams?

Mercantilism is the system Smith directly criticised in the Wealth of Nations. Options such as Keynesianism or Marxism are wrong.

4.1 What is the pin factory?

Smith used a pin factory as his example. Making a pin is divided into about eighteen distinct operations. Different workers handle different tasks.

4.2 What difference does it make?

Ten persons sharing the tasks could make upwards of 48,000 pins in a day. That is 4,800 pins for each person. Working separately, each could not have made twenty, perhaps not one pin in a day.

The lesson is simple. Splitting a job into steps lets workers specialise. Output per person then rises sharply.

5.1 What is sympathy?

Smith begins the Theory of Moral Sentiments with sympathy. He describes it as arising when we imagine how we would feel in the circumstances of others.

5.2 Who is the impartial spectator?

Smith asks us to judge, and act on, the feelings that a well-informed and impartial spectator would have. Think of an honest observer with no stake in the matter.

5.3 What is natural liberty?

Smith’s political interest included guaranteeing ordinary people the natural liberty to act on their own judgments.

6.1 How did he begin?

Thomas Paine was born on 29 January 1737 to a family of moderate means in Norfolk, England. At twelve he left school. He was apprenticed to his father to learn the craft of staymaking. Staymaking is the making of corset stays.

6.2 How did he reach America?

Paine secured letters of introduction from Benjamin Franklin. He sailed for the New World in April 1774.

7.1 When did it appear?

Common Sense was published anonymously in Philadelphia in January 1776. At that time, both separation from Great Britain and reconciliation were being considered. Anonymous means the author’s name was not printed.

7.2 How did Paine argue?

Paine used simple rational arguments. He focused blame for the colonies’ troubles on the British king. The pamphlet became a central text behind the call for American independence.

Paine also wrote about the difference between society and government. Society is produced by our wants. Government is produced by our wickedness. The first promotes happiness by uniting our affections. The second restrains our vices.

8.1 Why did Paine write it?

Edmund Burke’s Reflections on the Revolution in France appeared in November 1790. Paine decided to answer it. The result was Rights of Man. Part One came out in February or March 1791. It joined a story of French events with a sharp attack on Burke.

8.2 What was Part Two?

Rights of Man, Part the Second, came out in March 1792. It was explicitly republican. A republic is a state without a king, ruled by elected representatives.

The work was the most widely read pamphlet in the movement for reform in Britain in the 1790s. One editor of Paine’s writings calls the Paine–Burke exchange a duel that turned into a war between royalism and republicanism in Europe.

8.3 What else did he write?

Paine was a member of the French National Convention between 1792 and 1795. His Age of Reason gave a popular deist text. A deist believes in a creator on grounds of reason alone.

Agrarian Justice set out a case for a tax on inheritance. The money would give a capital grant to everyone reaching the age of majority. It would also give an annual pension to all at fifty.

Many see Paine as a key figure in claims that the state owes people welfare and education.

9.1 What should you not mix up?

Both wrote in the 1700s.

• Smith: invisible hand, pin factory, mercantilism, impartial spectator.
• Paine: Common Sense (1776), Rights of Man (1791–92), Age of Reason, Agrarian Justice.
• Same year: both major 1776 works appeared that year. One is a book on wealth. The other is a pamphlet on independence.