But, more than any of these things, he introduced science into the study of economics. He made the foundation of all subsequent economics the notion that wealth was created by labor. His influence in introducing historical method into political economy was far-reaching. The second effect of Smith’s work was in the shaping of thought. (Existing policy, as we have pointed out, favored the older trades, methods, and classes against the new “Lunar Society” type of individual and enterprise.) Thus, for example, it helped Pitt to pass a free-trade agreement, the Eden Treaty of 1786 with France, through Parliament. What effect did Smith’s work actually have? First, it gave the rising manufacturers and merchants a rationale for their desire to change existing government policy. On the other hand, shepherds can grow in number as their flocks grow: and can carry war into the hearts of civilized nations because they carry with them their food supply. A nation of shepherds may.” This is true, he thought, because the nature of hunting is such that large numbers cannot indulge in it the game would be exterminated. On another level, Smith applied his faith in a structure of things when he said: “A nation of hunters can never be formidable to the civilized nations in their neighbourhood. On one level, this might mean the acceptance of a “natural” price of things (reached when the supply, whether of goods or of labor, exactly equaled the demand). Man’s task, therefore, was to understand the nature or structure of things and to adjust himself harmoniously to the necessary results of this structure. This, in our judgment, is what Smith really meant by the “invisible hand” that, so to speak, an “order of nature” or a “structure of things” existed which permitted self-interest, if enlightened, to work for mankind’s good. Thus, he and his science of economics could show “how” and “in what manner.” In order to discover such a science of economics, however, Smith had to posit a faith in the orderly structure of nature, underlying appearances and accessible to man’s reason. Smith’s method was to form out of experience an abstract principle, to state this as a general rule and to give evidence and examples to support it. Country gentlemen were told that in their demand for a bounty on corn “they did not act with that complete comprehension of their own interest” which should have directed their efforts. He chided the mercantilists that their very cupidity, by imposing a heavy duty on certain goods, called into being a smuggling of the goods which ruined their business. However, he was constantly inveighing against the farmers, the workers, the manufacturers, and the banks, complaining that they did not understand their own particular interests. From then on, the inevitable benefits of self interest become a doctrine to which rising manufacturers and owners of newly enclosed land constantly appealed. What Smith did was to give it a reasoned economic exposition which made it acceptable and, so to speak, respectable. When Smith wrote, this view was already familiar to eighteenth century thinkers. The view that personal self-interest is the best regulator of public affairs had been put forward before: it is expressed in Bernard de Mandeville’s, Private Vices, Public Benefits. The result is his famous “invisible hand” theory in which the individual, intending only his own gain, is led “to promote an end which was no part of his intention,” the well-being of society. In the Wealth of Nations, Smith combined the two doctrines: God’s providential benevolence and man’s earthly self-interest. His teacher, Hutchenson, indeed, had taught that the only virtue was benevolence but Smith, while agreeing that this was the major virtue and the one which aimed “at the greatest possible good,” felt strongly that the system of benevolent ethics was too simple and left no room for the “inferior virtues.” Therefore he devoted himself to a more naturalistic theory of morals, in which man’s nature was accepted as it was. One difficulty in following Adam Smith’s account of self interest is that he had discussed the matter thoroughly in the Theory of Moral Sentiments, and he assumed that the reader of the Wealth of Nations would not think that he, Smith, considered self-interest the only or even the main motive, or virtue, of humanity. Private Tutoring with Pass Assurance NEW.

Mcat practice test princeton review