WEBVTT 00:00:00.000 --> 00:00:02.439 Welcome to The Deep Dive, the show where we take 00:00:02.439 --> 00:00:04.559 the sources you provide, run them through that 00:00:04.559 --> 00:00:07.759 academic filter, and give you the essential and, 00:00:07.839 --> 00:00:10.140 yeah, sometimes surprising insights you need 00:00:10.140 --> 00:00:13.339 to be truly well -informed. And today, we are 00:00:13.339 --> 00:00:15.939 really opening up the archives. We are. We're 00:00:15.939 --> 00:00:18.199 looking at a man whose name is, I mean, it's 00:00:18.199 --> 00:00:21.359 an icon. He's often revered, often misunderstood, 00:00:21.620 --> 00:00:25.160 and almost always tied to the modern global economy. 00:00:25.739 --> 00:00:27.839 Adam Smith. That is the perfect way to frame 00:00:27.839 --> 00:00:29.480 it. I mean, for most people, when you hear Adam 00:00:29.480 --> 00:00:32.119 Smith, your brain immediately goes to the invisible 00:00:32.119 --> 00:00:34.840 hand or the wealth of nations. Right. And he 00:00:34.840 --> 00:00:37.259 was, you know, a pioneering Scottish economist 00:00:37.259 --> 00:00:40.079 and philosopher. He was active during that amazing 00:00:40.079 --> 00:00:42.520 period of Scottish Enlightenment, living from 00:00:42.520 --> 00:00:45.640 1723 to 1790. And people call him the father 00:00:45.640 --> 00:00:48.259 of economics. They do. the father of economics, 00:00:48.479 --> 00:00:50.479 sometimes the father of capitalism, and rightly 00:00:50.479 --> 00:00:52.859 so in many ways. But the sources we have here, 00:00:52.920 --> 00:00:55.299 they really emphasize something much more holistic, 00:00:55.439 --> 00:00:57.960 something I think is crucial and goes way beyond 00:00:57.960 --> 00:01:01.659 a simple economic blueprint. Smith was a philosopher 00:01:01.659 --> 00:01:04.000 first. He was a product of that intellectual 00:01:04.000 --> 00:01:06.780 explosion, the Scottish Enlightenment. And his 00:01:06.780 --> 00:01:08.760 work wasn't just about money. It was about the 00:01:08.760 --> 00:01:11.319 fundamental nature of humanity, of morality, 00:01:11.700 --> 00:01:15.129 and of justice. Absolutely. What he did was, 00:01:15.370 --> 00:01:18.870 for its time, truly radical. He built this comprehensive 00:01:18.870 --> 00:01:22.349 system that just moved away entirely from the 00:01:22.349 --> 00:01:25.819 older. often theological explanations for why 00:01:25.819 --> 00:01:27.760 wealth and power were distributed the way they 00:01:27.760 --> 00:01:30.040 were. Explanations based on divine will, you 00:01:30.040 --> 00:01:32.400 mean? Exactly. Divine will, a mandated social 00:01:32.400 --> 00:01:35.579 hierarchy. Smith said no. He proposed that wealth 00:01:35.579 --> 00:01:37.359 and social order could be understood through 00:01:37.359 --> 00:01:40.959 rational, observable forces. It was all a complex 00:01:40.959 --> 00:01:44.040 interplay of natural, political, social, and 00:01:44.040 --> 00:01:46.439 economic factors. He just fundamentally believed 00:01:46.439 --> 00:01:48.519 the world was a system you could analyze and 00:01:48.519 --> 00:01:51.170 organize through reason. So our mission today 00:01:51.170 --> 00:01:53.469 is to get way beyond the textbook soundbites, 00:01:53.489 --> 00:01:55.569 beyond the political simplifications. We're going 00:01:55.569 --> 00:01:58.709 to do a deep dive comparing his two classic foundational 00:01:58.709 --> 00:02:00.909 works, which, you know, you really have to read 00:02:00.909 --> 00:02:02.989 them together. You absolutely do. The Theory 00:02:02.989 --> 00:02:06.209 of Moral Sentiments from 1759 and then his Economic 00:02:06.209 --> 00:02:09.810 Masterwork. An Inquiry into the Nature and Causes 00:02:09.810 --> 00:02:13.610 of the Wealth of Nations from 1776. We need to 00:02:13.610 --> 00:02:16.610 reconstruct that unified vision he had. Right. 00:02:16.669 --> 00:02:19.310 The cohesive philosophy of human nature, morality. 00:02:19.370 --> 00:02:22.310 and economic prosperity that Smith was actually 00:02:22.310 --> 00:02:24.129 trying to build. Because if you only read The 00:02:24.129 --> 00:02:25.969 Wealth of Nations, you're only getting half the 00:02:25.969 --> 00:02:28.050 man. You're getting half the picture. It's the 00:02:28.050 --> 00:02:30.569 two -sided Adam Smith that really holds the key 00:02:30.569 --> 00:02:33.069 to his legacy. So I think we should start by 00:02:33.069 --> 00:02:35.990 unpacking the man himself, you know. His formative 00:02:35.990 --> 00:02:38.289 years, because his early life gave him all the 00:02:38.289 --> 00:02:40.289 evidence for his later theories. Okay, let's 00:02:40.289 --> 00:02:42.789 do it. Let's unpack this and dive into the philosopher's 00:02:42.789 --> 00:02:45.550 formative years. Because his biography, it offers 00:02:45.550 --> 00:02:48.770 some incredible clues about his worldview. born 00:02:48.770 --> 00:02:51.729 in a small port town kirkcaldy in scotland and 00:02:51.729 --> 00:02:54.349 tragedy struck him really early on his father 00:02:54.349 --> 00:02:56.469 who was a customs controller and a senior lawyer 00:02:56.469 --> 00:02:59.250 he died before adam was even born so he was raised 00:02:59.250 --> 00:03:01.870 entirely by his mother margaret douglas and their 00:03:01.870 --> 00:03:04.409 bond by all accounts was just incredibly strong 00:03:04.409 --> 00:03:06.610 he actually lived with her until she died in 00:03:06.610 --> 00:03:09.889 1784. and right at the start of his life we get 00:03:09.889 --> 00:03:14.129 this This incredibly bizarre anecdote. It sounds 00:03:14.129 --> 00:03:16.210 like something pulled straight out of an 18th 00:03:16.210 --> 00:03:18.469 century novel. I know, it's amazing. When he 00:03:18.469 --> 00:03:21.330 was only three years old, Adam Smith was actually 00:03:21.330 --> 00:03:24.009 abducted by a passing band of Romani. It's an 00:03:24.009 --> 00:03:26.650 astonishing detail. The primary biography we 00:03:26.650 --> 00:03:29.189 have, written by John Ray, it says that the family 00:03:29.189 --> 00:03:32.229 immediately sent out scouts. They tracked the 00:03:32.229 --> 00:03:34.349 group for miles down the road into a place called 00:03:34.349 --> 00:03:36.629 Leslie Wood, and they eventually found the woman 00:03:36.629 --> 00:03:38.740 who had taken him. And the story goes that as 00:03:38.740 --> 00:03:41.180 soon as she saw the rescuers coming, she just 00:03:41.180 --> 00:03:43.159 threw the child down and ran off into the woods. 00:03:43.340 --> 00:03:45.460 It's such a striking image, isn't it? A sort 00:03:45.460 --> 00:03:49.080 of fleeting moment of pure, unpredictable chaos 00:03:49.080 --> 00:03:51.580 right before a lifetime that would be dedicated 00:03:51.580 --> 00:03:54.300 to imposing systematic order on the world. A 00:03:54.300 --> 00:03:57.120 very poetic way to put it. Happily, he was returned 00:03:57.120 --> 00:04:00.139 to his mother and his academic life began pretty 00:04:00.139 --> 00:04:03.169 soon after. He went to the Burr School of Kirkcaldy, 00:04:03.270 --> 00:04:05.490 which was, you know, a really high quality school 00:04:05.490 --> 00:04:07.889 for the time. He learned all the classics, Latin, 00:04:08.009 --> 00:04:10.699 math, history, writing. And his intellectual 00:04:10.699 --> 00:04:13.080 path really started to take shape when he got 00:04:13.080 --> 00:04:15.379 to the University of Glasgow at just 14 years 00:04:15.379 --> 00:04:18.060 old. So young. Right. And this is where he started 00:04:18.060 --> 00:04:21.040 studying moral philosophy under this hugely influential 00:04:21.040 --> 00:04:24.300 figure, Francis Hutchison. And that period in 00:04:24.300 --> 00:04:26.759 Glasgow, it clearly shaped the entire ethical 00:04:26.759 --> 00:04:29.100 foundation of his thought. It's where he developed 00:04:29.100 --> 00:04:32.240 his passion for reason, for civilian liberties, 00:04:32.459 --> 00:04:35.519 for free speech. Hutchison was a massive influence. 00:04:35.720 --> 00:04:38.139 He was really promoting the idea that public 00:04:38.139 --> 00:04:40.480 benevolence not just self -interest, was the 00:04:40.480 --> 00:04:42.759 true source of morality. But this is where it 00:04:42.759 --> 00:04:44.860 gets really interesting for me. The profound 00:04:44.860 --> 00:04:47.480 contrast he felt when he moved south to Oxford. 00:04:47.680 --> 00:04:50.639 Oh, yeah. In 1740, Smith got a really prestigious 00:04:50.639 --> 00:04:53.379 scholarship, the Snell Exhibition, and it sent 00:04:53.379 --> 00:04:56.040 him to Balliol College at Oxford for postgraduate 00:04:56.040 --> 00:05:00.259 studies. And he absolutely hated it. He was deeply, 00:05:00.360 --> 00:05:02.680 deeply disappointed. He saw the intellectual 00:05:02.680 --> 00:05:06.000 environment as just, well, stifling, vastly inferior 00:05:06.000 --> 00:05:08.319 to the vibrant academic world he had just left 00:05:08.319 --> 00:05:10.420 in Glasgow. And he didn't pull any punches about 00:05:10.420 --> 00:05:13.399 it later on. He criticizes Oxford directly in 00:05:13.399 --> 00:05:15.939 The Wealth of Nations, dedicating a whole passage 00:05:15.939 --> 00:05:18.480 to the institutional decay he saw there. And 00:05:18.480 --> 00:05:20.519 he blamed it on the endowments. That's the key 00:05:20.519 --> 00:05:23.660 technical insight. The colleges had so much money 00:05:23.660 --> 00:05:25.860 from these rich endowments that the professors' 00:05:26.019 --> 00:05:28.560 income was completely independent of their performance. 00:05:28.899 --> 00:05:30.620 It didn't matter if they were good teachers or 00:05:30.620 --> 00:05:33.600 if any students showed up. Exactly. Smith wrote 00:05:33.600 --> 00:05:35.319 that the greater part of the public professors 00:05:35.319 --> 00:05:38.519 there had, for many years, given up altogether 00:05:38.519 --> 00:05:41.579 even the pretense of teaching. That is just a 00:05:41.579 --> 00:05:43.759 scorching indictment. And it gives you an early 00:05:43.759 --> 00:05:45.959 look into his core economic thinking, doesn't 00:05:45.959 --> 00:05:49.040 it? He saw firsthand what happens when incentive 00:05:49.040 --> 00:05:51.939 structures are fundamentally broken. Right. When 00:05:51.939 --> 00:05:54.000 your security and your income are guaranteed 00:05:54.000 --> 00:05:57.660 no matter what, the effort just plummets. That 00:05:57.660 --> 00:06:00.139 observation right there in Oxford, it laid the 00:06:00.139 --> 00:06:02.519 groundwork for his later theories on competition 00:06:02.519 --> 00:06:06.079 and accountability. On top of that. The officials 00:06:06.079 --> 00:06:08.399 at Oxford weren't exactly encouraging radical 00:06:08.399 --> 00:06:11.060 new ideas. I mean, we have that specific account 00:06:11.060 --> 00:06:13.680 of them finding Smith reading a copy of David 00:06:13.680 --> 00:06:16.939 Hume's A Treatise of Human Nature. Hume was viewed 00:06:16.939 --> 00:06:19.360 with deep suspicion by the conservative English 00:06:19.360 --> 00:06:22.220 establishment at the time, a dangerous thinker. 00:06:22.360 --> 00:06:25.759 So imagine the scene. They reportedly confiscate 00:06:25.759 --> 00:06:27.540 the book, one of the most important philosophical 00:06:27.540 --> 00:06:31.040 works of the century, and they punish Smith severely 00:06:31.040 --> 00:06:34.180 just for reading it. It just shows you the restrictive, 00:06:34.420 --> 00:06:37.879 dogmatic environment he felt trapped in. Now, 00:06:37.939 --> 00:06:40.060 while his time there was unhappy, he did make 00:06:40.060 --> 00:06:42.600 great use of the Boyd Lane Library. He basically 00:06:42.600 --> 00:06:44.980 taught himself several subjects through intense, 00:06:45.180 --> 00:06:47.860 self -directed reading. But the intellectual 00:06:47.860 --> 00:06:51.000 repression was just too much. He left in 1746, 00:06:51.160 --> 00:06:53.980 before his scholarship was even done. Contemporaries 00:06:53.980 --> 00:06:55.819 said he was suffering from what was likely a 00:06:55.819 --> 00:06:58.339 severe nervous breakdown. Brought on by the stress 00:06:58.339 --> 00:07:00.870 and, you know, that intellectual vacuum. But 00:07:00.870 --> 00:07:02.870 he returns to Scotland and thankfully he moves 00:07:02.870 --> 00:07:05.649 into what he later called the happiest and most 00:07:05.649 --> 00:07:08.069 honorable period of his life, his career as a 00:07:08.069 --> 00:07:11.610 teacher. In 1748, he starts giving these incredibly 00:07:11.610 --> 00:07:13.870 successful public lectures at the University 00:07:13.870 --> 00:07:15.769 of Edinburgh. And these lectures were really 00:07:15.769 --> 00:07:19.459 diverse. He covered rhetoric. literary criticism, 00:07:19.660 --> 00:07:22.060 and most importantly, something he called the 00:07:22.060 --> 00:07:25.120 progress of opulence. Ah, so this is where it 00:07:25.120 --> 00:07:27.060 starts. This is where it starts. It was in these 00:07:27.060 --> 00:07:29.220 lectures that he first began to lay out his economic 00:07:29.220 --> 00:07:32.519 philosophy, what he termed the obvious and simple 00:07:32.519 --> 00:07:35.879 system of natural liberty. The idea that wealth 00:07:35.879 --> 00:07:38.319 arises naturally when people are allowed to pursue 00:07:38.319 --> 00:07:40.519 their own interests, as long as they stay within 00:07:40.519 --> 00:07:44.100 the bounds of justice. And around 1750, a crucial 00:07:44.100 --> 00:07:46.800 collaboration begins. He finally meets David 00:07:46.800 --> 00:07:49.910 Hume. the very writer whose book got him in so 00:07:49.910 --> 00:07:53.129 much trouble at Oxford. They formed this intellectual 00:07:53.129 --> 00:07:55.670 and personal bond that really became the defining 00:07:55.670 --> 00:07:58.370 friendship of Smith's life. They just shared 00:07:58.370 --> 00:08:00.310 an understanding of human nature and reason. 00:08:00.689 --> 00:08:03.250 Hume became his greatest friend and his intellectual 00:08:03.250 --> 00:08:06.500 sounding board. Smith then spent 13 years as 00:08:06.500 --> 00:08:09.199 this highly regarded professor of moral philosophy 00:08:09.199 --> 00:08:12.379 back at Glasgow, basically embodying the complete 00:08:12.379 --> 00:08:15.560 opposite of the lazy professionals he'd complained 00:08:15.560 --> 00:08:17.959 about at Oxford. And this professional diligence, 00:08:18.139 --> 00:08:20.639 this systematic approach, it stands in such a 00:08:20.639 --> 00:08:23.339 fascinating contrast to his personal life. The 00:08:23.339 --> 00:08:25.779 stories. The stories are amazing. We have so 00:08:25.779 --> 00:08:28.500 many accounts of him being absolutely comically 00:08:28.500 --> 00:08:31.939 absent -minded, a true genius, just lost in his 00:08:31.939 --> 00:08:35.549 own thoughts. Known for a peculiar way of speaking 00:08:35.549 --> 00:08:38.090 and walking and for smiling and talking to companions 00:08:38.090 --> 00:08:41.429 that no one else could see. The anecdotes are 00:08:41.429 --> 00:08:43.809 fantastic. They really paint a picture of a mind 00:08:43.809 --> 00:08:45.929 just constantly operating on another level. You 00:08:45.929 --> 00:08:47.649 have the famous story of him giving a tour of 00:08:47.649 --> 00:08:50.549 a tanning factory. He's intensely discussing 00:08:50.549 --> 00:08:53.889 free trade, so engrossed in his own theory that 00:08:53.889 --> 00:08:56.429 he just absentmindedly walks right into a huge 00:08:56.429 --> 00:08:58.690 tanning pit. And had to be rescued. It's just... 00:08:59.019 --> 00:09:00.860 It's perfect. And the domestic ones are just 00:09:00.860 --> 00:09:03.000 as good. There's the story of him making tea 00:09:03.000 --> 00:09:05.259 and instead of sugar, he puts bread and butter 00:09:05.259 --> 00:09:07.440 into the teapot. Brings the whole thing. Drinks 00:09:07.440 --> 00:09:09.820 this terrible concoction and then declares it 00:09:09.820 --> 00:09:12.340 to be. The worst cup of tea he had ever had, 00:09:12.419 --> 00:09:14.279 just completely disconnected from the physical 00:09:14.279 --> 00:09:17.179 world. But the best one, for me, has to be the 00:09:17.179 --> 00:09:19.019 time he walked out of his house in his nightgown, 00:09:19.100 --> 00:09:21.740 totally lost in thought, and ended up walking 00:09:21.740 --> 00:09:23.879 15 miles out of town. It was the sound of church 00:09:23.879 --> 00:09:26.539 bells that finally snapped him out of it. He 00:09:26.539 --> 00:09:28.940 realized he was miles from home, still in his 00:09:28.940 --> 00:09:31.639 sleepwear. The genius lost in his own systems. 00:09:32.080 --> 00:09:35.059 And this pattern of intense focus and personal 00:09:35.059 --> 00:09:38.039 detachment, it really defined his life. He never 00:09:38.039 --> 00:09:40.220 married. As we said, he lived with his mother 00:09:40.220 --> 00:09:42.919 until she died. And it all culminates in his 00:09:42.919 --> 00:09:46.120 final instructions before his own death in 1790. 00:09:46.340 --> 00:09:49.120 He had this powerful desire to control his intellectual 00:09:49.120 --> 00:09:52.279 legacy. He told his literary executors, the famous 00:09:52.279 --> 00:09:54.340 chemist Joseph Black and the geologist James 00:09:54.340 --> 00:09:57.039 Hutton, to destroy all of his unpublished material. 00:09:57.340 --> 00:09:59.500 Everything. All his notes, his correspondence, 00:09:59.840 --> 00:10:02.139 anything not deemed immediately fit for publication, 00:10:02.360 --> 00:10:05.139 just destroy it. And that intentional destruction 00:10:05.139 --> 00:10:07.919 is why so few of his personal papers survive. 00:10:08.789 --> 00:10:12.009 Smith, the ultimate system builder, he intentionally 00:10:12.009 --> 00:10:15.129 purged his own personal history. He wanted to 00:10:15.129 --> 00:10:17.110 make sure that his published work would stand 00:10:17.110 --> 00:10:19.809 as his only legacy. We're left with the system, 00:10:19.809 --> 00:10:22.590 not the man's intimate thoughts. Which means 00:10:22.590 --> 00:10:25.289 everything we know about his core philosophy 00:10:25.289 --> 00:10:27.870 has to come from those two great published works. 00:10:28.090 --> 00:10:30.110 And that brings us directly to the first one. 00:10:30.639 --> 00:10:33.480 The moral compass he built. Yes. Let's move to 00:10:33.480 --> 00:10:35.639 part two and talk about the theory of moral sentiments, 00:10:35.940 --> 00:10:38.860 published in 1759. I mean, if you want to understand 00:10:38.860 --> 00:10:40.679 the wealth of nations, you absolutely have to 00:10:40.679 --> 00:10:43.519 start here. This work is so critical. It establishes 00:10:43.519 --> 00:10:45.659 the philosophical, the psychological, the ethical 00:10:45.659 --> 00:10:47.559 foundation for everything that comes after it. 00:10:47.620 --> 00:10:50.220 It's often forgotten now, you know, overshadowed 00:10:50.220 --> 00:10:52.220 by the fame of his later work. But Smith himself 00:10:52.220 --> 00:10:54.299 thought it was his best work, right? He's widely 00:10:54.299 --> 00:10:56.460 believed to have considered moral sentiments 00:10:56.460 --> 00:10:59.659 superior to his economic writings. And crucially, 00:10:59.919 --> 00:11:03.220 He kept revising it. Six editions, adding and 00:11:03.220 --> 00:11:05.679 refining his arguments right up until his death 00:11:05.679 --> 00:11:09.639 in 1790. He really saw it as his defining statement 00:11:09.639 --> 00:11:12.500 on human nature. And the core question he's tackling 00:11:12.500 --> 00:11:16.220 here is just so fundamental. How do we humans, 00:11:16.440 --> 00:11:19.419 who start life as, you know, blank slates without 00:11:19.419 --> 00:11:22.399 some kind of divinely implanted moral code, how 00:11:22.399 --> 00:11:24.860 do we form moral judgments? How do we develop 00:11:24.860 --> 00:11:27.899 a conscience and become social beings? That is 00:11:27.899 --> 00:11:30.509 the radical departure. He wasn't relying on a 00:11:30.509 --> 00:11:32.470 preordained religious sense of right and wrong, 00:11:32.629 --> 00:11:34.830 which is the traditional answer. His approach 00:11:34.830 --> 00:11:37.070 was observational. It was behavioral, rooted 00:11:37.070 --> 00:11:39.529 entirely in human interaction. So how does it 00:11:39.529 --> 00:11:42.269 work? Smith proposed that morality arises dynamically 00:11:42.269 --> 00:11:45.389 from our interactive social relationships. And 00:11:45.389 --> 00:11:47.350 the essential mechanism, the glue that holds 00:11:47.350 --> 00:11:49.370 society together, is what he called sympathy. 00:11:49.649 --> 00:11:51.610 And we really need to clarify that term for a 00:11:51.610 --> 00:11:53.830 modern listener. When Smith used the word sympathy, 00:11:54.110 --> 00:11:56.169 it wasn't what we mean today, like pity or feeling 00:11:56.169 --> 00:11:58.480 sorry for someone. Not at all. In the 18th century, 00:11:58.679 --> 00:12:01.120 it was much closer to what we now call empathy. 00:12:01.679 --> 00:12:05.440 Right. The ability to recognize and share or 00:12:05.440 --> 00:12:08.039 at least mentally reconstruct the feelings of 00:12:08.039 --> 00:12:10.559 another person. Precisely. For Smith, morality 00:12:10.559 --> 00:12:13.820 isn't innate. It's socially constructed through 00:12:13.820 --> 00:12:16.659 this constant dynamic search for what he called 00:12:16.659 --> 00:12:19.059 the mutual sympathy of sentiments. So we're always 00:12:19.059 --> 00:12:21.620 watching other people. Always. We observe others 00:12:21.620 --> 00:12:23.620 judging us. We look at their faces, their reactions 00:12:23.620 --> 00:12:26.259 to what we do. And we instinctively try to adjust 00:12:26.259 --> 00:12:28.299 our behavior so that we can achieve that mutual 00:12:28.299 --> 00:12:31.059 feeling of understanding and approval. We want 00:12:31.059 --> 00:12:32.980 our emotions to resonate with the people around 00:12:32.980 --> 00:12:36.379 us. And this process of constantly calibrating 00:12:36.379 --> 00:12:39.179 our actions based on social feedback, this leads 00:12:39.179 --> 00:12:41.879 directly to his monumental concept of the impartial 00:12:41.879 --> 00:12:44.340 spectator. It's basically the mechanism of conscience. 00:12:44.919 --> 00:12:47.740 How does that inner moral judge develop? It's 00:12:47.740 --> 00:12:50.820 a process of internalization. By constantly observing 00:12:50.820 --> 00:12:52.700 and anticipating how other people are going to 00:12:52.700 --> 00:12:55.179 judge our actions, and by seeking their approval 00:12:55.179 --> 00:12:57.500 and avoiding their disapproval, we're forced 00:12:57.500 --> 00:12:59.539 to step outside of ourselves. To see ourselves 00:12:59.539 --> 00:13:03.100 as others see us. Exactly. And over time, this 00:13:03.100 --> 00:13:06.179 external pressure leads us to develop an internalized 00:13:06.179 --> 00:13:08.980 set of habits and principles and rules of conduct. 00:13:09.200 --> 00:13:12.100 That is the impartial spectator. It becomes the 00:13:12.100 --> 00:13:14.559 internalized voice of conscience, that neutral, 00:13:14.600 --> 00:13:17.639 objective judge we carry inside us, monitoring 00:13:17.639 --> 00:13:19.659 our private thoughts. in our public actions. 00:13:19.820 --> 00:13:22.100 So we end up modifying our behavior not just 00:13:22.100 --> 00:13:24.120 to please the people in the room, but to please 00:13:24.120 --> 00:13:27.120 this internalized, idealized standard, which 00:13:27.120 --> 00:13:29.600 kind of represents the objective view of society. 00:13:30.000 --> 00:13:32.480 And that self -control is absolutely key. The 00:13:32.480 --> 00:13:34.559 whole point of seeking the impartial spectator's 00:13:34.559 --> 00:13:37.740 approval is that it forces us to sacrifice immediate, 00:13:37.980 --> 00:13:41.409 selfish gratification. It demands that we exercise 00:13:41.409 --> 00:13:44.429 self -command and self -control to keep our passions 00:13:44.429 --> 00:13:46.690 within socially acceptable limits. So that ethical 00:13:46.690 --> 00:13:49.639 framework of self -command is the bedrock. It's 00:13:49.639 --> 00:13:52.139 the bedrock upon which a stable commercial society 00:13:52.139 --> 00:13:54.700 can later be built. Without it, you just have 00:13:54.700 --> 00:13:57.320 chaos. Okay, that brings us to the famous tension. 00:13:57.580 --> 00:13:59.720 If the impartial spectator is supposed to give 00:13:59.720 --> 00:14:02.000 us this framework for moral behavior and self 00:14:02.000 --> 00:14:04.500 -command, then where does that leave the intense 00:14:04.500 --> 00:14:06.820 focus on self -interest that he talks about later 00:14:06.820 --> 00:14:09.600 in The Wealth of Nations? Ah, yes, the infamous 00:14:09.600 --> 00:14:12.480 Adam Smith problem. This is where it historically 00:14:12.480 --> 00:14:15.419 came from, right? It is. The Adam Smith problem 00:14:15.419 --> 00:14:19.159 was this. historical conflict that earlier scholars 00:14:19.159 --> 00:14:22.659 saw. How could the same man write one book centered 00:14:22.659 --> 00:14:25.379 on sympathy and what seems like altruistic behavior 00:14:25.379 --> 00:14:28.600 and then 17 years later publish another book 00:14:28.600 --> 00:14:31.419 all about self -interest and private gain? They 00:14:31.419 --> 00:14:33.279 looked contradictory, like he'd had some kind 00:14:33.279 --> 00:14:35.720 of intellectual shift or even a moral failing. 00:14:35.919 --> 00:14:38.519 Was he an idealist who became a cynical economist? 00:14:39.279 --> 00:14:42.320 Well, modern scholarship has largely, and I'd 00:14:42.320 --> 00:14:45.399 say decisively, dismissed that conflict. So it's 00:14:45.399 --> 00:14:47.460 not a problem anymore. It's not a problem. The 00:14:47.460 --> 00:14:49.899 consensus now is that the two works aren't rivals 00:14:49.899 --> 00:14:52.120 at all. They're completely complementary parts 00:14:52.120 --> 00:14:55.299 of a single unified system. The theory of moral 00:14:55.299 --> 00:14:57.679 sentiments provides the necessary psychological 00:14:57.679 --> 00:15:00.759 and moral framework. It defines the ethical rules 00:15:00.759 --> 00:15:02.960 and the limits of acceptable human behavior. 00:15:03.080 --> 00:15:05.259 It sets up the rules of the game. Exactly. And 00:15:05.259 --> 00:15:07.120 then The Wealth of Nations describes how the 00:15:07.120 --> 00:15:09.200 game is actually played within those morally 00:15:09.200 --> 00:15:11.919 bounded rules. The Wealth of Nations applies 00:15:11.919 --> 00:15:15.320 the specific necessary virtue of prudence to 00:15:15.320 --> 00:15:18.220 the private sphere of the economy. Prudence, 00:15:18.220 --> 00:15:21.480 for Smith, is the virtue of self -care, rational 00:15:21.480 --> 00:15:23.919 self -management, looking after your family and 00:15:23.919 --> 00:15:26.360 your future. It's the lowest of the virtues, 00:15:26.460 --> 00:15:28.539 but it's still necessary. It's the foundation 00:15:28.539 --> 00:15:31.299 of economic action. And he had a plan for a third 00:15:31.299 --> 00:15:33.500 book, right, to complete the system. He did. 00:15:33.679 --> 00:15:36.840 He intended for this unified system to culminate 00:15:36.840 --> 00:15:40.139 in a planned third major work that would have 00:15:40.139 --> 00:15:42.720 been about the virtue of justice and public law. 00:15:42.919 --> 00:15:46.279 So you see the progression. from internal morality 00:15:46.279 --> 00:15:49.480 to private economic action to the rules of public 00:15:49.480 --> 00:15:51.860 order. One scholar in our sources argues that 00:15:51.860 --> 00:15:54.080 both books are actually, and I quote, Newtonian 00:15:54.080 --> 00:15:55.940 in their methodology. That sounds very technical. 00:15:55.980 --> 00:15:57.500 What does that mean? It's a really compelling 00:15:57.500 --> 00:15:59.519 analogy that connects Smith back to the scientific 00:15:59.519 --> 00:16:02.460 revolution. Think about it. Newton applied empirical 00:16:02.460 --> 00:16:04.840 observation and system building to understand 00:16:04.840 --> 00:16:07.200 the forces of nature, like gravity and motion. 00:16:07.399 --> 00:16:10.919 Smith applied that same observation -based, system 00:16:10.919 --> 00:16:13.240 -building approach of natural science to human 00:16:13.240 --> 00:16:15.830 social phenomena. to morality, to economics, 00:16:16.029 --> 00:16:18.750 to law. He was trying to identify the universal, 00:16:18.950 --> 00:16:21.049 predictable forces at work in human society, 00:16:21.269 --> 00:16:23.629 just like gravity is a universal force in physics. 00:16:23.870 --> 00:16:26.509 So things like market competition or our desire 00:16:26.509 --> 00:16:29.190 for mutual sympathy, he treated those like predictable 00:16:29.190 --> 00:16:32.230 social laws. Precisely. He argues that just as 00:16:32.230 --> 00:16:34.610 markets develop spontaneously, driven by rational 00:16:34.610 --> 00:16:37.399 incentives, a similar kind of market... dynamic, 00:16:37.480 --> 00:16:40.200 governs how our morality develops. People are 00:16:40.200 --> 00:16:42.259 constantly testing and adjusting their moral 00:16:42.259 --> 00:16:44.740 sentiments in a social marketplace, seeking that 00:16:44.740 --> 00:16:47.720 mutual sympathy. It's a kind of continuous market 00:16:47.720 --> 00:16:49.820 for social approval. And that internal check, 00:16:49.899 --> 00:16:52.000 that need for approval, it prevents the purely 00:16:52.000 --> 00:16:53.879 self -interested person from just becoming a 00:16:53.879 --> 00:16:56.019 social monster. That is the key takeaway for 00:16:56.019 --> 00:16:58.460 you, the listener. The desire for moral approval 00:16:58.460 --> 00:17:01.919 in his first book, TMS, actually functions as 00:17:01.919 --> 00:17:04.579 the internal restraint on the pure, unbridled 00:17:04.579 --> 00:17:07.279 self -interest he talks about later. It ensures 00:17:07.279 --> 00:17:09.420 that when people pursue their economic game in 00:17:09.420 --> 00:17:12.319 WN, they're still operating within the bounds 00:17:12.319 --> 00:17:14.519 set by their conscience and the need for social 00:17:14.519 --> 00:17:17.700 acceptance. So morality is the necessary precondition 00:17:17.700 --> 00:17:21.019 for a functioning, prosperous market economy. 00:17:21.180 --> 00:17:24.400 In short, in TMS, sympathy is the moral faculty 00:17:24.400 --> 00:17:27.720 that restrains self -interest. In WN, competition 00:17:27.720 --> 00:17:30.319 is the economic faculty that restrains self -interest. 00:17:30.519 --> 00:17:33.390 The two systems are completely interwoven. With 00:17:33.390 --> 00:17:35.269 that moral foundation established, let's turn 00:17:35.269 --> 00:17:37.269 our attention to the text that truly made his 00:17:37.269 --> 00:17:39.890 name famous around the world, The Wealth of Nations. 00:17:40.190 --> 00:17:42.109 Let's do it. So The Wealth of Nations, published 00:17:42.109 --> 00:17:45.269 in 1776, is often called the foundational text 00:17:45.269 --> 00:17:48.289 of modern capitalism. It's a landmark. But before 00:17:48.289 --> 00:17:50.269 Smith even wrote it, he spent this critical period 00:17:50.269 --> 00:17:52.670 touring Europe, which profoundly refined his 00:17:52.670 --> 00:17:55.369 economic thinking. Yes, the path to this book 00:17:55.369 --> 00:17:59.180 was paved with a massive career change. In 1764, 00:17:59.460 --> 00:18:02.579 Smith resigned his professorship, a job he loved, 00:18:02.720 --> 00:18:05.920 for a highly lucrative tutoring position. An 00:18:05.920 --> 00:18:08.440 offer he couldn't refuse. He was hired to tutor 00:18:08.440 --> 00:18:10.539 the stepson of the Chancellor of the Exchequer, 00:18:10.660 --> 00:18:14.019 a young man named Henry Scott, the Duke of Buccleuch. 00:18:14.039 --> 00:18:16.759 And the terms were stunning for the era. 300 00:18:16.759 --> 00:18:19.480 pounds a year plus all expenses and a guaranteed 00:18:19.480 --> 00:18:22.500 300 pounds a year pension for life. That was 00:18:22.500 --> 00:18:25.160 roughly double his professorial income. It's 00:18:25.160 --> 00:18:27.819 the ultimate market success story for the future 00:18:27.819 --> 00:18:29.619 champion of free markets. You could say that. 00:18:29.740 --> 00:18:32.200 And that tutoring job took him across the continent. 00:18:32.380 --> 00:18:34.900 He spent time in Toulouse, then moved on to Geneva, 00:18:35.119 --> 00:18:37.799 where he famously met the philosophical titan 00:18:37.799 --> 00:18:41.119 Voltaire. Later, in Paris, he met another radical 00:18:41.119 --> 00:18:43.329 intellectual, Benjamin Franklin. But his time 00:18:43.329 --> 00:18:45.069 in Paris was probably the most crucial for the 00:18:45.069 --> 00:18:47.630 book, right? I would say so. In Paris, he encountered 00:18:47.630 --> 00:18:50.289 the Physiocrats, a radical French school of thought 00:18:50.289 --> 00:18:53.150 founded by François Quesnay. This group was advocating 00:18:53.150 --> 00:18:55.069 for what they saw as the natural laws of economics. 00:18:55.490 --> 00:18:58.309 Their motto was the essence of early deregulation. 00:18:59.069 --> 00:19:01.529 Laissez faire et laissez passer. Le monde va 00:19:01.529 --> 00:19:04.130 de lui -même. Let do and let pass. The world 00:19:04.130 --> 00:19:07.230 goes on by itself. The ultimate expression of 00:19:07.230 --> 00:19:10.130 laissez -faire economics, born in France. Exactly. 00:19:10.309 --> 00:19:13.009 And Smith was hugely impressed by their work. 00:19:13.109 --> 00:19:16.250 He concluded that physiocracy was perhaps the 00:19:16.250 --> 00:19:18.789 nearest approximation to the truth in political 00:19:18.789 --> 00:19:21.609 economy published so far. They shared this core 00:19:21.609 --> 00:19:24.549 opposition to the dominant policy of the time, 00:19:24.569 --> 00:19:27.680 which was mercantilism. OK, we need to slow down 00:19:27.680 --> 00:19:29.599 and define this opposition because this is the 00:19:29.599 --> 00:19:31.460 intellectual battleground of the wealth of nations. 00:19:31.660 --> 00:19:34.619 What exactly was mercantilism? Mercantilism was 00:19:34.619 --> 00:19:36.960 the reigning economic strategy across Europe. 00:19:37.180 --> 00:19:40.599 The goal was simple. Maximize the nation's supply 00:19:40.599 --> 00:19:43.539 of hard currency, specifically gold and silver. 00:19:43.720 --> 00:19:46.380 So policy was all about getting a massive trade 00:19:46.380 --> 00:19:49.210 surplus. Right. Minimize imports with high tariffs, 00:19:49.349 --> 00:19:52.109 maximize exports, often relying on government 00:19:52.109 --> 00:19:54.569 monopolies and colonial extraction. A state's 00:19:54.569 --> 00:19:56.849 power was literally measured by the gold in its 00:19:56.849 --> 00:20:00.009 vault. Smith saw this as a suffocating and ultimately 00:20:00.009 --> 00:20:03.089 self -defeating policy. And the physiocrats challenged 00:20:03.089 --> 00:20:05.470 this by arguing that wealth came not from hoarding 00:20:05.470 --> 00:20:07.809 gold, but from the productive capacity of the 00:20:07.809 --> 00:20:11.039 land. That's right. But Smith made the crucial 00:20:11.039 --> 00:20:13.839 intellectual leap that really established classical 00:20:13.839 --> 00:20:16.859 economics. He went beyond the physiocrat's land 00:20:16.859 --> 00:20:20.460 -centric view. Smith focused squarely on labor. 00:20:20.680 --> 00:20:23.500 Ah, that's the key distinction. That is it. The 00:20:23.500 --> 00:20:26.700 source of national wealth for Smith was the annual 00:20:26.700 --> 00:20:29.299 produce of its labor, not the amount of gold 00:20:29.299 --> 00:20:31.720 a nation possessed, nor just its agricultural 00:20:31.720 --> 00:20:36.299 output. This reframing laid the absolute bedrock 00:20:36.299 --> 00:20:39.200 for classical economic theory. the labor theory 00:20:39.200 --> 00:20:41.359 of value. And this insight must have been immediately 00:20:41.359 --> 00:20:44.019 compelling. The success of The Wealth of Nations 00:20:44.019 --> 00:20:47.539 when it came out in 1776 was huge. It sold out 00:20:47.539 --> 00:20:49.640 its first edition in just six months. It was 00:20:49.640 --> 00:20:51.539 a sensation. Now, if we look at the classical 00:20:51.539 --> 00:20:53.380 perspective of the book central program, it's 00:20:53.380 --> 00:20:56.059 not really about some abstract invisible hand. 00:20:56.279 --> 00:20:58.119 It's about something much more mechanistic and 00:20:58.119 --> 00:21:00.259 observable. That's right. Classical economists 00:21:00.259 --> 00:21:02.839 correctly argue that Smith laid out his entire 00:21:02.839 --> 00:21:05.640 tangible program in the first few sentences of 00:21:05.640 --> 00:21:08.380 book one. National wealth, he says, depends on 00:21:08.380 --> 00:21:11.920 two things. First, the skill, dexterity, and 00:21:11.920 --> 00:21:14.559 judgment of labor. That's productivity. And second, 00:21:14.660 --> 00:21:18.259 the proportion of useful labor. So minimizing 00:21:18.259 --> 00:21:21.119 workers in unproductive sectors, though he was 00:21:21.119 --> 00:21:23.099 careful to acknowledge that the work of the sovereign 00:21:23.099 --> 00:21:25.960 and the army was definitely useful. And his solution 00:21:25.960 --> 00:21:29.150 for maximizing that first factor? Productivity, 00:21:29.230 --> 00:21:31.809 the engine of economic growth, that is the famous 00:21:31.809 --> 00:21:34.450 division of labor. This is the core operating 00:21:34.450 --> 00:21:37.329 system of his economic model. It is the central 00:21:37.329 --> 00:21:40.349 dynamic. Smith argued powerfully that deepening 00:21:40.349 --> 00:21:42.970 the division of labor breaking production down 00:21:42.970 --> 00:21:46.789 into specialized repetitive tasks leads to immense 00:21:46.789 --> 00:21:50.180 gains. In three ways, right? In three ways. increased 00:21:50.180 --> 00:21:52.619 dexterity, saving time you'd lose switching between 00:21:52.619 --> 00:21:56.140 tasks, and critically, fueling innovation as 00:21:56.140 --> 00:21:58.180 workers and engineers focus on just one specific 00:21:58.180 --> 00:22:00.799 process. And this innovation translates into 00:22:00.799 --> 00:22:03.700 vast compounding productivity increases. Exactly, 00:22:03.859 --> 00:22:05.819 which leads to greater output, which means lower 00:22:05.819 --> 00:22:08.319 prices, and consequently, an increasing standard 00:22:08.319 --> 00:22:10.759 of living for everyone. Smith coined the term 00:22:10.759 --> 00:22:12.960 universal opulence for all ranks of society. 00:22:13.450 --> 00:22:15.950 He argued that the poorest worker in a free commercial 00:22:15.950 --> 00:22:18.829 society lives better than an African king commanding 00:22:18.829 --> 00:22:20.809 thousands of subjects in a noncommercial system. 00:22:21.119 --> 00:22:23.259 That's the continuous growth machine he envisioned. 00:22:23.740 --> 00:22:26.220 Specialized labor leads to lower prices, which 00:22:26.220 --> 00:22:28.819 extends markets, which allows for more specialization, 00:22:29.059 --> 00:22:31.980 which drives more innovation. It's a continuous 00:22:31.980 --> 00:22:35.779 cycle of rising prosperity for all. And his famous 00:22:35.779 --> 00:22:38.579 pin factory example, where one worker doing 18 00:22:38.579 --> 00:22:41.299 separate operations is way less productive than 00:22:41.299 --> 00:22:43.940 10 workers specializing in one operation each. 00:22:44.140 --> 00:22:46.500 That's the classic anecdote that cemented the 00:22:46.500 --> 00:22:49.420 idea in history. It showed the sheer power of 00:22:49.420 --> 00:22:52.289 organization. a raw effort. Okay, this brings 00:22:52.289 --> 00:22:54.509 us to the famous phrase that is now synonymous 00:22:54.509 --> 00:22:58.130 with Smith, the invisible hand. It's often portrayed 00:22:58.130 --> 00:23:01.470 as his central thesis, but as we noted, it only 00:23:01.470 --> 00:23:03.890 appears once in The Wealth of Nations. It does. 00:23:04.069 --> 00:23:06.329 The neoclassical school of economics, which came 00:23:06.329 --> 00:23:08.230 much later and focused heavily on mathematical 00:23:08.230 --> 00:23:11.250 models of supply and demand, they seized on this 00:23:11.250 --> 00:23:13.549 single phrase and elevated it to define Smith's 00:23:13.549 --> 00:23:16.309 entire philosophy. They emphasize the idea that 00:23:16.309 --> 00:23:19.569 individuals pursuing their own gain are unintentionally 00:23:19.569 --> 00:23:22.269 led by an invisible hand to promote an end which 00:23:22.269 --> 00:23:24.849 was no part of his intention, meaning promoting 00:23:24.849 --> 00:23:27.250 the public interest. And this is perfectly captured 00:23:27.250 --> 00:23:29.890 in that famous line about self -interest. It 00:23:29.890 --> 00:23:31.490 is not from the benevolence of the butcher or 00:23:31.490 --> 00:23:33.470 the brewer or the baker that we expect our dinner, 00:23:33.609 --> 00:23:35.789 but from their regard to their own interest. 00:23:36.400 --> 00:23:39.140 We address ourselves not to their humanity, but 00:23:39.140 --> 00:23:42.099 to their self -love. Right. And it's not a moral 00:23:42.099 --> 00:23:44.579 endorsement. It's a pragmatic observation about 00:23:44.579 --> 00:23:47.819 motivation. The system works because we are reliably 00:23:47.819 --> 00:23:50.480 self -interested. And it's so easy for modern 00:23:50.480 --> 00:23:52.619 readers to stop right there and assume Smith 00:23:52.619 --> 00:23:55.380 was just a dogmatic champion of self -interest 00:23:55.380 --> 00:23:58.160 above all else. But that ignores his first book, 00:23:58.259 --> 00:24:00.519 and it ignores what is maybe the most surprising 00:24:00.519 --> 00:24:04.180 detail for modern advocates of pure, unregulated 00:24:04.180 --> 00:24:11.539 free markets. What's that? This point is absolutely 00:24:11.539 --> 00:24:13.759 crucial for understanding the complete Smith. 00:24:14.039 --> 00:24:16.819 He was deeply wary of the self -interested nature 00:24:16.819 --> 00:24:19.180 of merchants when that interest led them to coordinate 00:24:19.180 --> 00:24:21.900 or collude. His suspicion wasn't just a passing 00:24:21.900 --> 00:24:24.630 comment. It was structural. He warned about it 00:24:24.630 --> 00:24:27.569 again and again. He explicitly and repeatedly 00:24:27.569 --> 00:24:30.509 warned of businessmen's inherent tendency to 00:24:30.509 --> 00:24:33.250 form a conspiracy against the public or in some 00:24:33.250 --> 00:24:36.210 other contrivance to raise prices. He saw their 00:24:36.210 --> 00:24:38.970 natural tendency to form cabals or monopolies, 00:24:38.990 --> 00:24:41.869 to fix the highest price which can be squeezed 00:24:41.869 --> 00:24:44.630 out of the buyers. That's a stark recognition 00:24:44.630 --> 00:24:47.390 that the pursuit of gain, when it's unchecked, 00:24:47.599 --> 00:24:50.299 quickly turns predatory. And this deep skepticism 00:24:50.299 --> 00:24:52.380 translates into a powerful, almost suspicious 00:24:52.380 --> 00:24:55.579 warning directed at the government. Smith states 00:24:55.579 --> 00:24:58.660 clearly that any proposed law or regulation that 00:24:58.660 --> 00:25:00.700 comes from manufacturers and merchants. Yes. 00:25:01.059 --> 00:25:03.240 Not always to be listened to with great precaution 00:25:03.240 --> 00:25:05.819 and not never be adopted till after having been 00:25:05.819 --> 00:25:08.279 long and carefully examined, not only with the 00:25:08.279 --> 00:25:10.599 most scrupulous, but with the most suspicious 00:25:10.599 --> 00:25:13.700 attention. That is incredible. He is telling 00:25:13.700 --> 00:25:16.619 the government, in no uncertain terms, to distrust 00:25:16.619 --> 00:25:18.460 any political advice coming from the business 00:25:18.460 --> 00:25:20.480 community because their interests are almost 00:25:20.480 --> 00:25:22.779 certainly contrary to the public interest. He 00:25:22.779 --> 00:25:25.599 wasn't afraid of markets, but he was profoundly 00:25:25.599 --> 00:25:28.500 suspicious of the people running them, especially 00:25:28.500 --> 00:25:30.519 when they were seeking government privilege or 00:25:30.519 --> 00:25:34.319 political favors to distort competition. So the 00:25:34.319 --> 00:25:36.759 pursuit of wealth is only socially beneficial 00:25:36.759 --> 00:25:40.200 in his system when it's strictly checked. Strictly 00:25:40.200 --> 00:25:42.180 checked by the external force of competition 00:25:42.180 --> 00:25:45.059 in the market and by the internal force of the 00:25:45.059 --> 00:25:47.819 impartial spectator in the social sphere. You 00:25:47.819 --> 00:25:50.420 remove those checks and the very self -interest 00:25:50.420 --> 00:25:53.619 he described becomes a public threat. It becomes 00:25:53.619 --> 00:25:56.480 a conspiracy. This makes the question of government 00:25:56.480 --> 00:25:59.839 intervention the next logical step. If he had 00:25:59.839 --> 00:26:02.319 such deep suspicions, how limited did he actually 00:26:02.319 --> 00:26:04.660 think the government should be? Let's move to 00:26:04.660 --> 00:26:07.460 part four to explore Smith's very complex views 00:26:07.460 --> 00:26:10.759 on government, justice, and empire. Okay. For 00:26:10.759 --> 00:26:13.319 a man who is so frequently portrayed as the ultimate 00:26:13.319 --> 00:26:15.640 champion of laissez -faire and minimal government, 00:26:16.099 --> 00:26:18.299 Adam Smith actually spent a ton of time detailing 00:26:18.299 --> 00:26:20.619 the necessary and substantial duties of the state. 00:26:20.799 --> 00:26:23.019 The political caricature of Smith is just as 00:26:23.019 --> 00:26:25.079 simplistic as the economic one. It seems so. 00:26:25.440 --> 00:26:29.099 Absolutely. The modern, often dogmatic idea of 00:26:29.099 --> 00:26:32.279 Smith advocating for this tiny, passive night 00:26:32.279 --> 00:26:35.500 watchman state that just stands by. It's a serious 00:26:35.500 --> 00:26:37.380 misreading of book fee of the wealth of nations. 00:26:38.099 --> 00:26:40.799 That whole book is about the revenue of the sovereign 00:26:40.799 --> 00:26:43.640 and the necessary expenses of the Commonwealth. 00:26:43.880 --> 00:26:46.640 And he outlines four specific duties the government 00:26:46.640 --> 00:26:48.759 must fulfill. These aren't suggestions. They're 00:26:48.759 --> 00:26:51.319 mandates. They are mandates. And the first duty 00:26:51.319 --> 00:26:54.099 is the simplest. The state has to protect the 00:26:54.099 --> 00:26:56.180 society from external violence and invasion. 00:26:56.460 --> 00:26:59.740 National defense. That's the prerequisite for 00:26:59.740 --> 00:27:02.299 everything else. Right. Without security, you 00:27:02.299 --> 00:27:05.140 have no commerce. The second duty is arguably 00:27:05.140 --> 00:27:07.599 the most crucial for making a commercial society 00:27:07.599 --> 00:27:10.099 work. That is the exact administration of justice. 00:27:10.380 --> 00:27:12.859 This means establishing and funding an independent 00:27:12.859 --> 00:27:15.039 court system that can enforce property rights 00:27:15.039 --> 00:27:17.720 and uphold contracts. Without guaranteed justice, 00:27:18.059 --> 00:27:20.869 economic activity just grinds to a halt. The 00:27:20.869 --> 00:27:23.029 third duty is maybe the one that's most often 00:27:23.029 --> 00:27:25.250 overlooked by his modern fans, yet it's a huge 00:27:25.250 --> 00:27:27.369 portion of public spending in any modern state. 00:27:27.549 --> 00:27:30.150 Public works and institutions. This is where 00:27:30.150 --> 00:27:33.390 Smith's pragmatism really shines. He mandated 00:27:33.390 --> 00:27:35.730 that the government must provide public works 00:27:35.730 --> 00:27:38.950 and institutions of such a nature that the profit 00:27:38.950 --> 00:27:41.049 could never repay the expense to any individual. 00:27:41.549 --> 00:27:43.730 So the government has to step in where the private 00:27:43.730 --> 00:27:46.769 profit motive fails to meet a widespread public 00:27:46.769 --> 00:27:50.009 need. Exactly. The obvious examples are the critical 00:27:50.009 --> 00:27:53.130 infrastructure for trade roads, bridges, canals, 00:27:53.130 --> 00:27:55.970 harbors. Smith reasoned that private companies 00:27:55.970 --> 00:27:58.250 might build a profitable road near a big city, 00:27:58.329 --> 00:28:01.230 but they would never build and maintain the massive 00:28:01.230 --> 00:28:03.150 network needed to knit a whole nation together. 00:28:03.529 --> 00:28:06.690 The public benefit is just too great, so it requires 00:28:06.690 --> 00:28:09.650 public funding. And he also included public funding 00:28:09.650 --> 00:28:12.230 for things that build up human capital, right? 00:28:12.269 --> 00:28:14.930 Absolutely. He argued for partial public subsidies 00:28:14.930 --> 00:28:17.450 for elementary education. He recognized that 00:28:17.450 --> 00:28:19.369 the intense specialization from the division 00:28:19.369 --> 00:28:21.930 of labor, while great for productivity, could 00:28:21.930 --> 00:28:24.190 make workers as stupid and ignorant as it is 00:28:24.190 --> 00:28:26.569 possible for a human creature to become. Wow. 00:28:26.710 --> 00:28:29.309 So the state has a duty to counteract that intellectual 00:28:29.309 --> 00:28:32.170 atrophy through public education, promoting basic 00:28:32.170 --> 00:28:35.150 literacy and understanding. And he had a preference 00:28:35.150 --> 00:28:37.069 for how these things were managed. He did. He 00:28:37.069 --> 00:28:39.309 argued they're always better maintained by a 00:28:39.309 --> 00:28:41.829 local or provincial revenue under local administration. 00:28:42.269 --> 00:28:45.329 He favored decentralized control where local 00:28:45.329 --> 00:28:48.069 citizens have a direct stake in oversight. Okay. 00:28:48.109 --> 00:28:51.130 And finally, the fourth duty. Upholding the dignity 00:28:51.130 --> 00:28:53.769 of the chief magistrate, the monarch, or chief 00:28:53.769 --> 00:28:56.700 executive. Basically, making sure the head of 00:28:56.700 --> 00:28:58.960 state is provided for in a style that commands 00:28:58.960 --> 00:29:01.839 respect and maintains political stability. So 00:29:01.839 --> 00:29:04.759 given these four vast, expensive duties, defense, 00:29:04.920 --> 00:29:08.559 justice, infrastructure, the state itself, Smith 00:29:08.559 --> 00:29:11.480 needed a robust, fair way to collect revenue. 00:29:11.680 --> 00:29:14.619 This is where his four famous maxims of taxation 00:29:14.619 --> 00:29:17.579 come in. Still cited today. Equality, certainty, 00:29:17.759 --> 00:29:20.000 convenience, and economy. And the maximum of 00:29:20.000 --> 00:29:22.220 equality is probably the most debated. Smith 00:29:22.220 --> 00:29:24.220 argued that people must contribute in proportion 00:29:24.220 --> 00:29:26.359 to their respective abilities. And our sources 00:29:26.359 --> 00:29:28.859 show he went even beyond simple proportionality. 00:29:28.859 --> 00:29:31.319 He actually suggested a progressive tax structure. 00:29:31.619 --> 00:29:34.960 He did. He stated it very clearly. It is not 00:29:34.960 --> 00:29:37.900 very unreasonable that the rich should contribute 00:29:37.900 --> 00:29:40.920 to the public expense, not only in proportion 00:29:40.920 --> 00:29:43.559 to their revenue, but something more in that 00:29:43.559 --> 00:29:46.759 proportion. Why? What was his justification for 00:29:46.759 --> 00:29:49.730 the rich contributing more? His reasoning was 00:29:49.730 --> 00:29:51.529 rooted in the very nature of civil government. 00:29:51.950 --> 00:29:54.690 The wealthy benefit disproportionately from the 00:29:54.690 --> 00:29:57.970 state's protection. The entire apparatus of justice, 00:29:58.210 --> 00:30:01.849 police, defense, it's largely there to protect 00:30:01.849 --> 00:30:04.609 accumulated property. A poor person has little 00:30:04.609 --> 00:30:07.569 to lose, but a rich person needs the state to 00:30:07.569 --> 00:30:10.109 secure their largest fates and financial holdings. 00:30:10.150 --> 00:30:12.430 Exactly. Since they receive the greatest protective 00:30:12.430 --> 00:30:14.410 benefit from the government, they should pay 00:30:14.410 --> 00:30:17.250 a higher rate for that protection. It's a pragmatic 00:30:17.250 --> 00:30:20.009 argument. And this brings us to a really critical, 00:30:20.150 --> 00:30:23.029 almost radical insight of Smith's that underpins 00:30:23.029 --> 00:30:25.470 his whole justification for government. The link 00:30:25.470 --> 00:30:27.809 between property, inequality and the necessity 00:30:27.809 --> 00:30:30.569 of the state. He saw the societal costs of commercial 00:30:30.569 --> 00:30:33.690 society with unflinching clarity. He knew that 00:30:33.690 --> 00:30:36.670 the very system that creates that universal opulence 00:30:36.670 --> 00:30:39.849 also generates massive inequality. It's the tradeoff. 00:30:40.049 --> 00:30:42.769 And he links the need for a strong government 00:30:42.769 --> 00:30:45.430 directly to that inequality. He does. He wrote, 00:30:45.589 --> 00:30:48.390 wherever there is great property. there is great 00:30:48.390 --> 00:30:51.430 inequality. For one very rich man, there must 00:30:51.430 --> 00:30:55.130 be at least 500 poor. 500 poor for every one 00:30:55.130 --> 00:30:58.029 rich man. That is a staggering ratio. And he 00:30:58.029 --> 00:31:00.269 wasn't afraid to state the conclusion. He concluded 00:31:00.269 --> 00:31:02.710 with a quote that is often minimized or ignored 00:31:02.710 --> 00:31:05.670 by those who champion him as a purely libertarian 00:31:05.670 --> 00:31:09.710 thinker. He said that civil government, so far 00:31:09.710 --> 00:31:11.869 as it is instituted for the security of property, 00:31:12.069 --> 00:31:14.690 is in reality instituted for the defense of the 00:31:14.690 --> 00:31:16.930 rich against the poor. or of those who have some 00:31:16.930 --> 00:31:18.970 property against those who have none at all. 00:31:19.069 --> 00:31:21.609 That is a profoundly critical perspective. It 00:31:21.609 --> 00:31:24.529 sounds almost Marxist. He's viewing the state 00:31:24.529 --> 00:31:26.650 not just as a neutral protector of liberty, but 00:31:26.650 --> 00:31:28.730 as an institution required to manage the social 00:31:28.730 --> 00:31:30.869 conflict that comes from property inequality. 00:31:31.450 --> 00:31:34.690 It shows his vision wasn't utopian. He recognized 00:31:34.690 --> 00:31:37.630 the inherent tensions, and he justified a strong, 00:31:37.769 --> 00:31:40.309 well -funded government as a pragmatic response 00:31:40.309 --> 00:31:43.089 to these perpetual realities. And beyond divested 00:31:43.089 --> 00:31:45.750 policies, Smith also held these surprisingly 00:31:45.750 --> 00:31:50.089 egalitarian views on empire, colonialism, and 00:31:50.089 --> 00:31:53.170 social hierarchy. He was explicitly anti -empire 00:31:53.170 --> 00:31:56.250 and against hierarchy. He fundamentally challenged 00:31:56.250 --> 00:31:58.910 the belief that colonies were necessary for British 00:31:58.910 --> 00:32:01.710 prosperity, calling the whole imperial project 00:32:01.710 --> 00:32:05.039 financially ruinous. So what did he propose for 00:32:05.039 --> 00:32:07.920 the American colonies crisis? He proposed two 00:32:07.920 --> 00:32:10.759 pragmatic solutions. First, grant them immediate 00:32:10.759 --> 00:32:12.920 independence, but maintain a friendly relationship 00:32:12.920 --> 00:32:16.319 based on free trade and maybe a military alliance. 00:32:16.599 --> 00:32:18.519 He thought the cost of defending the colonies 00:32:18.519 --> 00:32:20.480 far outweighed the benefit. He has a second option. 00:32:20.680 --> 00:32:22.720 An imperial federation that would grant full 00:32:22.720 --> 00:32:25.099 political rights, including significant parliamentary 00:32:25.099 --> 00:32:28.079 representation, to the colonists. Either way, 00:32:28.119 --> 00:32:30.720 Smith demanded full equality or full separation. 00:32:31.019 --> 00:32:33.130 He just fundamentally opposed the... unequal 00:32:33.130 --> 00:32:35.369 structure of empire. And this opposition extended 00:32:35.369 --> 00:32:37.910 to human equality in general. Absolutely. He 00:32:37.910 --> 00:32:39.990 was a vocal opponent of slavery. He refused to 00:32:39.990 --> 00:32:42.269 accept that other cultures, like in China or 00:32:42.269 --> 00:32:45.609 India, were inferior to Europe. And his egalitarian 00:32:45.609 --> 00:32:47.829 streak was reflected in his views on common labor 00:32:47.829 --> 00:32:50.410 and knowledge. What did he say about that? He 00:32:50.410 --> 00:32:52.569 famously believed that a common street porter 00:32:52.569 --> 00:32:55.369 was not intellectually inferior to a philosopher. 00:32:55.890 --> 00:32:58.410 The only difference was the degree of habit and 00:32:58.410 --> 00:33:01.710 education afforded to each person. He cautioned 00:33:01.710 --> 00:33:04.049 against the idea that sophisticated science is 00:33:04.049 --> 00:33:07.230 inherently superior to common sense, a deep respect 00:33:07.230 --> 00:33:09.789 for practical expertise. So finally, let's look 00:33:09.789 --> 00:33:12.109 at his posthumous legacy and how the interpretation 00:33:12.109 --> 00:33:14.750 of him has shifted, which brings us back to why 00:33:14.750 --> 00:33:17.529 he's so controversial today. Well, the Bicentennial 00:33:17.529 --> 00:33:20.289 of the Wealth of Nations in 1976 was a massive 00:33:20.289 --> 00:33:23.569 catalyst. Academic interest surged, and critically, 00:33:23.849 --> 00:33:25.930 scholars started seriously reading the theory 00:33:25.930 --> 00:33:28.799 of moral sentiments again. It was only then that 00:33:28.799 --> 00:33:31.279 he was really reappraised, not just as an economist, 00:33:31.319 --> 00:33:33.680 but as the founder of both moral philosophy and 00:33:33.680 --> 00:33:36.460 economics, recognizing the unified nature of 00:33:36.460 --> 00:33:38.940 his system. But his legacy is still highly ambiguous, 00:33:39.140 --> 00:33:41.400 isn't it? It's often used politically to support 00:33:41.400 --> 00:33:44.140 viewpoints he explicitly cautioned against. He's 00:33:44.140 --> 00:33:46.579 been celebrated by free market titans like Alan 00:33:46.579 --> 00:33:49.319 Greenspan and Milton Friedman. Yet, when you 00:33:49.319 --> 00:33:51.519 actually engage with the nuance of his work, 00:33:51.599 --> 00:33:55.339 especially Book V, the picture changes significantly. 00:33:56.240 --> 00:33:58.720 The economist Herbert Stein once argued that 00:33:58.720 --> 00:34:01.119 the qualifications Smith included could actually 00:34:01.119 --> 00:34:03.640 justify a wide range of modern institutions. 00:34:04.079 --> 00:34:06.240 Like what? Institutions like the Food and Drug 00:34:06.240 --> 00:34:08.440 Administration, public utilities commissions, 00:34:08.659 --> 00:34:11.860 or even mandatory employer health benefits, things 00:34:11.860 --> 00:34:14.000 that ensure the basic security of the labor force. 00:34:14.500 --> 00:34:17.219 So those who cite Smith to champion dogmatic 00:34:17.219 --> 00:34:19.500 laissez -faire are often misrepresenting his 00:34:19.500 --> 00:34:22.960 full qualified vision. They are. Smith was skeptical 00:34:22.960 --> 00:34:25.039 of unnecessary government intervention, yes. 00:34:25.500 --> 00:34:27.840 because it often came at the behest of self -interested 00:34:27.840 --> 00:34:31.099 merchants seeking special privilege. But he was 00:34:31.099 --> 00:34:33.820 pragmatically prepared to accept or propose interventions 00:34:33.820 --> 00:34:36.380 when he judged their net effect would be beneficial. 00:34:36.760 --> 00:34:39.460 It's clear, then, that Adam Smith's true genius 00:34:39.460 --> 00:34:42.260 isn't in providing simple rules like less government. 00:34:42.480 --> 00:34:45.059 It's in articulating this complex system where 00:34:45.059 --> 00:34:48.039 human psychology, morality, economic incentives, 00:34:48.119 --> 00:34:50.679 and government structures are all necessary and 00:34:50.679 --> 00:34:53.219 often competing parts of a successful society. 00:34:53.789 --> 00:34:55.889 He refused to explain wealth by divine will. 00:34:56.269 --> 00:34:59.409 He insisted his two books form a single, unified 00:34:59.409 --> 00:35:02.349 philosophy where morality guides economic action. 00:35:02.610 --> 00:35:05.349 And his advocacy for free markets was constantly 00:35:05.349 --> 00:35:07.809 balanced by that deep suspicion of business interests 00:35:07.809 --> 00:35:10.969 and a clear, pragmatic mandate for government 00:35:10.969 --> 00:35:13.210 to provide public works, education, and defense. 00:35:14.210 --> 00:35:17.800 That is the complete Adam Smith. So to wrap up 00:35:17.800 --> 00:35:19.500 this deep dive, we want to leave you with one 00:35:19.500 --> 00:35:21.619 final thought, something for you to mull over 00:35:21.619 --> 00:35:23.880 that really touches on the tension Smith saw 00:35:23.880 --> 00:35:26.380 between the employer and the worker, a tension 00:35:26.380 --> 00:35:28.800 that is still central to economic policy today. 00:35:29.179 --> 00:35:32.000 Smith recognized a fundamental structural inequality 00:35:32.000 --> 00:35:35.260 between employers and laborers, one that dictates 00:35:35.260 --> 00:35:37.320 the balance of power in the market. You put it 00:35:37.320 --> 00:35:40.039 very starkly. A landlord, a farmer, a master 00:35:40.039 --> 00:35:42.059 manufacturer, a merchant, though they did not 00:35:42.059 --> 00:35:44.579 employ a single workman. could generally live 00:35:44.579 --> 00:35:46.460 a year or two upon the stocks which they've already 00:35:46.460 --> 00:35:48.960 acquired. But the workers, many workmen could 00:35:48.960 --> 00:35:51.260 not subsist a week. Few could subsist a month 00:35:51.260 --> 00:35:53.840 and scarce any a year without employment. That 00:35:53.840 --> 00:35:56.280 is the essence of labor precarity. The worker 00:35:56.280 --> 00:35:58.719 has to accept work immediately, but the employer 00:35:58.719 --> 00:36:01.719 can wait months for a better deal. So if the 00:36:01.719 --> 00:36:04.219 essence of Smith's philosophy is that constant 00:36:04.219 --> 00:36:07.480 search for mutual sympathy while pursuing self 00:36:07.480 --> 00:36:09.559 -interest, how much government intervention, 00:36:09.920 --> 00:36:12.780 how much structure like minimum wages or safety 00:36:12.780 --> 00:36:16.880 nets is truly necessary to ensure that the impartial 00:36:16.880 --> 00:36:20.119 spectator, that internal moral guide, can actually 00:36:20.119 --> 00:36:22.500 protect the most vulnerable workers from the 00:36:22.500 --> 00:36:25.360 immediate existential necessity created by the 00:36:25.360 --> 00:36:28.300 self -interested master? The market system delivers 00:36:28.300 --> 00:36:31.380 unparalleled growth. but his structure inherently 00:36:31.380 --> 00:36:34.159 disadvantages those with the least economic leverage. 00:36:34.420 --> 00:36:36.840 Smith acknowledged that. Understanding where 00:36:36.840 --> 00:36:39.300 the purely moral duty of the impartial spectator 00:36:39.300 --> 00:36:41.699 ends and where the protective arm of the justice 00:36:41.699 --> 00:36:44.360 system must begin to restore some degree of bargaining 00:36:44.360 --> 00:36:46.619 equality. That remains the central challenge 00:36:46.619 --> 00:36:49.420 for modern economies that are guided by his principles. 00:36:49.699 --> 00:36:51.920 That is a powerful note to end on. Thank you 00:36:51.920 --> 00:36:54.039 for joining us for this deep dive into the true 00:36:54.039 --> 00:36:56.750 unified legacy of Adam Smith. We hope you feel 00:36:56.750 --> 00:36:58.429 better informed and maybe a little more suspicious 00:36:58.429 --> 00:37:00.650 of anyone who tells you Smith was simple until 00:37:00.650 --> 00:37:01.389 next time.