Avoiding Mistakes About Adam Smith’s Wealth of Nations

I teach my business ethics students that in order to understand ethical issues in the world of commerce, you need to understand a little bit about markets, about modern corporations, and about the role of management. And for practical purposes, understanding the role of markets begins with the work of Adam Smith.

Adam Smith’s 1776 masterpiece, An Inquiry into the Nature and Causes of The Wealth of Nations, is undeniably one of the most important works of the last several centuries. But it is easily misunderstood.

Smith himself, of course, was a star. He was to economics what Darwin was to evolutionary biology: he didn’t invent the field, but the insights he had, and the way he synthesized what was known about the topic during his time, had a revolutionary impact. And while economists regard Smith as the grandfather of economics, philosophers regard him as an important moral philosopher of the Scottish Enlightenment period.

Regardless, Smith is often misunderstood. Smith is sometimes seen (both by fans and by detractors) as being a hardcore defender of unfettered markets. The truth is of course much more complex than that. In Wealth of Nations, Smith does rail against certain kinds of government interference in trade — he believes that, for the most part, people’s economic decisions should be made under conditions of what he calls “natural liberty.” In particular, he has harsh criticism for any government policy that limits or distorts trade in an attempt to protect the interests of a particular class of merchants (at the expense of the general population). In other words, Smith is against crony capitalism — a practice that very few today would openly support, in spite of how common it might, regrettably, be.

But Smith also evidences a strong mistrust of business. The Wealth of Nations includes many critical passages, but perhaps the most famous such passage is this: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.” If you think Smith was an unabashed admirer of business and businesspeople, you’re wrong.

But there’s another, much more basic way to end up misunderstanding Smith, and that’s to literally misunderstand the words he uses.

I recently made an effort to help with that problem, by writing what I believe to be the most extensive Glossary for The Wealth of Nations ever published for free online. Why a glossary? Smith after all was a relatively clear writer. But he was writing in the mid- to late 18th Century, and the English language was a bit different then. So some of the words Smith uses in Wealth of Nations are not in current usage. Almost no one would use the words artificer, or higgling, or manufactory today — and certainly not in everyday conversation. Other words Smith uses may seem familiar, but were used very differently in Smith’s time than in ours. For example, Smith uses the verb to afford to mean to yield or to produce, rather than meaning to be able to pay for something. He uses the word anciently where we would simply say previously or formerly. And when Smith refers to carriage, he’s not talking about a horse-and-carriage, but what we would call simply shipping (whether by land or by sea). Those are just a few examples. But the net result is that the average reader (or even a very educated one) can easily misunderstand many of Smith’s sentences, or even entire passages. And that’s a shame.

My hope is that — for students, at least, but perhaps also for others — my Glossary will help. If you find it useful, please feel free to share. If you find errors or important omissions, please let me know (at [email protected]) .

Here’s the link: Glossary — Adam Smith’s Wealth of Nations.