Adam Smith

Who was 'Adam Smith'

Adam Smith was an 18th-century philosopher and free-market economist famous for his ideas about the efficiency of the division of labor and the societal benefits of individuals' pursuit of their own self-interest. In his first book, The Theory of Moral Sentiments, Smith proposed the idea of the invisible hand, or the tendency of free markets to regulate themselves by means of competition, supply and demand, and self-interest. Smith is also known for his theory of compensating wage differentials, meaning that dangerous or undesirable jobs will tend to pay higher wages to attract workers to these positions. Smith died in 1790.

BREAKING DOWN 'Adam Smith'

Smith is famously quoted as saying in his 1776 magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest." Smith's ideas form the foundation of laissez-faire economics.

RELATED TERMS
  1. Self-Interest

    Acting in the way that is most personally beneficial. Adam Smith, ...
  2. Invisible Hand

    A term coined by economist Adam Smith in his 1776 book "An Inquiry ...
  3. Labor Theory Of Value

    An economic theory that stipulates that the value of a good or ...
  4. Social Entrepreneur

    A person who pursues an innovative idea with the potential to ...
  5. Mechanism Design

    A branch of microeconomics that explores how businesses and institutions ...
  6. Daniel Kahneman

    A professor emeritus of psychology and public affairs at Princeton ...
Related Articles
  1. Entrepreneurship

    Adam Smith And "The Wealth Of Nations"

    Adam Smith's 1776 classic may have had the largest global impact on economic thought.
  2. Economics

    Economist Guide: 3 Lessons Adam Smith Teaches Us

    Learn three critical lessons about economics from 18th century philosopher Adam Smith, considered by many to be the father of economics.
  3. Economics

    Understanding Self-Interest

    Acting in one’s self-interest means to act in the way that is the most personally beneficial.
  4. Economics

    Adam Smith's Legacy

    Adam Smith popularized many of the ideas that created classical economics.
  5. Economics

    What does "Invisible Hand" Mean?

    Invisible hand is a reference to a famous metaphor used by economist and philosopher Adam Smith in his classic 1776 book entitled “An Inquiry into the Nature and Causes of the Wealth of Nations.”
  6. Investing News

    Box Inc: How Two Best Friends Launched a Potential Empire (BOX)

    Learn how Aaron Levie and Dylan Smith, along with other childhood friends, came up with the idea for Box Inc. in a backyard hot tub.
  7. Investing News

    Smith & Wesson Q3 Results Crush Targets (SWHC)

    Having now beaten Wall Street's targets in twelve straight quarters, Smith & Wesson continues to fire on all cylinders.
  8. Investing News

    Smith & Wesson Target Raised to $32 by Wunderlich (SWHC)

    Thanks to stronger-than-expected gun sales, Smith & Wesson may shoot through its new price target in a relatively short period of time.
  9. Investing News

    What to Expect From Smith & Wesson's Earnings (SWHC)

    Smith & Wesson, which recently raised its business outlook, has been firing on all cylinders for quite some time.
  10. Investing Basics

    Can Smith & Wesson Survive Gun Control?

    We look at the past, present and future of this iconic American company.
RELATED FAQS
  1. What does the term 'invisible hand' refer to in the economy?

    Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern ... Read Answer >>
  2. How does the invisible hand affect a capitalist economy?

    Take a deeper look at how the invisible hand of the market works and why it is so crucial for understanding how capitalist ... Read Answer >>
  3. Who coined the term "entrepreneur"?

    For one, it wasn't Adam Smith. One person strangely overlooked in Smith's free market masterpiece, The Wealth of Nations, ... Read Answer >>
  4. Who discovered the law of supply and demand?

    Learn how the law of supply and demand affects the economy. This important economic principle is hundreds of years old but ... Read Answer >>
  5. What is the affect of the invisible hand on consumers?

    Discover how consumers help initiate and benefit from the invisible hand of the market, which naturally coordinates trade ... Read Answer >>
  6. How is the invisible hand affected in a communist or socialist economy?

    Discover why the invisible hand of the market is compromised by socialist and communist economies, where the government controls ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center