The Founder of Economics

Adam Smith was born in Kirkcaldy located to the north of Edinburgh in the year 1723. Adam Smith was to become the first political economist the world had ever known. He was to take his place at the head of the first school of economics, one that continues and is known as the "classical school." In 1740, at the age of seventeen, Smith was sent off to Oxford on scholarship.

In 1751, at age twenty-eight, Adam Smith became a professor of Logic at Glasgow. It was his first academic appointment. Smith was a curious human being. He treasured his library, and was continually absorbed in abstractions; he was notoriously absent-minded. Smith led a quiet and sheltered life; he lived with his mother (she lived to be ninety) and remained a bachelor all his life. Though silent and awkward in social situations, Adam Smith possessed, in considerable perfection, the peculiarly Scotch gift of abstract oratory. Even in common conversation, when once moved, he expounded his favourite ideas very admirably. As a teacher in public he did even better; he wrote almost nothing, and though at the beginning of a lecture he often hesitated, we are told, and seemed 'not to be sufficiently possessed of the subject,' yet in a minute or two he became fluent, and poured out an interesting series of animated arguments. Adam Smith acquired a great reputation as a lecturer.

Some time later he became a tutor to a wealthy Scottish duke. Then he received a grant of 300 pounds a year. It was a very big sum, 10 times the average income at that time. With the financial security of his grant, Smith devoted 10 years to writing his work which founded economic science. Its full name was ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ It was published with great success in 1776.

The Wealth of Nations opens with a description of the specialization of labour in the manufacture of pins; the book covers a variety of subjects: from the professorships at Oxford to the statistics on the herring catch since 1771; from stamp duties to the coined money used by the Romans. The book is full of detail. What Adam Smith did in his book was to explain how self-interest was the engine of the economy and competition its governor. He set forth the great lesson that all economists come to sooner or later. Robert Heilbroner wrote: “First, he [Adam Smith] has explained how prices are kept from ranging arbitrarily away from the actual cost of producing a good. Second, he has explained how society can induce its producers of commodities to provide it with what it wants. Third, he has pointed out why high prices are a self-curing disease, for they cause production in those lines to increase. And finally, he has accounted for a basic similarity of incomes at each level of the great producing strata of the nation. In a word, he has found in the mechanism of the market a self-regulating system which provides for society's orderly provision.”

On July 17th, 1790, Adam Smith died at Edinburgh; he was buried in the Canongate churchyard.

B.

David Ricardo (1772–1823)

David Ricardo was born on 19 April 1772 in London. He was the third son (out of seventeen!) of a Dutch Jew who had made a fortune on the London Stock Exchange. At the age of fourteen, after a brief schooling in Holland, Ricardo's father employed him full-time at the London Stock Exchange, where he quickly acquired a knack for the trade. At 21, Ricardo broke with his family and his orthodox Jewish faith when he decided to marry a Quaker called Priscilla Anne Wilkinson; Ricardo then converted to Christianity. His family disinherited him for marrying outside his Jewish faith.

Ricardo had to establish his own business. He continued as a member of the stock exchange, where his ability won him the support of an eminent banking house. He did so well that in a few years he acquired a fortune. This enabled him to pursue his interests in literature and science, particularly in mathematics, chemistry, and geology.

He became rich in a very short time. When he died, his estate was worth over $100 million in today's dollars.

In 1799 he read Adam Smith’s Wealth of Nations and got excited about economics. So for the next ten years he studied economics. Bright and talkative, Ricardo discussed his own economic ideas with his friends, notably James Mill. But it was only after the persistent urging of the eager Mill that Ricardo actually decided to write them down. In 1809 he wrote that England's inflation was the result of the Bank of England's propensity to issue excess bank notes. In short, Ricardo was an early believer in the quantity theory of money, or what is known today as monetarism.

In 1814, at the age of 42, Ricardo retired from business and took up residence at Gatcombe Park in Gloucestershire, where he had extensive landholdings. In 1819 he became MP for Portarlington. He did not speak often but his free-trade views were received with respect, although they opposed the economic thinking of the day. Parliament was made up of landowners who wished to maintain the Corn Laws to protect their profits. In 1815 Ricardo responded to the Corn Laws by publishing his Essay on the Influence of a Low Price of Corn on the Profits of Stock, in which he argued that raising the duties on imported grain had the effect of increasing the price of corn and hence increasing the incomes of landowners and the aristocracy at the expense of the working classes and the rising industrial class. He said that the abolition of the Corn Laws would help to distribute the national income towards the more productive groups in society.

In 1817, Ricardo published Principles of Political Economy and Taxation in which he analyzed the distribution of money among the landlords.

David Ricardo formalized the Classical system more clearly and consistently than anyone before had done. For his efforts, he acquired a substantial following in Great Britain and elsewhere – what became known as the "Classical" or "Ricardian" School. His system, however, was improved very little by his disciples. Perhaps only John Stuart Mill (1848) and Karl Marx (1867–94) added insights of any great weight.

He died on 11 September at Gatcombe Park (which is now the home of the Princess Royal and her family). He was 51.

C.