Adam Smith

Adam Smith and Insurance

Adam Smith did not write about much about insurance but here are some thoughts and quotes that are connected.

Adam Smith on Risk

The contempt of risk, and the presumptuous hope of success, are in no period of life more active than at the age at which young people choose their professions. How little the fear of misfortune is then capable of balancing the hope of good luck, appears still more evidently in the readiness of the common people to enlist as soldiers, or to go to sea, than in the eagerness of those of better fashion to enter into what are called the liberal professions.

I think people miscalculate risk in every corner of investing.  Ego and pride put risk to the side and desire for glory blind them. Look at the investment management of any current insurance company. They put people’s life savings at risk, which will be bailed out by taxpayers.

To Adam smith insurance was good value:

The trade of insurance gives great security to the fortunes of private
people, and, by dividing among a great many that loss which would ruin
an individual, makes it fall light and easy upon the whole society. In
order to give this security, however, it is necessary that the
insurers should have a very large capital. Before the establishment of
the two joint-stock companies for insurance in London, a list, it is
said, was laid before the attorney-general, of one hundred and fifty
private usurers, who had failed in the course of a few years.

Adam Smith insurance, diversification

Adam Smith wrote on diversification:

Many sail, however, at all seasons, and even in time of war, without any
insurance. This may sometimes, perhaps, be done without any
imprudence. When a great company, or even a great merchant, has twenty
or thirty ships at sea, they may, as it were, insure one another. The
premium saved up on them all may more than compensate such losses as
they are likely to meet with in the common course of chances. The
neglect of insurance upon shipping, however, in the same manner as
upon houses, is, in most cases, the effect of no such nice
calculation, but of mere thoughtless rashness, and presumptuous
contempt of the risk.

The message is this:

Diversification is a type of self-insurance

Adam Smith makes a great point that diversification can protect against loss. Why then do so many investment managers ignore this. Sure they use simple diversification, but not true diversification.

Insurance | Wealth of nations

The UK was a seafaring nation. Adam Smith has an interesting commentary on Insurance.

Adam Smith in the Wealth of Nations wrote this on Insurance:

That the chance of loss is frequently undervalued, and scarce ever
valued more than it is worth, we may learn from the very moderate
profit of insurers.

This means people are usually underinsured, at least in 1776. But something else.  People underestimate financial risk.  I agree 100% with this. Look at the stock market or these mortgage securities. People treated these as 100% safe.

Smith on insurance:

In order to make insurance, either from fire or
sea-risk, a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expense of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade. The person who pays no more than this, evidently pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it. But though many
people have made a little money by insurance, very few have made a great fortune; and, from this consideration alone, it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades, by which so many people make fortunes. Moderate, however, as the premium of insurance commonly is, many people despise the risk too much to care to pay it.

Interpretation of Adam Smith an Insurance

I think the above quote on insurance speaks for itself. It is a metaphor for financial risk as a whole.  People do not understand it and play with fire.  I think many insurance companies even risk investment assets.  This amazes me.

Adam Smith

Adam Smith’s view on Government

Government leaders have never read Adam Smith. I am sure of it. At least not in full.  In fact, if bureaucrats and politicians had read Smith they would understand that small government means small problems and big government means big problems. Or in the ideals of our founding fathers, ‘the government that governs least governs best’. But why is this true, what is the basis of this idea?

The Wealth of Nations was published in 1776 at the time of the start of the American revolution. It was the time of the enlightenment for philosophy and political economy.

The idea of the enlightenment was: trust the individual as innately good, support the individual in terms of freedom and education, and the individual will act in positive creative ways that the government could never engineer.

In essence, you personally, the reader are wiser than a politician with regards to your life.  In other words, you personally have the ability to run your life and bring society as a whole, to a greater good, better than a bureaucratic socially engineered solution.

It amazes me there are still people who believe the government can fix problems rather than create them.

When government gets big happiness decreases:  Kings to Socialists

In 1776 it was the Kings and royalty who were impeding the happiness of the common person. They followed mercantilist economic politics and laws that were partial towards and supported the upper class. In today’s world, it is the expansion of government under the guise of a greater common good. However, based on the experience of communism or societies that take the socialist route in contrast to a free market route we know the government’s expansion brings society to a lower social optimum.

Government analysts look at the cost/benefit analysis – Smith looked at overall happiness

Politicians including the local governments and county governments have a modus operandi moving forward with projects that seem to have a benefit to a society based on a cost-benefit analysis or at least sounds good. However, that does not take into account such things as opportunity cost or that private initiative would do it more efficient. They crowd out private opportunities. Therefore, governments universally view the incremental expansion of government as fair and just, however, in reality, it is determinate to society because they are not operating at the optimal. Yes, society might work, but the greatest happiness of the people is not reached. It amazes me people are not aware of this.

  • In other words: Individual people, rather than government acting on their own enlightened self interest is what pushes the frontier of the general good of society as a whole.

Adam Smith pointed out not only in his Wealth of Nations but also the Theory of Moral Sentiments that governments role should be limited to the scope of large projects that at the time of his writing private enterprises did not have the critical level of capital to move forward. Yes, the government has a role, in the world of Adam Smith but was not a solution to human suffering or the fundamental problem of economics, scarcity.

Smith was a Classical political economist (Mill, Locke).  These ideas were subsequently developed by Neo-classical economists during the marginal revolution (Marshall, Jevons) and transformed into a political prescription by Libertarians and Austrian economists (Menger, Walras).  Keynesians challenge this premise, however, they are incorrect and an example is concisely described in the Grand Failure (Zbigniew Brzezinski).

  • People acting on their own enlightened self interest are contrary to the general good of society as a whole.
Homesteaders growing their own food instead of relying on the government.

Adam Smith pointed out just the contrary. Smith said when you give people freedom, economic freedom which means no or low taxes, because people are good in nature, people will do things unconsciously for the greater good.  The government’s idea is people are bad by nature or at least do not trust that people can find their own solutions to problems, and the government must take action and make the choice how to spend your money or the greater good will suffer.

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 interest.  Adam Smith  – Wealth of Nations

Smith’s message is people know how to spend their own money better than the government does. The government’s message is big government is needed to create a Utopian social state.

Adam Smith was not a laissez-faire anarchist. Rather he prescribed limited government and trust in the actions of the enlightened self-interest of individuals rather over the government to guide the market to equilibrium.

The government should limit its activities to administer justice, enforcing private property rights, and defending the nation against aggression.

Adam Smith approve of limited public works that elevated and educated the population.

Three main roles of government in Adam Smith:

  • Protect the country from foreign invasion

The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies, can be performed only by means of a military force. But the expense both of preparing this military force in time of peace, and of employing it in time of war, is very different in the different states of society, in the different periods of improvement. The Wealth of Nations, Book V, Chapter 1, Part 1).

  • Protect people from injustice from within the country

The second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice, requires two very different degrees of expense in the different periods of society. (Wealth of Nations, Book V, Chapter 1, Part 2).

  • Provide culturally positive efforts from public works to schools

The third and last duty of the sovereign or commonwealth, is that of erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual, or small number of individuals; and which it, therefore, cannot be expected that any individual, or small number of individuals, should erect or maintain. The performance of this duty requires, too, very different degrees of expense in the different periods of society. (Wealth of Nations, Book V, Chapter 1, Part 3).

Throughout Adam Smith’s writings, we see reference to:

  • Provide for the common defense
  • Education of the Youth
  • Copyrights and patents of fixed duration
  • Police for the preservation of freedoms and against corruption
  • Regulation of paper money
  • Enforcement of contracts
  • Usury laws on banking and interest
  • Post office
  • Coinage and mint
  • Maintain low to no debt of the government
Correlation between the sizes of the government and societal happiness.

Advice from an Economics professor

My recommendation if you want to consider Adam Smith and the government, view it in the context of the time. Also see Smith’s work, not as the Bible of Capitalism but rather, the beginnings of an understanding of how markets come to equilibrium, this includes government action, like the Keynesian. It is easy to beat the drum of the free market by just gazing at the sky and invoking the name of Adam Smith in an argument, and say Aha, you won the debate you are engaged in. However, my advice is to see his work as a primary source document that others expanded on. There is a certain purity in his writing because of the time, and simplicity of the economy compared to today. See if you can find a new prescriptive on his writing that others have not seen and related it to modern economic theory on government intervention vs individual initiative.

Adam Smith

Adam Smith – How to Make Money

Adam Smith: virtue + self-interest = success

Adam Smith wrote about economics, but also self-actualization.  If you are going to study about making money, why not meditate on the wisdom of the ‘father of economics’, he spends his whole life thinking about the subject. He was not exactly a self-help guru,  and he wrote in verbose 18th century English. Smith’s writings were about individual action guided by moral philosophy and its effect on the whole of society in aggregate. However, if you read works he has insights about how to achieve success, in a way that is contrary to modern wisdom on the subject. I prefer him over most  21st century writers on how to make money.

If you want to know how to make money, consider the works of Adam Smith.

This place of Adam Smith’s birth – Kirkcaldy, The place of his education – Glasgow, the place of his teaching – Edinburgh from left to right.

When speaking about the economy as a whole Smith was concerned with how our individual decision come together and create the world we see around us. Therefore, your individual decisions are important in shaping the world. This hippie talk of the 1960s and its echoes of it today really is true.

If you want to change the world start with your actions, change it on a small scale, on a local scale and it will reverberate through the collective unconsciousness of society. Your choices are the lifeblood of the world. His advice was to make your choices based on self-interest guided by something higher, an enlightened understanding of virtue and understand why you make choices and what motivates you and others.

My premise is if you increase this awareness, about how people interact and exchange in society, it can help you make money. You will be thinking not just about the generation of income, but more about satiating a demand that people will love you for, and this often equates to rewards in the market. It is basically a shift in focus away from monetary reward towards self-actualization that has the unintended consequence of wealth.

I know it is hard to do. You have to pay the bills and you need money fast. However, if gain a greater awareness of what motivates people, you can develop ideas that align with your talents to offer something profitable.

Therefore, Adam Smith’s books The Theory of Moral Sentiments (1759), and An Inquiry into The Nature and Causes of the Wealth of Nations (1776), were books not only about economics but also guide to how to live a good happy life.  In summary, The Theory of Moral Sentiments was about virtue and The Nature and Causes of the Wealth of Nations was about money. Virtue plus money is a winning combination in life.

The Theory of Moral Sentiments was about reminding the reader why we act as we do

Many people who have not read The Theory of Moral Sentiments believe Smith was about capitalism, self-interest, and pursuit of happiness through economics means. Words like greed and selfishness have negatively been attributed to his works. This is a misinterpretation that puzzles me.

If you want your money making life to go well, take Adam Smith’s advice, to strive to be loved and lovely.

Adam Smith was a moral philosopher. He addressed questions about life, and how the Great Architect designed the universe, using terms of the enlightenment. He observed and deducted.

Man naturally desires, not only to be loved but to be lovely; or to be that thing which is the natural and proper object of love. – TMS Chapter II

This is in contrast to what we think about utility maximization, utility function, preference curves, demand curves. It was this innate desire to be loved and respected in a human way, rather than a monetary way, which the Great Architect encoded in our DNA. This desire to be love is a driving force in human action. It is not the same as being famous in a Hollywood way, rather, to be admired in a virtuous, altruistic way, even if the expression of your labor is through the market place.

Therefore to achieve success, in  The Wealth of Nations Smith believes each person should pursue their self-interest, but this was enlightened self-interest.

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 interest.

What this means was something else than what is attributed to Adam Smith. It is not about pure greed, but if you read the totality of his writings, you realize it is about self-actualization.  The butcher, the brewer, and the baker are doing this works because they enjoy it, it makes them happy, they have a talent for it, and it contributes to society. They enrich their lives and the world around them.

Recreate the world around you, through enlightened self-interest and virtue and the world will be a better place.

Adam Smith did not recommend the relentless pursuit of wealth, but rather the relentless pursuit of virtue and service to others in ways that you are free and fit to do and the economic rewards of the market will enrich you.  It is not just a do what you love and the money will follow, it is doing what you love, yet in a benevolent way and use your clever mind to find ways to profit. Become intimate with the market, prices and the way it operates and you will have an edge. Think about economic ideas like opportunity cost and margins and you will have an advantage over your competitor.

The unintended consequence of freedom is the Wealth of Nations and your personal wealth.

  • Take away is: pick a way to make money which you are passionate about but also helps others so you will be loved. Do not think about just selling something on eBay or getting a job in government because of the benefits, or a job in banking because it pays, rather be creative and compassionate. Think of something that really helps people.  For example, better would be creating homes with new building material that is inexpensive and non-toxic so struggling families can have inexpensive quality housing.

An unintended consequence of virtue might also be personal wealth if you are honest with yourself and do not deceive yourself.

This self-deceit, this fatal weakness of mankind, is the source of half the disorders of human life. – Theory of Moral Sentiments III.4.6 158

You need to be honest about your passions and ways in which you can market this to others.

His writings are a combination of Dale Carnegie’s How to Win Friends and Influence People and someone modern Zen businessman guru that says ‘do what you love and the money will follow’.

Virtues of Wealth

The man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence, may be said to be perfectly virtuous. – TMS III

If you act according to so some basic virtues, you will be loved by others, you will lubricate the wheels of business, maybe negotiate better terms of trade, have repeat customers, get better reviews on the web and feel good about yourself. It can not be a false virtue of smiling to the customer, but rather, and true transformation of self.

  • Take away: If you are virtuous in an authentic way, the business would open the door for you, you could never get from a self-help book.

These are the virtues Adam Smith recommends:

  • Propriety – Meeting the expectations of the people you interact with. Not shocking them or surprising them in a negative way. This seems like an outdated virtue. This virtue includes modesty in financial success. You would share this with a close family member but not someone that it would create jealousy with. People today do not understand propriety as it is more the 18th-century expression. It is proper behavior. I think Adam Smith’s virtue of Propriety is to be equated with authentic humility.
  • Prudence – Spending your time wisely and taking care of yourself well. Do not be on snap chat and Tinder, gadgets, rather think about how you spend your time.  Smith said to be on guard against “frivolous trinkets of utility”. Adam Smith used the watch for example. He noted that people had more expensive watches were not more punctual. Be prudent in your expenditures and in your use of time and things. A specific example in my life is I have a large organic garden. Instead of spending money on soil and mulch, I ask tree companies for free wood chips, that I subsequently use for much and compost. If you are prudent you can find ways to do things for less.
  • Justice – There is social justice and personal. Basically, this does not harm others when you look at this on a personal level. Do not steal or hurt others physically.
  • Benevolence – This means I am going to help others.  Smith calls this virtue ‘lose, vague and indeterminate’, it is harder to do, but generally be helpful to those around you. I think Google initially said ‘do no harm’ and now has said they want to ‘do good’. This is a specific example in the business of Justice and Benevolence in operation in the business. It is debatable if they do that, but generally yes.
Be prudent in your use of things and time – Adam Smith’s recommendation. With foresight, he used the newest watch as an example.

Adam Smith the Deist

Adam Smith believed the Creator put worry about what other people think of us, to guide and shape civilization in a positive way. If this was not in there we would simply pursue selfish activities. Remember Smith was a Deist (debatable), rather than a Christian. So he was writing about enlightenment God of the philosophers, rather than a religious call for transformation. He did not set out to create another Bible, but rather on his observations of what worked in the realm of business. Since he grew up in the Church of Scotland, Smith’s writings basically align with Christian virtues in his Theory of Moral Sentiments, just the ones with an economic effect.

Therefore, want to actualize ourselves not just in purely self-driven ways, but ways that are within the parameters of society’s recognition, will make others feel good and you feel good as that is the way the Great Architect designed it.

The Paradox of virtue – If you step back for a moment this will more often than not align with monetary reward, however, this can not be your goal or your virtuous goal of self-actualization would be a false pretense. Rather your mantra in once sense should be: ‘virtue is its own reward’.

It is a hard message to swallow in a time when self help gurus in their homilies are tell you to go for the gold. Further, many people claim you have to cheat or be ruthless to get ahead. I would say I know a lot more software engineers who have a nice life, than bank robbers, or corrupt bankers.

To make money with inspiration from Adam Smith – look at how nations generate wealth

Plato wrote about a city-state, a country that was ruled by a philosopher-king.  This was a metaphor for a man, a man ruled by his sense rather than his appetite drives.  Adam Smith wrote about nations and countries and an optimal way for countries to get wealthy.  From this, you can also extrapolate to your own personal situation based on the system in which countries get rich.

Adam Smith’s countries make money by creating something of value.  Actually creating something, not just services.  The Austrian economists did not agree with Smith on this point.  Austrian economists believed services were an integral part of the whole production process.

However, lets start with Adam Smith.  Smith’s basic idea was a county should create something and sell it internally or externally, something of value.  So what does that mean for you? It means that you should not focus on ‘how to get rich quick’, how to make money on the Internet’ by selling someone else’s product, you yourself need to produce, to create to make something of value.

So how do Adam Smith’s writings translate into personal wealth?

Choose a passion that you think will benefit yourself and others.  For example, you might want to skip traditional career methods.  Entrepreneurs statically make the most money. Then choose something you are passionate about.

Jean-Martin Fortier –  With his wife he has developed a bio-intensive form of organic agriculture that is profitable on just over an acre. He has enriched those around himself and his family.

Linus Torvalds  – who championed Linux, with his passion for the kernel he developed an operating system that is used as the basis of much of computing today. He also personally has enriched his life.

Cressida Cowell – transformed her childhood fantasies and imagination when living on an island in the North Atlantic into captivating stories about Vikings and Dragons.

Lauren Daigle  – who has a deep sultry voice, yet she sings music about the message of God.

Mark Biernat – That is me, your humble author, I am writing a language program for the Amish language. It is a fusion of my passion for languages, technology, the Amish and American culture. I am not counting the money, rather, focused on creating something of quality for others to enjoy.

God gives each of us a gift. With the freedom that exists in the world today, and a basic educational structure, anyone can transform their lives into the service of others by pursuing their enlightened self-interest, which is self-interest that is aware and conscious of the world around you.

If you want rags to riches story, I believe you can build off Adam Smith’s insights and economic theory, to make your own personal life wealthy in an honest way.

Adam Smith

Adam Smith’s Philosophy

Adam Smith was a Scottish moral philosopher with noteworthy contributions to political economy relating to how individuals make the market economy and free trade. However, at the core of his thinking, he was driven by a moral conviction to find how to improve society in a just way.

He is considered the father of modern economics, but remember he was a Professor of Moral philosophy. His economics ideas and prescriptions had a moral philosophical basis.

Adam Smith was part of the Scottish enlightenment. The enlightenment was based on the idea that individual action with a high degree of political and social liberty creates a just society. People acting on their own enlightened self-interest bring society to an equilibrium level which social engineering or government action could never achieve, in fact, to try to do so would be counterproductive.

Adam Smith’s two works were: The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776).

There is a clear evolution of the philosophy of Adam smith from this early writing’s to his latter

In his Theory of Moral sentiments – human action is weighed heavily on the human emotion of sympathy, compassion, and empathy. Sin Qua non (Sympathy) – was the center of Smith’s initial moral thinking. It was a desire to see our feelings “echoed in other people” (Adam Smith). We do things in order to be liked.

We should strive to be loved and to be lovely – Smith TMS

We as social creatures want to follow a moral path so we as a species would continue and survive. Geneticists today, believe this altruism is programmed into our DNA, so the human race can survive.  Smith concluded through observation the same. This desire to be liked keeps us in check, and in one sense is our moral compass. We though self-awareness check to see how we are in relation to others.

It is this desire to be like Adam Smith thought, helps guide morality.

In the Theory of Moral Sentiments (I.i.1.1) Adam Smith writes:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it.

A wealth of Nations contrasts the above and see human motivation based on enlighten self interest. That is an interest that is tempted by prudence or awareness of others in a sympathetic way. Smith believed that this principle comes from us from the wombs” ( Wealth of Nations II.iii28). It is innate. Therefore, you need to understand the philosophy of Adam Smith in the context of both his works or you will make inaccurate assumptions about this theory. It is not selfish greed, but an innate interest that drives us towards doing works unconsciously for the greater good under the veil of satiating our need for happiness and greater utility.

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 interest.

Like Plato Smith tried to answer the question: “is there a true altruist”. I believe yes, (like Smith) because it is the way we act out our self-interest that determines who we are.

I believe Smith was driven by a true belief in the goodness of individuals coupled with an altruistic desire to discover a way government and individuals could interact in a political and economic way that would be society as a whole to equilibrium that maximizes the happiness of the individual. Although the Theory of Moral Sentiments was his first book, he revised it later in his life.  It was the book he started with and continued to come back to. He does say she should pursue wealth and fame, in fact, be believed these things would corrupt us. His two works see like a dichotomous paradox. However, they are not if you understand his philosophy as a whole.

Self-interest is an enlightenment sense is what drives the human race to better itself.

An eccentric Professor of Moral Philosophy

Smith was thinking about the individual and they are well being. As a professor and head of moral philosophy at the University of Glasgow, there is no way Smith was anything but conscious thinking, good human being.  Russ Roberts calls him the Jane Austen of economics. His simple life, endearing eccentricities and all (talking to himself, his imaginary friends as well as his absentmindedness), was dedicated to thinking about how humans could maximize happiness and live and moral life.

Often people decree free markets and all they stand for as the root of all evil, with greed being basis. Similarly, on the other side, people use Adam Smith’s works as a Bible to take self-interest to a level that Smith would have opposed.

The middle ground is correct. Adam Smith was looking for a positive enlighten solution to help nations develop and lessen suffering among people. His philosophy was rigors and although lacking in certain aspects was essentially correct.

He develops Hume’s philosophy of utility and applied it to economics.

Adam Smith Religious views

Smith was raised as a moderate Christian and in the Church of Scotland. In his scholarly writing, he made reference to Great Architect of the Universe. It is argued and I agree that his writings were to find the natural order and harmony of the Great Architect of the Universe in moral philosophy and political economy. His writings were an inherent theology.

The four interpretations of his philosophy.

Four academic understandings of Smith’s  Wealth of Nations developing from Theory of Moral Sentiments

  1. The political approach – The key social virtue of justice was stressed with the government’s role limited to balance morals and economics in an optimal way for society. (J.W. Danford 1980, Knud Haakonssen 2006)
  2. The economic approach – Represents economic thinking and the issues with government intervention. Morals are not a central theme. (James E. Alvey 1998, WD Grampp in 2000). References I recommend for the economics of Smith are: Markets and morals  and Ethics in the market
  3. The moral approach -It was his moral philosophy that guided his economic and political views. (Charles L. Griswold 1999, Ryan Patrick Hanley 2011) I recommend Adam Smith and the Virtues of Enlightenment
  4. The principle approach – Moral, economic and political philosophy of Adam Smith could be distilled down to one idea, the invisible hand (Mehta 2006) Principles in Smith’s Economics
  • Good and evil fascinated Smith. He overturned the idea that morality was something that was objective, rather he said it was something that was inside ourselves. Smith lectures early in this career, “How do human beings develop a sense of morality” This is why I believe the moral approach is the most accurate interpretation of Smith if you examine his works in totality.

Enlighten self-interest and the idea of sympathy
Four ideas on Adam Smith’s ethical thinking
How morals shape economics

If you read Adam Smith and the Virtues of Enlightenment by Charles L. Griswold you will see a convincing argument that Smith was a moral and ethical philosopher first. The time of the enlightenment with Hume, Burke, Kant, and Hegel, was a time of passionate interest in morality, religion and truth, this went well beyond the thinking of such earthy temporal thoughts as government and economics.

The assertion that the central guiding idea of the invisible hand and all his other writings are a footnote of this idea is an oversimplification. This hand is out of content. Study his philosophy and you will understand the father of economics.

Many people have dragged the idea of the free market, and even the good name of Adam Smith through the mud recently.  It is trendy to say that capitalism does not work fully.

In a nutshell, Adam Smith’s lived a life of virtue and intellectual pursuit.  Perhaps a Deist and at least a man of ethics and a man of the enlightenment, Smith tried to explain why some people are rich and others are poor.  He wanted to explain the reason for poverty, and suffering caused by a material lack.

His books contained nothing about greed or materialism.  Adam Smith’s works do not praise the virtue of selfish like Ann Rand’s books. Smith is very different than Rand but the two get lumped together.

Rather the works of Smith are about the role of work are in our society. Work is about adding value to others.  Our work is our service to other people. Smith’s work was not about greed, but rather it was simply a discourse on the causes of wealth and poverty, and a prescription to alleviate the suffering caused by the lack,  written between the lines.

Recommendations on how to help the world, starting with yours

Adam Smith believed when everyone acts on their own enlightened self-interest, society as a whole benefit.  Everyone gets more pie.  When the government has more control people will suffer more and get poor. People should work to contribute to others and they will reap rewards themselves as will society.

This means poverty can be alleviated for society in aggregate when people realize that each person has the ability to contribute to society. He believed men are good in nature. Read more about this on Adam Smith and work

I live in Eastern Europe and I see what the government does to people.  My recommendation is if you are feeling sorry for others and want to help them,  read the books of Adam Smith.   If you feel bad about your personal economic situation in life, read Adam Smith.  Contained in his books was nothing about greed or malice, only goodness towards humanity.