The Competitiveness of Nations

in a Global Knowledge-Based Economy

Harry Hillman Chartrand

April 2002

Herbert F. Thomson


Quarterly Journal of Economics,

79(1), May 1965, pp. 212-233

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Introduction                                                                                              212

I. Characteristics of Smith’s early work on scientific methodology         214

II. Motives for philosophical inquiries                                                     215

III. The aesthetic element in Smith’s standard of judgment                     219

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IV. Psychological presuppositions of Smith’s scientific method             222

V. The selected analogy as the organizing principle of a science              223

VI. Smith’s “Moral Newtonianism” and “Historical Aristotelianism”    225

VII. Adam Smith’s purpose in the Wealth of Nations                              229


Adam Smith’s reputation has been so firmly established as an economist and moral philosopher that there has been little curiosity about his important contributions to other fields of thought.  Some attention has, it is true, been given to the Theory of Moral Sentiments as a clue to Smith’s intention in the Wealth of Nations; but it has usually been concluded that any comparison of the philosophy of these two works raises more problems than it solves.1  Smith’s other works, including his published classroom lectures and his youthful writings on language, belles-lettres, and scientific method, have been almost completely neglected.  It appears particularly unfortunate that Smith’s History of Astronomy, in which he presents a complete philosophy of scientific discovery, has not been related in any detail to his own later scientific achievement in the Wealth of Nations.

Smith’s studies in the history of science are the product of his youthful thought, and may well have been composed during the seven years that he spent, mainly reading in the library, at Oxford.2  We know that during these years Smith spent much of his time studying the works of Diderot and D’Alembert as they appeared in

* This article is based on a chapter of the author’s Ph.D. thesis at the University of Colorado (June 1964).  The author is particularly grateful to his thesis adviser, Professor Morris Garnsey, and to Professor Carl McGuire, for help on this paper.

1. Jacob Viner, “Adam Smith and Laissez Faire” in The Long View and the Short (Glencoe, Ill.; Free Press, 1958), p. 216. “The Germans, who, it seems, in their methodical manner commonly read both the Theory of Moral Sentiments and the Wealth of Nations, have coined a pretty term, Das Adam Smith Problem, to denote the failure to understand either which results from the attempt to use the one in the interpretation of the other.

2. John Rae, Life of Adam Smith (London and New York: Macmillan, 1895), p. 23.  Rae suggests that, in the absence of any effective teaching at Oxford, Smith spent his time in the Balliol College library, reading almost every available book and performing exercises in English composition and in translation into English of literary and scientific works in French, Italian, and Greek.


successive volumes of the Encyclopaedia,3 in translating French works into elegant English, and in composing some initial articles for a projected “history of the liberal sciences and elegant arts,” which he intended to expand eventually to the proportions of an English “Encyclopedia.”  This work was later abandoned as “far too extensive,” but the essay, Principles which lead and direct Philosophical Enquiries, illustrated by the History of Astronomy, 4 has survived as the chief example of Smith’s early thought.  That Smith continued even in his later years to regard this essay as a significant achievement is indicated in his instructions to David Huxne, his intended literary executor, in 1773:

As I have left the care of all my literary papers to you, I must tell you that except those which I carry with me, there are none worth the publishing but a fragment of a great work, which contains a history of the astronomical systems that were successively in fashion down to the time of Descartes.  Whether that might not be published as a fragment of an intended juvenile work I leave entirely to your judgment, tho’ I begin to suspect myself that there is more refinement than solidity in some parts of it. 5

We assume that this History of Astronomy was put in its final form about 1750, either shortly after Smith’s return from Oxford to Kirkaldy and Edinburgh, or during his early Glasgow years.

We have seen that Smith’s mature judgment about the merits of his own early writing is not altogether unfavorable.  Other historians have praised his work with less restraint.  James McCosh, who was both a historian and a philosopher, contends that Smith might have ranked first in the English language as an historian of science, had he concentrated in this field. 6  Dugald Stewart con cludes that “the most unexceptionable specimens (of conjectural or theoretical history) which have yet appeared, are indisputably the fragments in Mr. Smith’s posthumous work on the History of Astronomy and on that of the Ancient Systems of Physics and Metaphysics.” 7  And Joseph Schumpeter, one of the great historians of economic thought in recent times, asserts that “nobody ... can have an adequate idea of Smith’s intellectual stature who does not know

3. C.R. Pay, Adam Smith and the Scotland of his Day (Cambridge University Press, 1956), p. 35n.

4. References to this work, which will hereafter be referred to as the History of Astronomy, are from Smith’s Works, ed. Dugald Stewart (London: Cadell & Davies, 1811), V, 55-190.

5. Rae, op. cit., p. 262.

6. James McCosh, The Scottish Philosophy (New York: Robert Carter & Brothers, 1875), p. 171.

7. Dugald Stewart, Dissertation exhibiting a general vista of the Progress of Metaphysical Ethical and Political Philosophy since the Revival of Letters in Europe, in Works, VI, 4.

213 Index

these essays (on the history of science).  I venture to say that, were it not for the undeniable fact, nobody would credit the author of the Wealth of Nations with the power to write them.” 8


I. Characteristics of Smith’s Early Work on Scientific Methodology

The outstanding feature of the History of Astronomy is a certain dynamic quality, whereby through his favorite principle of sympathy, Smith places himself en rapport with the scientists whose thought he appraises and with the times in which they wrote. 9  Starting from the principles of human nature and the circumstances of the society in which each contributor lived, Smith attempts to trace the evolution of the Newtonian system as the latest phase of a continuing historical and social process.  Dugald Stewart compares Smith’s approach to the history of science with the method previously adopted by D’Alembert.1

In accounting for the systematic dimension of his History of Astronomy, Adam Smith himself appears to give the main credit to Descartes:

In Natural Philosophy, or any other science of that sort ... we may lay down certain principles, primary or proved, in the beginning, from whence we account for the several phenomena, connecting all together by the same chain.  This latter, which we may call the Newtonian method, is undoubtedly the most philosophical, and in every sense, whether of Morals or Natural Philosophy, etc., is vastly more ingenious, and for that reason more engaging, than the other (the Aristotelian method).  It gives us a pleasure to see the phenomena which we reckoned the most unaccountable, all deduced from some principle (commonly a well-known one) and all united in one chain, far superior to what we feel from the unconnected method, where everything is accounted for by itself, without any reference to the others.  We need not be surprised, then, that the Cartesian philosophy (for Descartes was in reality the first who attempted this method) though it does not perhaps contain a word of truth, - and to us who live in a more enlightened age and have more inquired into these matters, it appears very dubious, - should nevertheless

8. J. A. Schumpeter, A History of Economic Ana1ysis, ed. from ms. by Elizabeth B. Schumpeter (New York: Oxford University Press, 1954), p. 182.

9. McCosh, op. cit., p. 171.

1. Stewart, Account of the Life and Writings of Adam Smith, L1.D). in Smith, Works, I, xxxv.  “The Late M. d’Alembert has recommended that arrangement of their elementary principles (of the sciences) which is founded on the natural succession of inventions and discoveries as the best adapted for interesting the curiosity and exercising the genius of students.... It is somewhat remarkable, that a theoretical history of this very science (in which we have, perhaps, a better opportunity than in any other instance whatever, of comparing the natural advances of the mind with the actual succession of hypothetical systems) was one of Mr. Smith’s earliest compositions.”


have been so universally received by all the learned in Europe at that time. The great superiority of the method over that of Aristotle ... made them greedily receive a work which we justly esteem one of the most entertaining romances that have ever been wrote.2

A third important influence in molding Adam Smith’s scientific method was the Baron de Montesquieu. 3  It may be remembered that the Esprit des Lois was published during Smith’s residence in Edinburgh, about three years prior to his appointment to the Chair of Logic at Glasgow.  One of Smith’s students during his early years at Glasgow suggests that his treatment of moral philosophy and jurisprudence was patterned in large part on this recent work by Montesquieu:

[Smith] treated at more length of that branch of morality which relates to justice, and which, being susceptible of precise and accurate rules, is for that reason capable of a full and particular explanation.  Upon this subject he followed the plan that seems to be suggested by Montesquieu; endeavoring to trace the gradual progress of jurisprudence, both public and private, from the rudest to the most refined ages, and to point out the effects of those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent improvements or alterations in law and government. 4

In an article written for the Edinburgh Review in 1755, Smith indicates that the authors ‘with whom he was then most familiar also included Rousseau, Voltaire, Daubenton, and Buffon. 5  It appears to have been the French writers who exercised the greatest influence on Smith’s scientific method and on his style, and who suggested to him the unusual project of outlining a philosophy of science before he had made a contribution to any particular science.


II. Motives for Philosophical Inquiries

Joseph Black and James Hutton, who edited Smith’s History of Astronomy, have added the explanation that this work “must be viewed, not as a History or Account of Sir Isaac Newton’s Astron-

2. Lectures on Rhetoric and Belles Lettres, ed. Lothian (London and New York: Thomas Nelson, 1964), pp. 139-40.  Since this lecture is recorded from a student’s dictate book, Smith cannot be held responsible for mistakes in grammar or spelling.

3. John Millar writes: “I am happy ... to have had the benefit of hearing his [Smith’s] lectures on the History of Civil Society, and of enjoying his unreserved conversation of the same subject.  The great Montesquieu pointed out the road.  He was the Lord Bacon in this branch of philosophy.  Dr. Smith is the Newton.” Fay, op. cit., p. 93.

4. Stewart, Account ..., op. cit., p. xvii.  These recollections are also given by John Millar, who became Professor of Law at the University of Glasgow.

5. “A Letter to the Authors of the Edinburgh Review,” in Smith, Works, V, 576-84.

215 Index

omy, but chiefly as an additional illustration of those Principles in the Human Mind which Mr. Smith has pointed out to be the universal Motives of Philosophical Reseaches. 6  The specific principles of the human mind to which Adam Smith calls attention are wonder, surprise, and admiration.  Thus, in explaining the priority of wonder, Smith asserts that:

Wonder, and not any expectation of advantage from its discoveries, is the first principle which prompts mankind to the study of Philosophy, of that science which pretends to lay open the concealed connections that unite the various appearances of nature; and they pursue this study for its own sake, as an original pleasure or good in itself, without regarding its tendency to procure them the means of many other pleasures. 7

McCosh has stated that in Smith’s view “wonder called forth by the new and singular, surprise excited by what is unexpected, and admiration raised by what is great and beautiful, these — and not any expectation of advantage or love of truth for its own sake — are the principles which prompt mankind to try to discover the concealed connections that unite the various appearances of nature, which give rise to the study of philosophy, which is defined as the science of the connecting principles of nature.” 8  McCosh’s exclusion of “love of truth for its own sake” from Smith’s motives for the study of philosophy appears unwarranted and unjust to Adam Smith.  Yet the fact that the author of Wealth of Nations should so clearly rule out “any expectation of advantage” as a typical motive for philosophical inquiries seems both surprising and wonderful, and invites further search into the reasons for this apparent discrepancy in Smith’s thought.

Smith points to security and leisure as the necessary conditions for that sentiment of wonder which is the basis for all philosophical inquiries:

When law has established order and security, and subsistence ceases to be precarious, the curiosity of mankind is increased, and their fears are diminished.  The leisure which they then enjoy renders them more attentive to the appearances of nature, more observant of her smallest irregularities, and more desirous to know what is the chain which links them altogether.... And that magnanimity and cheerfulness, which all generous natures acquire who are bred in civilized societies, where they have so few occasions to feel their weakness, and so many to be conscious of their strength and security, renders them less disposed to employ, for this connecting chain, those invisible beings whom the fear and ignorance of their rude forefathers had engendered.  Those

6. Works, V, 190.

7. History of Astronomy, op. cit., pp. 79-80.

8. McCosh, op. cit, pp. 170-71.


of liberal fortunes, whose attention is not much occupied either with business or with pleasure, can fill up the void of their imagination, which is thus disengaged from the ordinary affairs of life, no other way than by attending to that train of events which passes around them. 9

The emphasis in this passage may at first seem difficult to reconcile with the prominence given in the Wealth of Nations to self-interest and to competition.  The explanation that must be made is that the passions of ordinary life which dominate the thought of the Wealth of Nations are pictured, not as vehicles of intellectual progress, but only as forces contributing to progress in opulence.  Subsequently, when the increment in opulence has been employed to support a more numerous leisured class, philosophy may also become a beneficiary.

Smith’s subordination of utility to the intellectual or aesthetic sentiments of wonder, surprise, and admiration is apparent in the Theory of Moral Sentiments, as well as in the History of Astronomy:

The greater part of the praise ... is bestowed upon what are called the intellectual virtues.... The utility of these qualities, it may be thought, is what first recommended them to us; and, no doubt, the consideration of this when we come to attend to it, gives them a new value.  Originally, however, we approve of another man’s judgment, not as something useful, but as right, as accurate, as agreeable to truth and reality. 1

A large portion of the material in the Theory of Moral Sentiments is devoted to an attack on those who would propose utility as the primary objective of scientific investigations or of ethical judgments.  Smith’s interest in this issue seems to have been provoked mainly by the unusual prominence given to utility by David Hume.  In Smith’s view, utility should be regarded as only one among several features of beauty, from which it derives its value:

That Utility is one of the principal sources of beauty, has been observed by every body who has considered with any attention what constitutes the nature of beauty.... That the fitness of any system or machine to produce the end for which it was intended, bestows a certain propriety and beauty upon the whole .. . is so very obvious, that nobody has overlooked it…The same principle, the same love of system, the same regard to the beauty of order, of art and contrivance, frequently serves to recommend those institutions which tend to promote the public Welfare. 2

It is in the abstruser sciences, particularly in the higher parts of mathematics, that the greatest and most admired exertions of human reason have been displayed.  But the utility of those sciences... is not very obvious, and

9. History of Astronomy1 op. cit., pp. 88-89.

1. Theory of Moral Sentiments, in Works, I, I, iv, pp. 20-21.

2. Ibid., IV, i, pp. 257, 265.

217 Index

to prove it, requires a discussion which is not always very easily comprehended.  It was not, therefore, their utility which first recommended them to the public admiration.  This quality was but little insisted upon, till it became necessary to make some reply to the reproaches of those, who, having themselves no taste for such sublime discoveries, endeavour to depreciate them as useless. 8

Notable in all Smith’s works is his minimal emphasis upon the natural or inherited abilities of individuals as factors in the advance of knowledge.  In keeping with the equalitarian tradition of Locke and Rousseau, Smith regards knowledge as a product of society, or of that part of society which is endowed with leisure and security.  Through the division of labor individuals are differentiated, and those who have specialized in the particular arts and sciences where superior discernment is necessary acquire taste and judgment with regard to their own field of competence. 4  The advance of knowledge thus becomes cumulative; each advance should provide more leisure and security for affluent individuals to devote more time to its advancement.  Their inquiries tend to augment utility as well as to extend the limits of knowledge; but it is the sentiment of wonder which motivates these inquiries.

Not only does Smith repudiate utility as the main object of scientific inquiry, but he repeatedly extols the distinctive role of the philosopher. Sir Isaac Newton is referred to as a philosopher, and not as a scientist. 5  In this, his outlook contrasts sharply with that of Thomas Hobbes, Bernard de Mandeville, Jeremy Bentham, and certain other materialistic utilitarians with whose thought he is in some respects associated.  The following quotation taken from Smith’s classroom lectures at Glasgow University is a strong endorsement of a philosophical perspective:

It was probably a farmer who made the original plough, though the improvements might be owing to some other.  Some miserable slave who had perhaps been employed for a long time in grinding corn between two stones, probably first found out the method of supporting the upper stone with a spindle.  A miln-wright perhaps found out the way of turning the spindle with the hand; but he who contrived that the outer wheel should go by water was a philosopher, whose business it is to do nothing, but observe everything.  They must have extensive views of things, who, as in this case, bring in the assistance of new powers not formerly applied. 6

3. Ibid. IV, II p. 272.

4. Wealih of Nations, ed. Cannan, Modern Library Edition (New York: Random House, 1937), pp. 15-16.

5. “Conditions concerning the First Formation of Languages” in Smith, Theory of Moral Sentiments, op. cit., p. 509. “We say ... of a philosopher, that he is a Newton.”

6. Lectures on Justice, Police, Revenge and Arms, ed. Cannan (Oxford: Clarendon Press, 1896), II, ii, pp. 167-78.


Boswell reports that when the publication of Smith’s Wealth of Nations was mentioned to Samuel Johnson, who had long been unfriendly to Smith, it was expected that Johnson would speak contemptuously of this work by an author who had had little practical experience in the field on which he was writing.  To the surprise of all, Johnson remarked:

A man who has never been engaged in trade himself may undoubtedly write well upon trade, and there is nothing which requires more to be illustrated by philosophy than trade does.... A merchant seldom thinks but of his own particular trade.  To write a good book upon it a man must have extensive views.  It is not necessary to have practiced, to write well upon a subject. 7


III. The Aesthetic Element in Smith’s Standard of Judgement

To a person familiar only with Smith’s Wealth of Nations, it seems surprising that the standard of judgment which is favored by Smith in his early writings should be that of beauty, or appeal to the taste .8 This taste is that of the mature scholar who is a complete master of his subject; and the elements of beauty on which he passes judgment are simplicity, elegance, harmony, continuity, and coherence.  Yet it is a striking feature of Smith’s system of science that he more frequently refers to his own standard of judgment as aesthetic than as strictly rational,9 and that as his final criterion of truth he is willing to accept neither the rational test of consistency nor the empirical standard of correspondence with the observed facts.  In preferring the criterion of beauty, Smith appears to be at one with his teacher, Francis Hutcheson (d. 1746) and also with Lord Shaftesbury (d. 1713), who is regarded as the founder of the cult of style in Britain.

Smith speaks of himself occasionally as an empiricist, yet his reluctance to align himself with the purely inductive school of scientific methodology was due to the excesses to which this method had been carried by previous generations of scholars.  The empiricism of Bacon, Hobbes, and Locke appeared unsatisfactory to Smith

7. Boswell, Life of Johnson, Modern Library Edition (New York: Random House, 1952) p. 581.

8. Even in the Wealth of Nations, we find traces of Smith’s aesthetic ideal.  For instance, Wealth of Nations, V, I, p. 724: “The beauty of a systematical arrangement of different observations connected by a few common principles, was first seen in the rude essays of those ancient times towards a system of natural philosophy.  Something of the same kind was afterward attempted in morals.”

9. One critic observes: “It is clear. . . that Smith deliberately proposed to make an emotional rather than an intellectual appeal to the interest of the students (at Glasgow), to stimulate their feelings and their aesthetic sense, rather than their powers of reasoning,” Lothian, Introduction, to Adam Smith, Lectures on Rhetoric and Belles Lettres, op. cit., p. xvi.

219 Index

for several reasons.  In emphasizing the objective, measurable, truth, it had isolated the “primary qualities” of things, which appeared to reflect the substantial reality of “matter in motion,” and had neglected the “secondary qualities” of color, sound, taste, and smell.  Yet Smith had been persuaded by the demonstrations of Berkeley that these secondary qualities were not separable in such an absolute manner from the more tangible primary qualities.  By thus obscuring the clear distinction between the primary and secondary qualities, Berkeley had undermined the bases of certainty and definiteness which the early empirical school regarded as its chief merit.  Smith’s emphasis on the “secondary qualities” can be seen in the following quotation from his academic lectures at Glasgow, about 1763:

Man is the only animal who is possessed of such a nicety that the very color of an object hurts him.  Among different objects, a different arrangement or division of them pleases.  The taste of beauty, which consists chiefly in the three following particulars, proper variety, easy connexion, and simple order, is the cause of all this niceness.  Nothing without variety pleases us. 1

The element of beauty within an object or within a representation of this object in a painting or in a scientific system seemed to Smith to have a substantive meaning, and to point to the form or species to which this particular object belonged:

In each species of creatures, what is most beautiful bears the strongest characters of the general fabric of the species, and has the strongest resemblance to the greater part of the individuals with which it is classed.  Monsters, on the contrary, or what is perfectly deformed, are always most singular and odd, and have the least resemblance to the generality of that species to which they belong.  And thus the beauty of each species though in one sense the rarest of all things, because few individuals hit this middle form exactly, yet in another is the most common, because all the deviations from it resemble it more than they resemble one another.  The most customary form therefore is, in each species of things... the most beautiful. 2

In preference to either a consistent rationalism or a strictly inductive process of reasoning, Smith favored the intuitive judgment of the expert, who through extensive experience and erudition with a particular field of study has acquired a skill or taste with respect to his field of specialization.  From such a perspective, the beauty, order, and harmony of a system of thought become parts of its verification.

The more practiced thought of a philosopher, who has spent his whole

1. Lecturers on Justice, Police, Revenue, and Arms, op. cit. p.158.

2. The Theory of Moral Sentiments, op. cit., V, I, p. 287.


life in the study of the connecting principles of nature, will often feel an interval betwixt two objects, which, to more careless observers, seem very strictly conjoined.  By long attention to all the connections which have ever been presented to his observation, by having often compared them with one another, he has, like the musician, acquired, if one may say so, a nicer ear, and a more delicate feeling with regard to things of this nature. 8

The truly culpable error of the scientist, in Smith’s view, is to ignore the thought of his own age, to theorize subjectively or in isolation, and to fail to keep abreast of the discoveries currently being made by contemporary scholars within his field of competence:

Neither Cicero nor Seneca, who have so often occasion to mention the ancient systems of Astronomy, take any notice of Hipparchus.  His name is not to be found in the writings of Seneca.... Such profound ignorance in these professed instructors of mankind, with regard to so important a part of the learning of their own times, is so very remarkable, that I thought it deserved to be taken notice of, even in this short account of the revolutions of philosophy.... That supercilious and ignorant contempt, too, with which at this time they regarded all mathematicians, among whom they counted astronomers, seems to have hindered them from enquiring so far into their doctrines as to know what opinions they held. 4

Smith’s adherence to the school of Shaftesbury and Hutcheson is especially apparent in his emphasis upon literary style in his own works.  The style of presentation appears to Smith to be so intimately related to the substance of an argument, that the two could not be isolated 5  The task of the scientist might be compared to that of the artist; he should select or abstract those features of his subject which seem most essential to its being and operations, and should accentuate these features in his own representative system.  In modern economics, this procedure has been called model building; but Smith conceived it less mathematically as akin to the painting of a picture. 6  Thus two or more alternate theories may provide equally satisfactory explanations of a given body of phenomena, and may be equally true; the one explanation would be preferred to another on account of its simplicity and elegance.

3. History of Astronomy, op. cit., pp. 78-80.

4. Ibid., pp. 115-16.

5. Even the division of labor is derived by Smith from a desire to persuade.  Thus: “Different genius is not the foundation of this disposition to barter which is the cause of the Division of Labor.  The real foundation is that principle to persuade which so prevails in human nature.” Lectures on Justice, Revenue Police and Arms, op. cit., p. 171.

6. John Kenneth Galbraith has listed Adam Smith among the two or three greatest stylists among all those who have written on economics in the English language, calling attention to Smith’s humor and irony.  It is in large part by conscious attention to the style of his writing that Smith achieved this distinction.  Cf. Galbraith, “The Language of Economists,” in Fortune, LXVII (Dec. 1962), 129.



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