The Theory of Moral Sentiments, Smith's first and in his own mind most important work, outlines his view of proper conduct and the institutions and sentiments that make men virtuous. Here he develops his doctrine of the impartial spectator, whose hypothetical disinterested judgment we must use to distinguish right from wrong in any given situation. We by nature pursue our self-interest, according to Smith. This makes independence or self-command an instinctive good and neutral rules as difficult to craft as they are necessary. But society is not held together merely by neutral rules; it is held together by sympathy. Smith argues that we naturally share the emotions and to a certain extent the physical sensations we witness in others. Sharing the sensations of our fellows, we seek to maximize their pleasures and minimize their pains so that we may share in their joys and enjoy their expressions of affection and approval.
IF we examine the most celebrated and remarkable of the different theories which have been given concerning the nature and origin of our moral sentiments, we shall find that almost all of them coincide with some part or other of that which I have been endeavouring to give an account of; and that if every thing which has already been said be fully considered, we shall be at no loss to explain what was the view or aspect of nature which led each particular author to form his particular system. From some one or other of those principles which I have been endeavouring to unfold, every system of morality that ever had any reputation in the world has, perhaps, ultimately been derived. As they are all of them, in this respect, founded upon natural principles, they are all of them in some measure in the right. But as many of them are derived from a partial and imperfect view of nature, there are many of them too in some respects in the wrong.
Adam Smith (1723-1790) is commonly regarded as the first modern economist with the publication in 1776 of The Wealth of Nations. He wrote in a wide range of disciplines: moral philosophy, jurisprudence, rhetoric and literature, and the history of science. He was one of the leading figures in the Scottish Enlightenment. Smith also studied the social forces giving rise to competition, trade, and markets. While professor of logic, and later professor of moral philosophy at Glasgow University, he also had the opportunity to travel to France, where he met François Quesnay and the physiocrats; he had friends in business and the government, and drew broadly on his observations of life as well as careful statistical work summarizing his findings in tabular form. He is viewed as the founder of modern economic thought, and his work inspires economists to this day. The economic phrase for which he is most famous, the “invisible hand” of economic incentives, was only one of his many contributions to the modern-day teaching of economics.