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Adam Smith: David Hume
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"The European Union, Japan and Canada, are avid supporters of the ideas of Adam Smith and David Ricardo, but only when it means liberalising the markets of smaller and weaker countries, not their own." 4/15
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Smith was a founding member of the Glasgow Literary Society the following year; the society engaged in high-level discussions and debates, and met diligently every Thursday evening from November to May. Hume and Smith were both members, and at one of the first sessions, Smith read an account of some of Hume's recently printed Political Discourses. Oddly enough, the two friends, clearly the brightest members of the Society, were extremely diffident, and never said a word in any of the discussions.
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Smith was in favor of free trade. He derived his support for free trade among nations by basing it on the obvious desirability of trade among individuals: "It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy". Though Smith is usually thought to have relied on the Theory of Absolute Advantage to derive his support for free trade, this quote shows that Smith's argument in favor of free trade actually relied on the Theory of Comparative Advantage. (It was David Ricardo... who later worked out the details of that theory.) According to Smith, free trade not only expanded the extent of the market and, thereby, allowed greater division of labor; free trade also increased productivity by allowing countries to specialize in what they do well. Here he used the Law of Absolute Advantage.
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Smith vehemently opposed mercantilism—the practice of artificially maintaining a trade surplus on the erroneous belief that doing so increased wealth. The primary advantage of trade, he argued, was that it opened up new markets for surplus goods and ... provided some commodities at less cost from abroad than at home. With that, Smith launched a succession of free trade economists and paved the way for David Ricardo's and John Stuart Mill's theories of comparative advantage a generation later.
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In that work, Smith postulated the theory of the division of labor and emphasized that value arises from the labor expended in the process of production. He was led by the rationalist current of the century, as well as by the more direct influence of Hume and others, to believe that in a laissez-faire economy the impulse of self-interest would bring about the public welfare; at the same time he was capable of appreciating that private groups such as manufacturers might at times oppose the public interest. Smith was opposed to monopolies and the concepts of mercantilism in general but admitted restrictions to free trade, such as the Navigation Acts, as sometimes necessary national economic weapons in the existing state of the world. He ... accepted government intervention in the economy that reduced poverty and government regulation in support of workers.
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Smith became a central figure in the Scottish Enlightenment, making firm friends with David Hume, amongst others. Smith published a series of minor philosophical works which were soon to be overshadowed by The Wealth of Nations. He travelled on the Continent and added to his already considerable reputation, not only as an economist, but ... as a social theorist.
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David Hume