Adam Smith: An Enlightened Life
By Nicholas Phillipson
Allen Lane, £25

Not many thinkers have been as unlucky in their disciples as Adam Smith. For Smith, economics was a humanistic inquiry grounded in human psychology and history.

Law and politics, not the physical sciences, were the subjects to which economics was most closely allied.

Believing that markets were not mechanical devices but social institutions, Smith spent his life promoting political economy: a widely-ranging discipline quite different from the introverted
exercises in mathematical cleverness that dominate economics at the present time.

Smith needs rescuing from the dogmas peddled in his name by cheerleaders of the free market. It would never have occurred to him to imagine that the uncertainties of economic life could be removed by applying a formula, as today's "quants", who trade markets by computerised algorithms, would like to believe.

The Nobel prize-winning economists who set up the hedge fund Long Term Capital Management, the collapse of which in 1998-2000 marks the real beginning of the global financial crisis, may have believed they were practitioners of the discipline that Smith helped found. In reality they were suffering from intellectual hubris, which a better understanding of Smith's work might have guarded them against.

Nicholas Phillipson's path-breaking biography shines new light on the complex development of this much-misunderstood thinker.

The difficulties faced by anyone trying to write Smith's life are daunting. Smith had most of his papers destroyed in the months before his death and did all he could to make the biographer's task impossible.

Yet a vivid picture emerges in Phillipson's book of this eccentric and self-absorbed personality, and Smith presents an engagingly otherworldly figure. Philipsson recaptures Smith as a personality in a way that has not been done before.

At the same time, he gives a fresh account of the gestation of Smith's ideas in the brilliant intellectual ferment of the Scottish enlightenment.

Despite his faults, Smith reminds us of what economics once used to be: an inquiry into the nature of society that understood markets to be no more infallible or incorruptible than any other human institution.