Smith’s favored words were “active” and “productive.” Illustration by David Hughes

1776 was a good year for big ideas, a rare thing. It was also a big year for good ideas, an even rarer one. Our own big-deal Declaration was, in its way, the small pugnacious summary of Enlightenment ideas that had reached their apex that winter, in London. In February, Edward Gibbon published the first volume of “The Decline and Fall of the Roman Empire,” which included the hymn to Roman republican virtues and the great chapter explaining the rise of Christianity in terms of men, not miracles. Then, a month later, his friend Adam Smith published his big book, “The Wealth of Nations,” which put an end to any attempted defense of the mercantile system of colonial dependence on a mother country.

Classics of English prose, Gibbon’s and Smith’s books don’t just belong to the history of ideas; they helped establish the ideas of history and economics. Gibbon’s is still a model of the tone with which truly enlightened history is written; Smith’s is still the best account of the foundations of market economics. Why do classical economists believe that free trade is good for everyone? Why does the amount of gold kept in the treasury not make much difference to a country’s wealth? Why don’t better machines for making pins eliminate jobs for good, instead of making more jobs of another kind? Why, for that matter, does it not matter whether we’re productive in farming or manufacturing so long as we’re productive? What does productivity even mean? Complex ideas—the division of labor, the advantages of trade—become lucid to the non-economist for the first, and perhaps last, time.

But where Gibbon is a clear figure in shadowy light, a figure of the Enlightenment who found his place in the twilight of history where reason fell, Adam Smith is a shadowy figure in clear light. He is to most of us the invisible-hand guy, the Scottish face on the British twenty-pound note—the one who showed that greed was good, that the market, left to its own devices, would always set the right price and favor the right goods, Milton Friedman in a kilt. Yet a very different Smith is current in the academy. This Adam Smith is seen not as the apostle of the free market but as one of the fathers of the French Revolution, albeit the nicer, warmer bits of the French Revolution. None other than Noam Chomsky is a fan of this Smith, while one of the most original and mind-altering academic works of the past decade, Emma Rothschild’s “Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment,” claims him for sentimentalists more than for stockbrokers, as a man who believed that feelings of sympathy and engagement preceded impulses of industry and ambition. By cutting off “The Wealth of Nations” from his other great book, “The Theory of Moral Sentiments,” we not only cut off one half of Smith’s mind from the other but lobotomize our own understanding of modern life, making economics into a stand-alone statistical quasi-science rather than, as Smith intended, a branch of the humanities.

Nicholas Phillipson’s new biography, “Adam Smith: An Enlightened Life” (Yale; $32.50), tries, very successfully, to pull together the two Smiths, letting us see how the man of feeling became the little god of finance. Phillipson, a historian at the University of Edinburgh, follows Rothschild, making it plain that Smith was more moral-man than market-man. He even finds a couple of deeper emotional veins, which, though hardly turning Smith into Lord Byron, do spice his life with incident and subplot. One was his intimate friendship with the philosopher David Hume, his closest colleague and greatest influence, and his not quite forthright embrace of the atheism for which Hume was notorious. Smith’s real question, it turns out, was not the economist’s question, How do we get richer and poorer?, or even the philosopher’s question, How should one live? It was the modern question, Darwin’s question: How do you find and make order in a world without God?

Smith’s biographers have always sighed at his irredeemable dullness; not much happened to him, certainly nothing romantic. He was a bachelor who lived with his mother for most of his life, and the only really lively surviving anecdote about him is that he was kidnapped at the age of three by a Gypsy, and had to be rescued by his uncle. But the uneventfulness of his career is part of its modernity. Where his fellow-intellectuals typically had to scramble and scrape, Smith had just the career that a man of similar gifts would have now: he scored early by giving well-received lectures under the patronage of an older wise man, became a department chairman at a classy university, then moved into government, until he could make a good living publishing big books while giving, so to speak, an occasional undergraduate survey course.

The possibility of such an existence does owe something to his nature, but it owes more to his country—to his place as a citizen of Scotland, and particularly of Edinburgh at the height of the Scottish Enlightenment, a renaissance of learning and ambition that followed the union between England and Scotland, in 1707. Smith, who was born in 1723, in Kirkcaldy, Fife, on Scotland’s east coast, studied moral philosophy at Glasgow, spent an unhappy half decade at Balliol College, Oxford, and then arrived in Edinburgh around 1749, when he was in his mid-twenties.

Edinburgh was commonly called the Athens of Britain, though it really was more like an eighteenth-century Chicago. It had a slightly wounded, slightly imperious sense of secondness—to London, in this case—and was belligerently proud of being the place where thinking and teaching went on with less pretension and more common sense than elsewhere. Above all, Edinburgh’s intellectual life, like Chicago’s, was built around a distinctly city university, intertwined with the commercial life and the civic life of a merchant capital, rather than set off in a country town with country values. The intellectual life of Edinburgh was tied to public lectures that were attended by large non-academic audiences. Phillipson sees “The Wealth of Nations” as a Scottish street book, “one of the supreme achievements of a remarkable intelligentsia that was engaged in the project for distilling a theory of sociability out of a popular culture of politeness.”

In Edinburgh, Smith was immediately befriended by David Hume, who was a dozen years his senior, and whose freethinking essays he had read, thrillingly and illicitly, at Balliol. “The heads of the college thought proper to visit his chamber, and finding Hume’s ‘Treatise on Human Nature,’ then recently published, the reverend inquisitors seized that heretical book, and severely reprimanded the young philosopher,” a later memoir tells. Hume, though far from a romantic figure, had a core of courage, which both impressed Smith and frightened him a little. As the inquisitors at Balliol understood, Hume hardly made a secret of his contempt for organized religion. (An earlier biographer of Smith, James Buchan, points out that both Smith’s and Hume’s fathers died when their boys were small; perhaps the loss made them curiously aware of the spectral nature of authority.) Phillipson shows that many of Smith’s ideas derive from Hume’s. Even his economic theories have origins in Hume’s thought. His theory of the “flow” of balance of trade was Hume’s first of all, and his idea of sympathy as the mucilage of the market was Hume’s, too. Yet Smith’s favored words, “active” and “productive,” are not at all Hume’s favorites. Smith liked life. What he took from Hume’s demonstration of the limits of reason, the absurdity of superstition, and the primacy of the passions was not a lesson of stoical indifference, of Humean serenity, but something more like Epicurean intensity: if we are living in the material world, then let us make it our material.