Wealth of Nations Gets Business School Revival at Smith’s House

Michael Spence
So far, 20 Nobel laureate professors in economics have agreed to join the project’s advisory board, including Harvard University’s Amartya Sen and Michael Spence of New York University, the school says. Photographer: Jerome Favre/Bloomberg

As wind and rain sweep through Edinburgh’s Old Town, men with hammers and chisels are busy reviving an 18th century center of global economics.

Panmure House, where Scottish philosopher Adam Smith lived while updating his “Wealth of Nations” in the years after its 1776 publication, is being transformed into a haven for scholars by the Edinburgh Business School. So far, 20 Nobel laureate professors in economics have agreed to join the project’s advisory board, including Harvard University’s Amartya Sen and Michael Spence of New York University, the school says.

“This is the place he lived in when people realized he was a very great man,” Nicholas Phillipson, author of the 2010 biography “Adam Smith: An Enlightened Life,” said on a tour of the house. “He’s a very modest star, but he is a star and this is where the star shone. It’s unique.”

Built in 1690 as a townhouse for the Earls of Panmure, Smith lived in the two-story, L-shaped building from 1778 until his death in 1790. Left to ruin, it became a boys club in the 1950s until Edinburgh’s municipal government ran it as a refuge for troubled children.

The city sold the building to the business school, part of Heriot-Watt University, in 2008 for 800,000 pounds ($1.3 million). It beat a higher bid of 955,000 pounds from an investor planning to turn it into a private residence because the influx of “additional senior executives to study” in the city would benefit the local economy by more than the difference in price, according to a City of Edinburgh Council document.

‘Intellectual Curiosity’

The business school is raising 10 million pounds for the project, including 4 million pounds to refurbish the building and the rest to finance its future use. So far, it has secured 1.3 million pounds, said Chris Watkins, who was appointed in May to run the redevelopment.

“They were keen not to make it into a museum but to make it into an active building,” Watkins said. “So there will be a lot of discussions, lectures going on, trying to recreate the intellectual curiosity of Smith’s time.”

The plan is to complete the revamp by 2015. Workmen are still expunging the evidence of council occupation, including stripping out the remains of bathrooms and erasing graffiti in the basement.

New York University’s Spence, who won a Nobel prize in 2001 with George Akerlof and Joseph Stiglitz for their analyses of markets, said he signed up for the project to protect the “intellectual history” of Smith in Edinburgh.

Honesty Matters

“Smith is rightly revered for fully understanding how markets and prices with locally self-interested decisions solve a massive coordination problem,” Spence said in an e-mail. “He also saw and others later forgot the complementary pieces including values like honesty, and regulation.”

Even so, it’s taken four years for work to start on the project, during which time Edinburgh’s relationship with finance has been more about collapse than revival. The city is home to Royal Bank of Scotland Group Plc, whose bailout starting in 2008 still stands as the world’s biggest rescue of a bank.

In 2009, Historic Scotland recommended rejecting the initial development plan because of an external stair and glass atrium it deemed to spoil the character of Panmure House. After months of back and forth, a public enquiry was held in March 2011 before the plans were approved in July that year. The glass structure has since been scrapped, Watkins said.

Suitably Modest

Smith moved into Panmure House after being appointed commissioner of customs in Scotland, hosting social gatherings in the house with contemporaries such as David Hume and Adam Ferguson, according to Historic Scotland.

So far there’s been little recognition of his time in Edinburgh. He was born less than a dozen miles away as the crow flies across the Firth of Forth in Kirkcaldy. While his home there was demolished in the 19th century, the town maintains its links with the Adam Smith Theatre and Adam Smith College.

In the capital, he was honored only in July 2008 with the first public monument to him in the city, a bronze statue further up the Royal Mile closer to the castle.

Smith is buried in a corner of the Canongate Kirkyard adjacent to Panmure House. Former U.S. Federal Reserve Chairman Alan Greenspan noted in his memoirs that a visitor to Smith’s grave in 2000 found it strewn with beer cans and debris. While that’s no longer the case, the lack of fanfare around his life in Edinburgh still reflects the man himself.

“It’s not a flash house and it can never have been a flash house because Smith wasn’t a flash man,” said Phillipson, an honorary fellow at Edinburgh University. “He’s a modest man and sociable man and this does him very nicely.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE