Abstract
In recent years studies have appeared that highlighted Adam Smith’s interventionist recommendations. These opinions are not new. The exceptions to liberalism in Smith’s thought were pointed out by Jacob Viner in 1927. Even before Viner, there were economists who condemned the exaggeratedly liberal portrayal of Smith. But one thing is to stand aside from extreme viewpoints, and another not to have a clear orientation: the thesis of this article is that Adam Smith was in balance a liberal. To prove it, the interventionist and liberal aspects of Smith are contrasted, and his writings are situated in context to sort out the contradictions, and to define him as a moderate liberal.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
In spite of Murray N. Rothbard’s criticism of Smith, Michael E. Bradley believes that Austrian economics is more consistent with Smith than neoclassical analysis, and sees “some similarities between the analysis of competition and markets in the later Austrian literature and Smith’s ‘system of liberty’”, Bradley 2010, 254; Rothbard 1996, 463–469; Otteson 2006, 52.
A.L. Macfie said that the list of interventions advised by Smith and compiled by Viner “add up to suggest a formidable state autocracy: a socialist spread of controls that would make some modern socialists’ eyes pop”, Macfie 1967, 9.
In a remarkably wrong prediction, a speaker at the Political Economy Club in 1876 foresaw, due to the influence of Adam Smith, “a development of Political Economy as will reduce the functions of government within a smaller and smaller compass”, Skinner 1988, 1.
See also the comments by Smith on the “oppressive inequality” in the Early Draft of Wealth in LJ 563–4.
His comments in favour of rising salaries are well-known: he says that “the liberal reward of labour” is a condition of development he encourages: “To complain of it is to lament the necessary effect and cause of the greatest publick prosperity”, WN I.viii.27 and I.viii.36, 42; cf., also Salter 2012, 559. Nicholson had this to say on Smith and the workers: “There is no writer, not the most extreme socialist, who has a keener appreciation of the economic importance of labour”, Nicholson 1903, 557.
This was the thesis fought by Jeremy Bentham in his Defence of usury of 1787. Amartya Sen points out that the criticism of Bentham demonstrates that the interventionism of Adam Smith was analysed and highlighted even before the death of the Scottish philosopher (Sen 2011, 258). But the utilitarianism of Bentham also took him to anti-liberalism and to criticise Smith for being liberal: “I have not, I never had, not ever shall have, any horror, sentimental or anarchical, of the hand of government. I leave it to Adam Smith, and the champions of the rights of man (for confusion of ideas will jumble together the best subjects and the worst citizens upon the same ground) to talk of invasions of natural liberty, and to give as a special argument against this or that law, an argument the effect of which would be to put a negative upon all laws”, Bentham 1952, vol. 3, 257–8.
“It is, however, in the chapters on education that the humanity of Adam Smith stands in the sharpest contrast to the popular dogmas of which he is supposed to be the first parent”, Nicholson 1903, 558.
Dennis Rasmussen says that Smith was not a “free market absolutist”, but yet “insisted that when politicians intervene in the economy for the sake of promoting national prosperity their actions are usually either futile or positively counter productive”; Smith “joined Hume in regarding commercial society as unequivocally preferable to the alternatives”, Rasmussen 2017, 168, 173.
“At no point does he suggest that markets are infallible mechanisms”, Hill 2016, 330. Vivienne Brown says that the system of natural liberty is not based on the efficiency of competitive markets, but on a sectoral view of growth (Brown 1994, 183). In this sense it might approximate a dynamic view like that of the Austrian economists. In Book IV of Wealth, when he lists his differences with Quesnay, Smith says: “If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered”, WN IV.ix.28.
Cf. Winch 1978, 11; Vernon Smith 2016, 273. Rasmussen (2017, 99) states: “Hume and Smith use the term [justice] in a distinctively narrow and entirely negative sense. For both, the virtue of justice entails nothing more (or less) than refraining from harming the life, liberty, or property of others”. Vernon Smith and Bart Wilson (2017, 28) see WN and TMS) as “two worlds…distinct but complementary, and Sentiments articulated the critical preconditions for the emergence of justice and the enabling of civil society”.
See also TMS III.3.6 and de Jasay 2010. The negative definition of justice for Smith is what impedes his identification with John Rawls, for whom the State redistributes, while for Smith it is the market; Hurtado Prieto 2006, 108–9. Other interpretations in Forman-Barzilai 2010, Buchanan 1979, and West 1979 and 1990.
See the ironic comments about the Government and shopkeepers in WN IV.vii. c.63, and about hunting, or actually fishing, for subsidies in WN IV.v.a.32.
Otteson (2016, 507) suggests that Smith’s tax argument disparages income tax, progressive or not.
Rasmussen (2017, 13–14) says that both Smith and Hume “embraced the core ideals associated with the liberal tradition, stressing the benefits of the rule of law, limited government, religious tolerance, freedom of expression, private property, and commerce…they both distrusted large and sudden innovations in politics. …They might be even better described as pragmatic liberals”.
“In a rude society nothing is honourable but war”, says Smith, and he illustrates it with the old contempt for merchants, an idea he thinks is “mean and despicable”, and “obstructed the progress” of the economy; although it reached its peak in the primitive world, “even in a refined society it is not utterly extinguished” LJ 527.
According to Rasmussen, this is “the most important passage” in WN, linking Hume and Smith with the notion that “the promotion of personal liberty and security is by far the most important of all of commerce’s effects”, Rasmussen 2017, 163. Cf. also Anderson 2016, 166–7. In modern times, the relationship between economics and politics changes: “Wealth, as Mr. Hobbes says, is power. But the person who either acquires, or succeeds to a great fortune, does not necessarily acquire or succeed to any political power, either civil or military” WN I.v.3. Cf. also WN.I.x.b.38 and II.v.37. Rasmussen (2016, 346) reminds us that, in his lessons on rhetoric, Smith had stressed that in ancient Greece commerce and luxury already “gave the lowest an opportunity of raising themselves to an equality with the nobles”; cf. LRBL, 150. Hanley concludes that, although Smith clearly indicated the defects of a market society, he also underscored with the same clarity that its virtues were greater, especially two: “first, commercial society’s relief of poverty through the increase it makes possible in the material welfare of all; and second, commercial society’s promotion of freedom by substituting interdependence for the direct dependence characteristic of social relations in earlier political and economic orders”, Hanley 2009, 15.
Hume had written in 1751: “But historians, and even common sense, may inform us that, however specious these ideas of perfect equality may seem, they are really, at bottom, impracticable; and were they not so, would be extremely pernicious to human society. Render possessions ever so equal, men’s different degrees of art, care, and industry will immediately break that equality. Or if you check these virtues, you reduce society to the most extreme indigence; and instead of preventing want and beggary in a few, render it unavoidable to the whole community. The most rigorous inquisition too is requisite to watch every inequality on its first appearance; and the most severe jurisdiction, to punish and redress it. But besides, that so much authority must soon degenerate into tyranny”, Hume [1748, 1751] 1777, 194.
References
Anderson, E. (2016). Adam Smith on Equality. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 157–172). Princeton and Oxford: Princeton University Press.
Bentham, J. (1952). Economic Writings. W. Stark (Ed.). London: George Allen and Unwin.
Bradley, M. E. (2010). Adam Smith’s System of Natural Liberty: Competition, Contestability, and Market Process. Journal of the History of Economic Thought, 32(2), 237–262.
Brown, V. (1994). Adam Smith’s discourse: canonicity, commerce and conscience. London: Routledge.
Buchanan, J. M. (1979). The Justice of Natural Liberty. In G. P. O’Driscoll Jr. (Ed.), Adam Smith and Modern Political Economy (pp. 117–131). Ames: The Iowa State University Press.
Coase, R. H. (1976). Adam Smith’s view of Man. Journal of Law and Economics, 19(3), 529–546.
Coats, A. W. (1975). Adam Smith and the Mercantile System. In A. S. Skinner & T. Wilson (Eds.), Essays on Adam Smith (pp. 218–236). Oxford: Clarendon Press.
Cropsey, J. (1957). Polity and Economy. An Interpretation of the Principles of Adam Smith. The Hague: Martinus Nijhoff.
Cropsey, J. (1979). The Invisible Hand: Moral and Political Considerations. In G. P. O’Driscoll Jr. (Ed.), Adam Smith and Modern Political Economy (pp. 165–176). Ames: The Iowa State University Press.
Checkland, S. G. (1975). Adam Smith and the Bankers. In A. S. Skinner & T. Wilson (Eds.), Essays on Adam Smith (pp. 504–523). Oxford: Clarendon Press.
Darwall, S. (1999). Sympathetic Liberalism: Recent Work of Adam Smith. Philosophy and Public Affairs, 28(2), 139–164.
de Jasay, A. (2010). Social Justice examined, with a little help from Adam Smith. In H. Kliemt (Ed.), Political Philosophy Clearly (pp. 101–112). Indianapolis: Liberty Fund.
Fleischacker, S. (2004a). On Adam Smith’s Wealth of Nations. A Philosophical Companion. Princeton and Oxford: Princeton University Press.
Fleischacker, S. (2004b). A Short History of Distributive Justice. Cambridge MA and London: Harvard University Press.
Fleischacker, S. (2016). Adam Smith and the Left. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 478–493). Princeton and Oxford: Princeton University Press.
Forman-Barzilai, F. (2010). Smith’s anti-cosmopolitanism. In V. Brown & S. Fleischacker (Eds.), The Philosophy of Adam Smith (pp. 145–160). Routledge/The International Adam Smith Society: London and New York.
Grampp, William D. [1952] 1960. The Liberal Elements in English Mercantilism. In Joseph J. Spengler and William R. Allen, eds., Essays in Economic Thought: Aristotle to Marshall. Chicago: Rand McNally, 61–91.
Grampp, W. D. (2000). What did Smith Mean by the Invisible Hand? Journal of Political Economy, 108(3), 441–465.
Griswold, C. L. (1999). Adam Smith and the Virtues of Enlightenment. Cambridge: Cambridge University Press.
Haakonssen, K. (1981). The Science of a Legislator. The Natural Jurisprudence of David Hume and Adam Smith. Cambridge: Cambridge University Press.
Hanley, R. P. (2009). Adam Smith and the Character of Virtue. New York: Cambridge University Press.
Hill, L. (2016). Adam Smith and Political Theory. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 321–339). Princeton and Oxford: Princeton University Press.
Hume, David. [1748, 1751] 1902. Enquiries Concerning the Human Understanding and Concerning the Principles of Morals, L. A. Selby-Bigge ed., Oxford: Clarendon Press.
Hurtado Prieto, J. (2006). Rawls y Smith. De la utilidad de la ‘simpatía’ para una concepción liberal de la justicia. Estudios Públicos, 104(Spring), 89–111.
Kennedy, G. (2016). Adam Smith: some popular uses and abuses. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 461–477). Princeton and Oxford: Princeton University Press.
Lieberman, D. (2006). Adam Smith on Justice, Rights, and Law. In K. Haakonssen (Ed.), The Cambridge Companion to Adam Smith (pp. 214–245). Cambridge: Cambridge University Press.
Long, D. (2006). Adam Smith’s Politics. In K. Haakonssen (Ed.), The Cambridge Companion to Adam Smith (pp. 288–318). Cambridge: Cambridge University Press.
Lubasz, H. (1995). Adam Smith and the ‘free market’. In S. Copley & K. Sutherland (Eds.), Adam Smith’s Wealth of Nations. New interdisciplinary essays (pp. 45–69). Manchester and New York: Manchester University Press.
Macfie, A. L. (1967). The Moral Justification of Free Enterprise. A Lay Sermon on an Adam Smith Text. Scottish Journal of Political Economy, 14(1), 1–11.
Mehta, P. B. (2006). Self-Interest and Other Interests. In K. Haakonssen (Ed.), The Cambridge Companion to Adam Smith (pp. 246–269). Cambridge: Cambridge University Press.
Milgate, M., & Stimson, S. C. (2009). After Adam Smith. A Century of Transformation in Politics and Political Economy. Princeton and Oxford: Princeton University Press.
Montes, L. (2003). Das Adam Smith Problem: Its Origins, the Stages of the Current Debate, and One Implication for Our Understanding of Sympathy. Journal of the History of Economic Thought, 25(1), 63–90.
Montes, L. (2004). Adam Smith in context. A Critical Reassessment of some Central Components of His Thought. London: Palgrave Macmillan.
Nicholson, J. S. (1903). The Use and Abuse of Authority in Economics. Economic Journal, 13(52), 554–566.
Niehans, J. (1990). A History of Economic Theory. Classic Contributions 1720–1980. Baltimore and London: The Johns Hopkins University Press.
O’Brien, D. P. (1975). The Classical Economists. Oxford: Clarendon Press.
Otteson, J. R. (2002). Adam Smith’s Marketplace of Life. Cambridge and New York: Cambridge University Press.
Otteson, J. R. (2006). Adam Smith y la Libertad. Estudios Públicos, 104(Spring), 51–87.
Otteson, J. R. (2016). Adam Smith and the Right. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 494–511). Princeton and Oxford: Princeton University Press.
Paganelli, M. P. (2016). Adam Smith and the History of Economic Thought: the Case of Banking. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 247–261). Princeton and Oxford: Princeton University Press.
Peacock, A. (1975). The Treatment of the Principles of Public Finance in The Wealth of Nations. In A. S. Skinner & T. Wilson (Eds.), Essays on Adam Smith (pp. 553–567). Oxford: Clarendon Press.
Peart, S. J., & Levy, D. M. (2005). The “vanity of the philosopher”. From Equality to Hierarchy in Post-Classical Economics. Ann Arbor, University of Michigan Press.
Posner, R. A. (1980). A Theory of Primitive Society, with Special Reference to Law. Journal of Law and Economics, 23(1), 1–53.
Rasmussen, D. C. (2016). Adam Smith on What is Wrong with Economic Inequality. American Political Science Review, 110(2), 342–352.
Rasmussen, D. C. (2017). The Infidel and the Professor. David Hume, Adam Smith, and the Friendship that Shaped Modern Thought. Princeton and Oxford: Princeton University Press.
Reeder, J. (1995). Estudio preliminar. In A. Smith (Ed.), Ensayos filosóficos. Madrid: Pirámide.
Robbins, L. (1965). The Theory of Economic Policy in English Classical Political Economy. London: Macmillan.
Rosenberg, N. (1979). Adam Smith and Laissez-Faire Revisited. In G. P. O’Driscoll Jr. (Ed.), Adam Smith and Modern Political Economy (pp. 19–34). Ames: The Iowa State University Press.
Rothbard, M. N. (1996). An Austrian perspective of the History of Economic Thought. Volume I. Economic thought before Adam Smith. Cheltenham: Edward Elgar.
Rothschild, E. (2001). Economic Sentiments. Adam Smith, Condorcet, and the Enlightenment. Cambridge and London: Harvard University Press.
Rothschild, E., & Sen, A. (2006). Adam Smith’s Economics. In K. Haakonssen (Ed.), The Cambridge Companion to Adam Smith (pp. 319–365). Cambridge: Cambridge University Press.
Salter, J. (2012). Adam Smith on Justice and the Needs of the Poor. Journal of the History of Economic Thought, 34(4), 559–575.
Schmidtz, D. (2016). Adam Smith on Freedom. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 208–227). Princeton and Oxford: Princeton University Press.
Schneider, L. (Ed.). (1967). The Scottish Moralists on Human Nature and Society. Chicago: The University of Chicago Press.
Sen, A. (2011). Uses and Abuses of Adam Smith. History of Political Economy, 43(2), 257–271.
Sidgwick, Henry. [1901] 1968. The Principles of Political Economy. Oscar Nuccio ed., Roma: Edizioni Bizzarri.
Skinner, A. (1988). Adam Smith and Economic Liberalism. Edinburgh: The David Hume Institute.
Skinner, A. (1995). Adam Smith and the role of the state: education as a public service. In S. Copley & K. Sutherland (Eds.), Adam Smith’s Wealth of Nations. New interdisciplinary essays (pp. 70–96). Manchester and New York: Manchester University Press.
Smith, A. [1759] 1982a. TMS The Theory of Moral Sentiments. Indianapolis, Ind.: Liberty Fund.
Smith, A. [1776] 1981. WN An Inquiry into the Nature and Causes of the Wealth of Nations. Indianapolis, Ind.: Liberty Fund.
Smith, A. [1795] 1982b. EPS Essays on Philosophical Subjects. Indianapolis, Ind.: Liberty Fund.
Smith, A. [1896] 1982c. LJ Lectures on Jurisprudence. Indianapolis, Ind.: Liberty Fund.
Smith, A. (1985). LRBL Lectures on Rhetoric and Belles Lettres, Indianapolis Liberty Fund.
Smith, A. (1987). Cor Correspondence of Adam Smith. Indianapolis, Ind: Liberty Fund.
Smith, C. (2013). Adam Smith and the New Right. In C. J. Berry, M. P. Paganelli, & C. Smith (Eds.), The Oxford Handbook of Adam Smith (pp. 539–558). Oxford: Oxford University Press.
Smith, V. (2016). Adam Smith and Experimental Economics: Sentiments to Wealth. In R. P. Hanley (Ed.), Adam Smith. His Life, Thought and Legacy (pp. 262–280). Princeton and Oxford: Princeton University Press.
Smith, V. L., & Wilson, B. J. (2017). Sentiments, conduct and trust in the laboratory. Social Philosophy and Policy, 34(1), 25–55.
Sowell, Thomas. [1987] 2007. A Conflict of Visions. Ideological Origins of Political Struggles. New York: Basic Books.
Tribe, K. (1995). Natural liberty and laissez faire: how Adam Smith became a free trade ideologue. In S. Copley & K. Sutherland (Eds.), Adam Smith’s Wealth of Nations. New interdisciplinary essays (pp. 23–44). Manchester and New York: Manchester University Press.
Viner, Jacob. [1927] 1960a. Adam Smith and Laissez Faire. In Joseph J. Spengler and William R. Allen, eds., Essays in Economic Thought: Aristotle to Marshall, Chicago: Rand McNally, 305–329.
Viner, J. (1960b). The Intellectual History of Laissez Faire. Journal of Law and Economics, 3(October), 45–69.
von Hayek, F. A. (1985). New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul.
West, E. G. (1975). Adam Smith and Alienation. Wealth Increases, Men Decay? In A. S. Skinner & T. Wilson (Eds.), Essays on Adam Smith (pp. 540–552). Oxford: Clarendon Press.
West, E. G. (1979). Adam Smith’s Economics of Politics. In G. P. O’Driscoll Jr. (Ed.), Adam Smith and Modern Political Economy (pp. 132–152). Ames: The Iowa State University Press.
West, E. G. (1990). Adam Smith and modern economics: from market behavior to public choice. Aldershot: Edward Elgar.
Winch, D. (1978). Adam Smith’s Politics. An essay in historiographic revision. New York: Cambridge University Press.
Winch, D. (2011). Review Essay: Politics and Political Economy after Smith. Journal of the History of Economic Thought, 33(1), 119–129.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
An earlier version of this paper appeared in Spanish in Guatemala, in a companion volume to Adam Smith, Julio H. Cole ed., Universidad Francisco Marroquín, 2016.
Rights and permissions
About this article
Cite this article
Rodríguez Braun, C. Adam Smith’s liberalism. Rev Austrian Econ 34, 465–478 (2021). https://doi.org/10.1007/s11138-019-00474-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11138-019-00474-9