Adam Smith’s liberalism

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.

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Notes

  1. 1.

    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.

  2. 2.

    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.

  3. 3.

    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.

  4. 4.

    See also the comments by Smith on the “oppressive inequality” in the Early Draft of Wealth in LJ 563–4.

  5. 5.

    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.

  6. 6.

    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.

  7. 7.

    “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.

  8. 8.

    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.

  9. 9.

    An analysis of the different interpretations of the invisible hand in Grampp 2000. Craig Smith (2013) reflects on the influence exerted by Adam Smith’s notion of the unintended consequences on twentieth century liberals like Milton Friedman, James Buchanan and Friedrich A. von Hayek.

  10. 10.

    “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.

  11. 11.

    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”.

  12. 12.

    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.

  13. 13.

    Cf. Fleischacker 2004a, 177, 194–5, 205–6, 214. This author denies that Smith would have identified with modern socialists or welfare-state liberals: “Claiming him for these camps would also be intellectually irresponsible”, Fleischacker 2016, 487.

  14. 14.

    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.

  15. 15.

    Otteson (2016, 507) suggests that Smith’s tax argument disparages income tax, progressive or not.

  16. 16.

    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”.

  17. 17.

    “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.

  18. 18.

    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.

  19. 19.

    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.

  20. 20.

    Coats 1975, 224; Winch 1978, 70; even anti-liberal authors recognise that for Smith personal freedom, free trade and private property go together: Milgate and Stimson 2009, 69.

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Correspondence to Carlos Rodríguez Braun.

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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.

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Rodríguez Braun, C. Adam Smith’s liberalism. Rev Austrian Econ (2019). https://doi.org/10.1007/s11138-019-00474-9

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Keywords

  • Liberalism
  • Adam Smith
  • Classical economics

JEL classification

  • B12
  • H11
  • P10