Adam Smith, politics, and natural liberty.

Author:Mueller, Paul D.
  1. Introduction

    A tension exists in both An Inquiry into the Nature and Causes of the Wealth of Nations (Smith 1776) and The Theory of Moral Sentiments (Smith 1759) between two important, yet contradictory, themes. In the Wealth of Nations, Smith frequently criticizes government intervention because it prevents self-interested individuals from coordinating themselves as they are "led by an invisible hand" (Smith 1776, p. 456). He argues in favor of the "obvious and simple system of natural liberty" and "the inviolable sacred right of property" (Smith 1776, pp. 687, 138). Yet, as many scholars have pointed out, in the same book Smith claims that government intervention can improve the market by restraining the excesses of private greed and acquisitiveness (Viner 1927; Rothschild 2001; Brubaker 2006; Kennedy 2005, 2008). Similar tension between his advocacy of liberty and his exceptions to liberty can be found in The Theory of Moral Sentiments. Scholars have taken this tension in two different directions.

    Some interpret The Wealth of Nations as arguing that narrow self-interest, directed toward advancing one's material ends, best promotes social cooperation and prosperity (Stigler 1971). Others claim that Smith thought self-interest a necessary evil that often needs to be restrained and that sympathy, benevolence, and generosity are more important human motivations (Brown 1994; Rothschild 2001; Brubaker 2006). Advocates of both of these views, however, agree about the following claim: Adam Smith thought that many government interventions could be beneficial. For Stigler (1971), Smith's views of beneficial government intervention contradict his premise that all men are self-interested and that self-interest in markets leads to good outcomes. Rothschild and others use this tension to argue that Smith may not have been as pro-liberty as many people thought. I argue that neither of these views is accurate because they are both based on a misconception of Smith's views on government. These scholars have overlooked a critical element in Smith's works: his distrust of political decision-making. There is little reason to believe that Smith thought political actors had enough benevolence or wisdom to interfere beneficially in citizens' lives.

    In the next section I elaborate on the tension between Smith's advocacy of liberty and his support of various government interventions. I also offer a brief overview of how many Smithian scholars have tried to resolve this tension. Then I argue in Section III that Smith was skeptical of politics and political action because he believed that politics promotes faction and fanaticism, which corrupt individuals' morals. Furthermore, Smith claimed that politicians and bureaucrats have little incentive to care for the poor and even less knowledge of how to do so effectively. In Section IV, I outline how the lens of a "presumption of liberty" adequately describes Smith's view of the world and how many of Smith's exceptions fit with both his presumption of liberty and his skepticism of politics and government intervention. I conclude with remarks about the relevance of Smith's politics and his presumption of liberty today.

  2. A Popular Misconception

    Although hundreds of books and articles have been written about Adam Smith, most put insufficient weight on his descriptions of politicians, bureaucrats, and political decision-making in the The Wealth of Nations and The Theory of Moral Sentiments. The literature most closely related to this topic integrates Smith's thought across his works and across disciplines, including philosophy, history, political theory, and economics. Yet even these works tend to address either Smith's various policy prescriptions or his moral philosophy. Stigler frames the problem beautifully when he asks: "How could [Smith] have failed to see the self-interest written upon the faces of politicians and constituencies? The man who denied the state the capacity to conduct almost any business save the postal--how could he give the sovereign the power of extirpating cowardice in the citizenry? How so, Professor Smith?" (1971, p. 174). Could it be that Smith analyzed market behavior using the idea of narrow self-interest, yet simply assumed benevolence in the realm of politics?

    Several scholars have taken up Stigler's question and resolved the conflict by arguing that Smith was not as caught up in self-interest as Stigler suggests. Rothschild (2001), for example, argues that Smith was concerned about greed and acquisitiveness as well as about the plight of the poor. Brubaker extends this claim by arguing that Smith was not opposed to government intervention per se but only to bad government policies. In fact, she argues, Smith saw many examples of self-interest in markets creating conflicts and injustice. Therefore, self-interest must be ameliorated by wise government policy in order for natural liberty to flourish (Brubaker 2006, pp. 198-99). Self-interest is only one of many human motivations, and certainly not the best.

    Of course many scholars do not accept that interpretation of Smith and counter that he was staunchly in favor of markets and liberty (Klein 2012). Otteson (2002) argues that Smith saw markets as promoting beneficial orders through self-interest, not only in economics but in language and morals, too. Liberty, and the protection of rights, were most important to Smith. If government limits itself to protecting that liberty, prosperity and human happiness will take care of themselves. Paganelli (2006) takes a slightly different approach to Smith's defense of natural liberty. She argues that Smith was more concerned about reducing imperfections and creating a "robust" system than he was about creating a perfect system. Therefore, he favored liberty and markets where people motivated by self-interest naturally tend to help one another and have limited ability to do harm. Contrast that system with one where government officials have the power to do great harm but are constrained in their ability to do good because of their lack of benevolence and knowledge.

    Some scholars attempt to take the middle ground between arguing that liberty was most important to Smith and that liberty was relatively unimportant to him. Viner (1927) catalogues the many exceptions to liberty in the Wealth of Nations. He calls Smith "the great eclectic" and praises him for promoting markets yet also recognizing useful and important roles for government. Kennedy (2005, 2008) argues that in light of these exceptions to liberty, and the clear mandates that he gives to the state, Smith cannot be categorized as an advocate of completely free markets. Although he agrees that Smith did not solely advocate self-interest in markets (Kennedy 2008, pp. 162, 245-49), contra Rothschild and Brubaker, Kennedy argues that natural liberty, free from government intervention, is important to Smith and that Smith recommends government intervention hesitantly.

    But even Kennedy's position, for all its merit, fails to adequately address Stigler's question. He never resolves the tension between government intervention and natural liberty except to claim that "utility, not principle, was [Smith's] stance" (2008, p. 232)--as if utility was not itself a principle. But even assuming that Kennedy meant a particular principle, we are still not any closer to resolving the puzzle of how Smith thought about, and justified...

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