The father of the free-market - Adam Smith

Adam Smith was born in 1723 in Kirkcaldy, Scotland.

Unlike his French counterparts and even his bosom friend David Hume, he led a retired life, much of it in the small Scottish town where he was born, and he lived with his mother until she died at a very advanced age. He was shy, destroyed most of his letters, and did not seem to relish giving brilliant performances, either in print or in conversation. He never fell afoul of civil or religious authority, had no mistresses, and engaged in no public quarrels.
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Adam Smith has become, along with Milton Friedman and Friedrich Hayek, one of the deities in the libertarian-conservative pantheon. I suspect Smith would have firmly declined this honor, even before his more zealous devotees, the proponents of the “efficient markets” hypothesis, nearly succeeded in wrecking the economies of the United States, Britain, and their unfortunate imitators.

The Wealth of Nations appeared in the eventful year 1776. The title page described the author as “formerly professor of Moral Philosophy in the University of Glasgow.” His principal influence, Francois Quesnay, chief of the Physiocrats, was a distinguished physician. They were both amateurs, generalists, and reformers—political economists, far removed in outlook and purpose from today’s “specialists without spirit.” The celebrated sarcasms and exhortations in Wealth of Nations—“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind,” for example, or “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”—are not incidental but central. The book might equally well have been titled The Welfare of Nations.

Everyone knows, of course, what Adam Smith stood for: free trade, the division of labor, the minimal state, the invisible hand, the illimitable growth of wants and needs. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” “Every individual … intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” Case closed.

What everyone knows is seldom altogether wrong; but often it is not altogether right, either. As Emma Rothschild notes at the outset of Economic Sentiments, her superb study of Smith and Condorcet, “They think and write about self-interest and competition, about institutions and corporations, about the ‘market’ and the ‘state.’ But the words mean different things to them, and their connotation is of a different, and sometimes of an opposite, politics.” It is far from obvious that Smith would have entertained cordial feelings toward Alan Greenspan or Margaret Thatcher.

For one thing, Smith roundly mistrusted businessmen. In addition to the sallies already quoted, he insisted that businessmen, for all they may talk of freedom and fairness, “generally have an interest to deceive and even oppress the public.” One example out of many from The Wealth of Nations:

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.

In other words Smith was a sane and circumspect pragmatist not a lala-land libertarian.