The Public Policy
Meyerson, Adam
by Adam Meyerson The Public Policy Adam Smith and "The Wealth of Nations": A Bicentennial Celebration What do Edmund Burke, Karl Marx, Woodrow Wilson, and Milton Friedman have in common? All of...
...There is no denying Smith's fondness for the pursuit of Self-interest, or as he-called it, "the uniform, constant, and uninterrupted effort of every man to better his condition...
...But he recognized that, like it or not, people are generally actuated by self-interest, even those, like university professors, who try to disguise their motivations under a veil of high-minded purpose...
...Smith saw this effort as the motor force of economic growth, in that it led both to the accumulation of capital and, by encouraging exchange, to greater division of labor...
...Smith's book is remarkable in all .se ways, but I should like to suggest t there is one way in which the Wealth Nations is more remarkable still—and t is in its all-embracing compassion...
...and as a rk of great literary charm, written with :h a lively sense of metaphor and such andness for illustrations from ordinary • that it can transform the manufacture coats into a subject of delightful read...
...Smith never expected human society to adopt a system of economic freedom and marketplace competition...
...Indeed, he saw such a connection between the prosperity of the American colonies and their "liberty to manage their own affairs" (despite British restrictions on foreign trade) that he frequently illustrated his argument for the "simple system of natural liberty" with American examples...
...therefore, he argued for .ilations to protect workers during ;e bargaining...
...We have fulfilled Smith's expectations, and have become 'not only a great and formidable empire...
...A proper understanding of the Wealth of Nations shows that there is no inconsistency between the author's benevolence and his appreciation of competition and self-interest...
...This is what Smith meant when he observed that in pursuing his own interests, an individual is "led by an invisible hand to promote an end whichwas no part of his intention...
...To begin with, the Wealth of Nations is remarkable as the first great synthesis of scientific thought in economics...
...He showed that a free market economy can maintain itself only when suffused by a just and benevolent spirit...
...He argued against the greediness of merchants and manufacturers forever seeking to narrow their competition...
...And second, by interring with the beneficent workings of the nvisible hand,' ' they led to unnaturally gh (or low) prices, encouraged an inFicient use of capital, and retarded ecomic advancement...
...But with his systematization of a theory of economic growth based on the accumulation of capital and the division of labor, with his insistence that wealth consists not in gold and silver but in- real annual income- (the origin of our gross national product accounting), with his elegant description of supply and demand forces in the marketplace, and with his (sometimes contradictory) theories of value, Smith established the framework for economics as a discipline...
...First, prenticeship regulations and the like "violations of natural liberty" and erefore unjust...
...disposed to humanity, Smith accepted people as they are, with all their foibles and pretensions, and did so cheerfully...
...There is not a single idea of Smith's which cannot be found somewhere in previous economic literature, nor is there any analysis of his which has not been refined or modified by subsequent developments in thediscipline...
...Alternative: An American Spectator March 1976 9...
...lad they read the Wealth of Nations, example, they would have discovered t Smith's sympathies in wage disputes ween masters and workmen tended to with the workers: he had observed, t, that masters can subsist without Dloyees longer than workmen can sist without employment, and, sec, that "masters are always and every re in a sort of tacit, but constant and Form combination, not to raise the ;es of labour above their actual rate," sometimes even "to sink {them] >w this rate...
...The Wealth of Nations is remarkable ) as a work of extraordinary scope, disarsing learnedly but unpedantically on t•rything from the opulence of the Sarri empire under the Abassides to the igious teachings of Zwinglius...
...Nevertheless, the publication of the Wealth of Nations effectively marked the emergence of political economy as a distinct subject of inquiry...
...The "wretched spirit of monopoly" was too pervasive, too many private interests benefited from existing restrictions...
...is observation may strike some as :uliar, for they will find it difficult to igine how anyone who glorified cornition and the unabashed pursuit of F-interest should be known as compaslate...
...It is altogether fitting that we should be celebrating the two hundredth anniversary of the Wealth of Nations in the same year as our own nation's bicentennial...
...Smith wrote much of e Wealth of Nations as a tract against e mercantilist and monopolistic policies eviiling in the eighteenth century—g...
...In fact, the fiercest language in the Wealth of Nations was directed against the "mean rapacity" of merchants and manufacturers, and Smith thought that one of the great virtues of marketplace competition was that it protected people from the avarice of businessmen...
...Along the way the readers would have been astonished to find countless other examples of Smith's humaneness, for instance his argument that if the removal of trade barriers would deprive many people of their livelihood, "freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection...
...And as he was so kindly...
...he did not intend—someone else's interest—and he "frequently promotes that of society...
...Our skeptics would be astonished by Smith's humaneness, because, as I suggested earlier, they would find,it difficult to reconcile his compassionate observations with, his relish for competition and self-interest...
...Provided the marketplace is competitive, and the buyer has a choice of sellers, the seller necessarily promotes an end...
...He imbued its vigor with a sacredness and a...
...and legislators were directed too much "by the clamorous importunity of_partial interests" to take "an extensive view of the general good" which would lead to such an adoption...
...Smith's own professorship at the University of Glasgow was in moral philosophy, of which political economy was considered to be one branch...
...But I suspect such skeptical souls ,e never read the Wealth of Nations...
...A corn merchant, for example, finds it most profitable in times of food scarcity to ration the corn he brings to market in exact proportion to the exigencies of consumer demand...
...The book is remarkable, secondly, as an eloquent defense of individual freedom, particularly economic freedom, or, in Smith's words, that "obvious and simple system of natural liberty" in which "[e]very man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and his capital into competition with those of any other man...
...but the freest and most prosperous nation that has ever adorned this earth...
...As Milton Friedman pointed out recently in these pages, we have also been the most philanthropic...
...if y had, they would most likely recogit...
...Smith's fondness for self-interest, however, cannot be understood apart from his appreciation of the social character of the marketplace...
...Humane `people are supposed to be cooperative rather than competitive, altruistic rather -than selfish—and so they generally are...
...The Wealth of Nations ns with a famous celebration of the sion of labor and its effect upon protivity, but if our skeptics had made r way to the back of the book, they Id have read one of the most moving cisms ever levelled at industrial soy—a description of how, by simplify-work into repetitive tasks, the divisionof labor drives common people to torpor and boredom...
...Smith was deeply attached to economic freedom, but not at the expense of human suffering...
...as one of the nicest books ever tten...
...All of them fondly admired and avidly read Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations (and one still does...
...While not in favor of American independence, he thought that the members of the Continental Congress were "contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world...
...Throughout the book, Smith argued against the national envy and malignity implicit in trade restrictions aimed at "the impoverishment of all our neighbours...
...kind of mystery, comparing it to the "unknown principle of animal life...
...Smith recognized e need for some infringements of natuI liberty, for example to ensure a sound nking system, and he did not believe at the pursuit of self-interest under free mpetition always promoted the general od...
...Smith himself, according to his biographers, was so kind-hearted and generous that he not only gave most of his substantial royalties to charity, but he did so secretly...
...The book must indeed be remarkable to have attracted such a diverse following of enthusiasts...
...Above all, he took genuine delight just in seeing men strive to improve their lives in the way they thought best...
...He recognized how the excesses of self-interest are held in check by the very mechanism of market exchange, for the seller must satisfy his customers if he is to achieve his own ends...
...This is not to say that Smith was unaware of the danger that one man's greed might pose for another's well-being...
...And herein lies the ultimate niceness of the Wealth of Nations: Only a fundamentally benevolent and unselfinterested man would take the position that the public interest is best served by the free interplay of private interests...
...import quotas_ exclusive trading larters, apprenticeship regulations—id he subjected these restrictions on t•edom to his double criticism...
...But his combination of natural;hts and utilitarian arguments for gnomic freedom is stirring, and it has ;pired economic liberals ever since...
...Smith was fascinated by America—by its abundance of good land, by its extraordinary economic advances, above all by its spirit of freedom...
...This defense was fortified by Smith's conviction that free competition, through the guidance of an "invisible hand" that frequently harmonized private and social interests, 8 The Alternative: An American Spectator March 1976 Duld result in the most efficient allo.tion of resources...
...and as it first made its way into print two hundred years ago this month, it may be proper to pause a while and reflect upon its significance...
...The world seems to be in an anti-American mood these days, and we.seem to kick ourselves every chance we get, but it is worth considering in this joint bicentennial year, that we, like Adam Smith, just might be awfully nice...
...Note the humane significance of competition here: each seller is guided by the pressure of the market to please buyers...
...Although later practitioners have departed from many of his particular ideas, and have used mathe- matical techniques far beyond his com- prehension, they have generally followed the outlines of his inquiry...
Vol. 9 • March 1976 • No. 6
