The Orthodox Classical Liberal Interpretation of Smith
Mueller offers a survey of different interpretations of Adam Smith by classical liberal thinkers.
There is a lively debate over how much Adam Smith supported free markets and opposed government intervention. The traditional view claims that Smith was an advocate of liberty and an opponent of government encroachment into social affairs. The revisionist view, advocated by Left Smithians, argues that, although Smith saw markets as productive, he was worried about their moral, cultural, and political effects. They claim that he sought to remove privilege and help the marginalized, and that he did not maintain a principled opposition towards government.
Left Smithians also argue that Smith thought that benevolent government intervention could correct people’s mistakes and restrain their corrupt moral sentiments. Besides checking people’s folly, it could also ameliorate some of the worst effects of commercial society by providing the poor with public education. Many of them argue that Smith would view unemployment insurance, health insurance, retirement pensions, etc. in a similarly favorable light today. Left Smithians often caricature the traditional view, as though the traditional view sees Smith as a dogmatic advocate of laissez-faire. They portray those who believe Smith advocated free market ideas as being either unaware of the exceptions he made to natural liberty or naive about the need for government to promote the rule of law.
Not surprisingly, they rarely cite who actually believes that Smith was completely laissez-faire. Proponents of the traditional view, many of whom I highlight in this post, are well aware of Smith’s reservations, exceptions, and concerns about commercial society. But they still maintain that Smith’s ideal was the “simple system of natural liberty.” I highly recommend an article by Ronald Coase about “Adam Smith’s View of Man” where he summarizes The Theory of Moral Sentiments. After seventeen pages of insightful prose, Coase concludes that:
It is wrong to believe, as is commonly done, that Adam Smith had as his view of man an abstraction, an “economic man,” rationally pursuing his self-interest in a single-minded way. Adam Smith would not have thought it sensible to treat man as a rational utility-maximiser. He thinks of man as he actually is—dominated, it is true, by self-love but not without some concern for others….But if one is willing to accept Adam Smith’s view of man as containing, if not the whole truth, at least a large part of it, realization that his thought has a much broader foundation than is commonly assumed makes his argument for economic freedom more powerful and his conclusions more persuasive.
I also recommend that you read one of the most famous papers about Smith: “Adam Smith and Laissez Faire.” In it, Jacob Viner catalogs Smith’s exceptions to liberty but still concludes that:
There is no possible room for doubt, however, that Smith in general believed there was, to say the least, a strong presumption against government intervention beyond its fundamental duties of protection against its foreign foes and maintenance of justice.
Left Smithians often mistake Smith’s moderation towards reforming government for diffidence towards liberty and free markets.
Alan Macfarlane, for example, points out that:
It is often alleged that Smith advocated a weak state. This is a half-truth. In fact what he suggested was that the State should both be strong, as a defence against sectional interests, but also not interfere too much. Ideally the State should be like a referee or umpire - able to punish or even expel, but not actually involved in the everyday contests and exchanges that led to wealth creation.
The issue is not the strength of the state, but the scope and extent of its influence. For enforcing contracts and protecting the borders, a strong state complements the system of natural liberty well. Without the rule of law, commercial society deteriorates rapidly.
Joseph Cropsey, despite being well-aware of Smith’s reservations about commercial society, says that Smith was a decided advocate of commercial society. Cropsey defends the traditional view of Smith, but with liberty and freedom being desirable consequences of commercial society, not vice versa. Cropsey claims that Smith was an advocate of “civilization, which implies not merely the distinction of polity and society but the subordination of the former to the latter, and the general reduction of ‘polity’ to the service of ‘society’ for the sake of ‘civilization.’” Smith favored commercial society in part because it begot freedom, not vice versa. Furthermore, Smith subordinated the state to the interests of society. As Jeff Young puts it, Smith’s work is actually “anti-political economy” in the sense that Smith does not want government to actively manage or promote economic growth.
E. G. West claims that Smith had a strong presumption of liberty, meaning that “Smithian exceptions to laissez-faire might better be regarded at most as failures of the ideal to be realized.” Smith differs from other liberals like J. S. Mill who suggested that men should have liberty “except where ‘harm to others’ may be prevented.” In contrast, Smith thought liberty meant freedom to pursue one’s interests and to act according to one’s plans “as long as he does not violate the laws of justice.” West concludes that the “wording of Smith’s condition is clearly the tighter and less likely to provide loopholes for ambitious, arrogant and ideological legislators.”
Similarly, Francis Hirst talks about how the “so-called exceptions or limitations” Smith makes regarding retaliatory or defensive tariffs were not ideal or wealth-enhancing. Smith’s “exceptions” were a matter of expediency; such as determining whether it is better, or perhaps more politically feasible, to reduce tariffs gradually rather than immediately. As Smith writes, it is a question of “what manner…trade ought gradually to be opened; what are the restraints which ought first, and what are those which ought last to be taken away; or in what manner the natural system of perfect liberty and justice ought gradually to be restored.”
Frederic Maitland also claims that Smith advocated liberty and limited government. Besides being the first systematic book on political economy, the Wealth of Nations “is also the first powerful plea for commercial freedom.” Maitland also maintains that the “main argument of the Wealth of Nations remains to this day a valid reason for leaving trade free, and the main argument is that interference only makes bad worse.” Maitland argues that although many people think the primary defense of laissez faire is the harmony between individuals’ economic interests, Smith did not put too much stock in this defense. Problems, corruption, and conflict can arise out of individuals’ economic interests—even in a free society.
Instead, Smith’s defense of commercial society against government interference comes primarily through his criticisms of government. As Maitland writes, “The most convincing pleas for laisser faire…are those which insist a priori on the great ‘probable error’ of any opinions on matters…of political economy, and those which relate a posteriori the history of the well-intentioned failures of wise and good men.” Smith’s skepticism of government intervention is rooted in the fact that political actors generally have limited, incomplete, or simply false knowledge about what effects their policies will have on society.
I have highlighted the contributions of only a few classical liberal scholars. There are many others I could have drawn from including: Vernon Smith, Friedrich Hayek, James Buchanan, Thomas Sowell, Jim Otteson, Douglas Den Uyl, Craig Smith, Daniel Klein, Maria Paganelli, and Michael Clark. All of these scholars maintain that Smith supported free markets and was skeptical of government intervention, despite the exceptions in his work. But to really appreciate Smith’s defense of free markets, we first need to examine the exceptions he made to his ideal system of liberty.