Adam Smith vs. Ayn Rand on Justifying the Free Society

Both Smith and Rand supported free markets, free trade, and government limited to protecting private property. In Rand’s case, the protection of private property was absolute, based on her conception of inviolable natural rights. In Smith’s case, the protection of private property was a robust default that arose from his empirical observation that those societies that protected private property fared best. For Smith, however, private property protections could be overridden in some specific cases. It turns out that there are not many such cases (more on this in a moment), but Smith, unlike Rand, was willing to entertain the possibility that there could be such.

But let me focus instead on four specific substantive issues on which Smith and Rand differ:

1. Their methodologies: Rand pursues her political economy on the basis of an a priori construction of rights that she claims follows from reason (perhaps from pure reason); Smith, by contrast, pursues his political economy principally on the basis of induction over empirical observation guided by its coincidence with a moral vision he finds attractive.

2. The role of self-​interest in human behavior: Rand believes in only self-​interest; Smith believes in both self-​interest and other motivations, including other-​regarding motivations.

3. The role of individual rights: Rand is a rights theorist; Smith is not.

4. The role of government: Rand believes the state should protect individual rights, including in particular—indeed, perhaps exclusively—private property rights; Smith believes it should protect person, property, promises, and then also provide some few basic “publick works.”

In each of these cases, I would like to suggest that Smith enjoys both a strategic and substantive advantage over Rand.

First, on methodology. Smith had read Locke—he had even lectured on Locke in his jurisprudence classes—so he was well aware of the natural law tradition. Nonetheless, in The Wealth of Nations he chooses not to base his argument on premises of self-​ownership, natural rights under natural law, and so on. Why? For two principal reasons: one strategic, one substantive.

The strategic reason: getting the institutions right that could alleviate human misery was so important that it needed every rhetorical help it could get. Beginning with a controversial metaphysical apparatus claiming to deduce rights from a contentious conception of natural law would immediately reduce the chances of people being sympathetic to his argument. He thus chose instead to begin on grounds almost everyone would accept: We all want to alleviate misery; what seems to be the best ways to do that?

The substantive reason: nobody agrees—never had, never would—on what the natural law exactly is, what it holds, or what it implies. Hence little or no headway could be achieved in that direction. By contrast, everyone agrees that misery is bad, and everybody seemed to agree that a Newtonian method of observing empirical reality and looking for patterns of regular behavior could help us understand the world. Why not implement it in the service of humankind?

Second, on the role of self-​interest: Rand argued either that all human behavior is fundamentally self-​interested, or that all human behavior should be self-​interested. Following in Bernard Mandeville’s tradition, she said that selfishness was a virtue. Smith, by contrast, claimed that while it is obvious that human beings are motivated by self-​interest, it was equally obvious that they often are not. The sacrifices a parent makes for his child or that a soldier might make for his country were examples Smith adduced to substantiate his position. He believed that people could simultaneously have multiple motives. So it was perfectly possible for the parent to change his baby’s diaper both because it made the baby feel better and because it made him (the parent) feel better. Indeed, this became for him a fundamental tenet of his understanding of a free-​market political economy, encapsulated in his conception of market exchanges as positive-​sum: both parties benefit, and often part of the reason each party exchanges is because the other party benefits.

Here again Smith’s position has both a strategic and a substantive advantage over Rand’s. The strategic advantage is that it comports more closely with people’s beliefs and impressions, and it is thus more intuitively plausible. Its substantive advantage is that his position is, well, right.

Third, on rights: Smith believed, along with his friend David Hume, that as powerful as human reason is, it could easily fall prey to what Sir Francis Bacon had called “idols of the mind”—what Marx might have called “ideologies,” or what today we might call “biases.” It is far less risky, then, to begin by not putting too much faith in pure reason, and simply going out and observing. Smith was an Aristotelian empirical naturalist, not a rationalistic Platonic philosopher-​king. Platonic philosopher-​kings who believe they can fully apprehend all the necessary principles of human society have done a lot of harm in the world, whereas the more intellectually humble problem-​solvers have actually solved problems. (Consider here William Easterly’s apt distinction in his The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good between “Planners” and “Searchers.” Planners try to impose universal orders; Searchers instead try to find specific problems where they can make marginal, ground-​level differences.)

The fact is that people can be captured by peculiar conceptions of human rights, and they can take them in all kinds of bizarre directions. For example, one might conclude from the Lockean assertion of a natural right to life that one therefore has a right to have others provide health care for one; or one might conclude from the claim that one has a right not to be harmed that one has a right not to be offended; and so on. Here again Smith enjoys both a strategic and substantive edge. Strategic, because he can sidestep the interminable disagreements about the origin, nature, and scope of rights and not be seduced by the inevitable distortions of any conception of rights, however initially plausible they might seem. (Here Max Hocutt’s “Rights: Rhetoric versus Reality” in the Summer 2012 volume of The Independent Review is instructive.) Substantive, because Planners tend to do more harm than good, whereas Searchers are the reverse. Establishing one’s political economy on rationalistic grounds risks leading to the elevation of oneself as a presumed philosopher-​king and one’s thought to Planning with a capital “p.” Think, for example, of Jeffrey Sachs and his plans to “end world poverty.” By contrast, Searchers get good work done, marginally and gradually improving the world one step at a time.

And fourth, on “publick works”: Smith believed the government could and perhaps should provide certain “publick works.” Many libertarians find fault with Smith here, and Rand certainly would have. Yet consider his criteria for something’s qualifying as a public work: (1) it must benefit the entire “great nation,” not merely one group at the expense of others, and (2) it must be impossible for private enterprise to provide it a competitive the market. Now, I ask: How many goods or services would actually qualify for state provision under these two criteria? Answer: not many. Smith’s suggestions (more like guesses) are things like bridges, roads, and canals—all reasonable conjectures, I would say, for someone at the cusp of the onset of commercial society—but still nothing like the expansive state we have today.

But one further conjecture Smith made was education. In a famous passage in Book V of The Wealth of Nations, Smith wrote that extreme division of labor might have baleful consequences:

What is Smith’s proposed remedy? Partially subsidized primary schooling. Note the first and third words: “partially” (meaning less than half, he says) and “primary” (teaching only to “read, write, and account,” he says). So: not fully subsidized, and not through high school—let alone college. What a great step in the right direction it would be if the United States adopted the Smithian educational model! And here indeed we see a telling difference between Smith and Rand. Whereas the Randian would raise a principled objection against any kind of state incursion (including in education) on grounds of violation of individual rights, the Smithian is willing to entertain the possibility, but shifts the burden of proof on to the proposer and maintains a high threshold to initiate action.

This is simultaneously a strength of Smith’s position and indicative of a weakness of Rand’s. Smith’s intellectual humility prevents him from believing that he can excogitate rules for human behavior applicable to all times and all places. Instead, like an Aristotelian empirical scientist, he adopts conclusions tentatively but subject to further empirical review. This gives him a reasonable starting point based in observed reality. Yet it also allows for innovation and flexibility, as the dynamics of human society changes.

Let me now conclude with one final point. Recall this famous passage in Smith: “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. We address ourselves, not to their humanity but to their self-​love, and never talk to them of our own necessities but of their advantages” (WN I.ii.2). That sounds rather Randian, does it not? But what Smith saw in market transactions was not selfishness—as many people, both friends and foes of Smith, claim—but respect: it was peers meeting one another and making offers to one another, each of them respecting the other enough to recognize the other’s authority to say “no, thank you” and go elsewhere. What a profound and deep respect it shows others not to impose one’s own will, values, or purposes on them, not to require permission from or beg the mercy of “superiors,” and instead to recognize each person’s moral authority to say “no.”

The political economy Smith endorsed could, therefore, not only be demonstrated empirically to lead to material prosperity and the alleviation of human misery, but it also instantiated and exemplified the morally beautiful equality of individual human freedom. That is why it should inspire us yet today on both substantive and rhetorical grounds, and why every student should read Adam Smith.