The Online Library of Liberty

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• Literature of Liberty a Review of Contemporary Liberal Thought
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• I: Legal Philosophy
• Hayek and the Rule of Law
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• Aquinas and Natural Law
• Legal Naturalism and Just Legal Systems
• Lon Fuller and Natural Law
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• Horwitz: Law and Economic Interests
• II: Republican Ideology
• Civic Virtue, Mercantilism, and Liberalism
• Republican People's Militias
• Gibbon On Virtue, Property, and Militias
• The Unwritten Common Law
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• Adams, Factions, and a Balanced Constitution
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• Republicanism: Virtue Or Lockean Individualism?
• Jefferson's Declaration: Lockean Or Scottish?
• III: Self-interest, Social Harmony, and Aggression
• Cultural Evolution As Spontaneous Order
• Spontaneous Order In Human Action
• Aggression: a Sociobiological View
• Sociobiology's Program and Weaknesses
• Aggression Vs. Cooperation
• Natural Values and Individual Decisions
• Sociobiology and Ethics
• Self-interest: an Invisible Hand For Social Good
• Is Market Self-interest Socially Responsible?
• Is Egoism a Valid Ethic?
• Egocentric Altruism
• Individual Assertion Vs. Aggression
• Constructive Assertiveness
• Liberalism and Self-interest
• Sociology: Holism Vs. Individualism
• IV: Iv Economic Schools and Analysis
• Ancient Greek Economic Thought
• Scholastic Economic Thought
• Scholasticism and Austrian Economics
• Mercantilism Vs. Economic Liberalism
• The Social Meaning of Economic Liberalism
• Adam Smith Scholarship
• Jevons and Laissez-faire
• Social Sciences and the “methodenstreit”
• The Limits of Mechanistic Economics
• The Limits of Mechanistic Economics
• Austrian Economics Vs. the Mixed Economy
• Macroeconomic Formalism Vs. Human Action

Adam Smith Scholarship

E. G. West

• Carleton University

“Scotland's Resurgent Economist: A Survey of the New Literature on Adam Smith.” Southern Economic Journal 45 (October 1978): 343–369.

Professor West surveys fifty-eight studies in a critical review of the important developments of the literature on the Wealth of Nations (WN) in the last thirty years. He steers a middle course between the over-exuberant interpreters who see Smith presaging neoclassical economics, and those critics who fail to consider the historical and social circumstances in which Smith wrote. Paul Samuelson falls in the first category, seeing Smith as an always logical and consistent analyst who anticipated “general equilibrium modelling.” But this view ignores Smith's advocacy of removing governmental restraints on the economy in order to end monopolies and improve efficiency.

In his criticism of Smith's political advice to sovereigns, George Stigler overlooks the political realities of the seven-teeth century and misunderstands Smith's task in the WN. Smith was interested in constitutional reform, not the day-to-day calculus of the vote-grubbing politician.

What emerges from West's summary is the traditional liberal interpretation of the WN reaffirmed and strengthened. Smith was “a ‘total political economist’, a man who has not only competent analysis but economic judgment and a full sense of what issues are relevant.” West finds Smith an advocate of markets freer of substantial political interference than was heretofore believed. Government should exist only to permit a liberal civil and commercial society to prosper, and not to pursue other goals, however laudable. Smith's “concessions” on government economic activity in the provision of highways, bridges, and canals represent misunderstandings. He advocated not government's providing these goods, but legal permission for joint-stock enterprises to provide these “public works.” Once again misinterpretation arises from the failure of modern readers to appreciate eighteenth-century institutional realities.

The WN compares favorably with modern neoclassical economic analysis in two critical areas: the treatment of institutions and the view of competition. Modern economics is all but devoid of institutional considerations. The social, legal, and political institutions played a central role in Smith's analysis, with much of the WN advocating changes in British laws of trade, tariffs, and monopolies.

Smith viewed competition as a process, whereas most modern theorists treat it statically, as a state of affairs (“perfect competition”). In recent times, Smith's approach to the theory of competition has been advocated by relatively few theorists, F. A. Hayek being the most prominent among these. The only modern economic school following Smith in this area is the Austrian. In this view, competition is a dynamic process occurring precisely because we are not in an “equilibrium.” Divergence of expectations, change, invention, and profits and losses characterize this process. All this is absent from modern analysis.

The Smithian view of competition is integrated with his institutional emphasis. In an uncertain world, we seek not those “experts” who know best, but those institutional arrangements best suited to facilitating unknown individuals' using their talents and knowledge to their advantage and thus to society's.