Front Page Titles (by Subject) Smith as Political Economist - Literature of Liberty, April/June 1978, vol. 1, No. 2
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Smith as Political Economist - Leonard P. Liggio, Literature of Liberty, April/June 1978, vol. 1, No. 2 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Smith as Political Economist
“The Just Economy: The Moral Basis of The Wealth of Nations.” Review of Social Economy 34 (1976): 295–315.
Adam Smith's The Wealth of Nations is intimately concerned with justice and injustice, with the conflict between private and public interests, and with the antinomy of liberty vs. coercion. Smith's central concern, this problem of a just economy, has been neglected. Political economy for Smith was a subdivision of jurisprudence because he believed the proper administration of justice was a prerequisite for a functioning economy and the accumulation of wealth.
Smith followed the Greek tradition of moral philosophy and was not a Hobbesian. He judged that moral norms make community possible; therefore all human societies are essentially moral communities and are committed to notions of right and wrong. Justice is uniquely important because its norms undergird the social order.
Accenting the central role of justice in his Wealth of Nations, Smith at the end of his Theory of Moral Sentiments inter preted positive law as an “imperfect attempt towards a system of natural jurisprudence, or towards an enumeration of the particular rules of justice.” (This resembles Friedrich Hayek's view of law in Law, Legislation, and Liberty.)
According to Smith, political economy aims at a just economy in a just society. Within this moral society, the well-being of all would advance in the fairest, even though imperfect, manner. Not opulence, but economic advancement for the masses in a just society was Smith's goal. No conflict exists between this economic advancement, motivated by self-love in The Wealth of Nations, and the moral advancement through prudence expounded in Moral Sentiments.
Within Smith's moral framework, justice both preserves and makes society possible. Enforcement of justice alone makes force acceptable. And only the enforcement of justice is the prerogative of the state. Otherwise, individuals must be left free to develop higher virtues, such as beneficence. These virtues are intimately connected with personal choice and freedom, and hence cannot be enforced or commanded.
Government, although necessarily connected with force, is not force. Smith defined the institution of government by its purpose, justice; and not by its means, force. Thus for Smith, government is justice institutionalized: “The liberty, reason, and happiness of mankind ... can only flourish where civil government is able to protect them.” [Wealth, p. 754.]
Adam Smith saw liberty (political, economic, religious) in a just society as the ideal, and portrayed it as the central theme of The Wealth of Nations. In a free society, and under a system of justice, people would have their self-expression protected to develop other virtues and efficiently produce goods. Moreover, liberty presupposes limiting government, which though it exists to insure justice, is itself a source of injustice. Through its sheer size, government is dangerous, since it can then perpetrate grave injustices far worse than the minor misdeeds of individual citizens which may be easily rectified in the social order.
In all this, Adam Smith was dealing not merely with the unique problems of one historical era. “Mercantilism” was the name he gave to manifestations of abuses not unknown today in the twentieth century. Mercantilism, and its zero-sum approach to economic relationships under a variety of guises, seems to be a persistent characteristic of modern states.