Liberty Matters

Adam Smith’s Emergent Rules of Justice (June/July 2023)

June 2023 marks the 300th anniversary of Adam Smith's birth. Celebrations of this tercentenary abound, notably at our sister site, AdamSmithWorks. Most often known as the father or modern economics, OLL readers know that Smith's thought was much broader than just that. In fact, political economy as we know it did not quite exist yet in Smith's time; Smith was in fact a professor of Moral Philosophy.

In this month's Liberty Matters, we're looking back at Adam Smith's legacy, and we can think of no better scholar to start than Nobel laureate Vernon L. Smith, who attributes much of his path-breaking work to his own discovery of Adam Smith. In his lead essay, Vernon Smith ties together not just the Wealth of Nations and the Theory of Moral Sentiments, he also brings Smith's posthumous Lectures on Jurisprudence into sharp relief. Vernon Smith will be joined by several other broad ranging scholars- Brianne Wolf, Leonidas Montes, Caroline Breashears, and Peter Onuf. We are delighted to bring you this forum in cooperation with our friends at Law & Liberty


The Discussion

Vernon Smith, Adam Smith’s Jurisprudence: The Origins of Property, Government, and Taxes in Implementing the Emergent Rules of Justice

Brianne Wolf, The Affective Foundations of Property, Justice, and Political Judgment

Leonidas Montes, Vernon’s Lessons about Exchange

Caroline Breashears, "Practicing Oratory on Others": Adam Smith and the Rhetoric of Life”

Peter S. Onuf, Adam Smith, State Formation, and the American Revolution

The Conversation

Read all our Scholars' responses


Vernon Smith, Adam Smith’s Jurisprudence: The Origins of Property, Government, and Taxes in Implementing the Emergent Rules of Justice



Adam Smith’s scholarly contributions concern the origins, consequences and understanding of human action. Thus, in his second published book, An Enquiry into the Nature and Causes of the Wealth of Nations (1776; WN), Smith locates the origins of national economy in the universal propensity of individuals to truck, barter, and exchange one thing for another. The unintended consequence of this propensity is the formation of public prices out of the higgling and bargaining of buyers and sellers in markets. Buyers each come to market with a maximum private willingness-to-pay money, wtp, for particular goods and are motivated to buy cheap; sellers each bring goods to market for which they have a private willingness-to-accept money, wta, based on their costs of bringing particular goods to market and are motivated to sell dear. The resolution of this collective conflict yields contract prices in buyer-seller trades that make public these previously hidden private wtp and wta valuations. Indeed, this led to Smith’s second fundamental theorem that specialization is limited by the extent of the market. People then, without realizing it or intending it, find it natural to use these prices in “pursuing their own interest in their own way,” by learning to specialize in their choice of activities, skills, and the development of their expertise. In this way, wealth is created out of enhanced resource cooperation in a vast network of connectedness that would not otherwise occur. Thereby does Smith account for the miraculous increase in national output and wealth accumulation in Northern Europe beginning in the century before him.[1]

It does not seem to be widely known or appreciated, outside of academic specialties, that in his first published book, The Theory of Moral Sentiments (1759, TMS) Smith derives a coherent fundamental theory of justice as property relevant for all societies, down to the present, and a precondition for this economic development. This theme is further informed by class notes taken by two of his students and published over two centuries later in Lectures on Jurisprudence (1978; LJ). 


Justice Is Negative 

Smith’s theory of property is a straightforward interpretation of his concept of negative justice: “Actions of a hurtful tendency, which proceed from improper motives, seem alone to deserve punishment; because such alone are the approved objects of resentment, or excite the sympathetic resentment of the spectator.” (TMS, p 112)

It is negative because the way we get more justice is by reducing injustice, that is, hurtful actions. 


Justice is Fueled by the Emotion of Resentment 

Our proclivity to vengefully strike back at those who deliberately hurt us is so immediately felt and powerful, and our response so automatic, that we may unwittingly strike an inanimate object that hurts us: 

“The causes of pain and pleasure, whatever they are, or however they operate, seem to be the objects, which, in all animals, immediately excite those two passions of gratitude and resentment. [Resentment is] excited by inanimated, as well as by animated objects. We are angry, for a moment, even at the stone that hurts us. A child beats it, a dog barks at it, a choleric man is apt to curse it. The least reflection, indeed, corrects this sentiment, and we soon become sensible, that what has no feeling is a very improper object of revenge. When the mischief, however, is very great, the object which caused it becomes disagreeable to us ever after, and we take pleasure to burn or destroy it. We should treat, in this manner, the instrument which had accidentally been the cause of the death of a friend, and we should often think ourselves guilty of a sort of inhumanity, if we neglected to vent this absurd sort of vengeance upon it.” (TMS, p 136)


Justice as Punishment Proportioned to Resentment 

The violation of justice is the violation of fair play rules. The resentment felt is proportioned to the evil inflicted, and the justified punishment response is proportioned to the resentment felt. Consequently, the greatest evil is for one person to cause the death of another. Hence, humankind, and the relatives and friends of the person slain, harbor the greatest resentment for murder and seek its maximal punishment. To be deprived involuntarily of things in our rightful possession “is a greater evil than to be disappointed of what we have only the expectation. Breach of property, therefore, theft and robbery, which take from us what we are possessed of, are greater crimes than breach of contract, which only disappoints us of what we expected.” (TMS, p 121)

With great insight, Smith is here invoking his principle (though he offers no cross references) of the subjectively experienced asymmetry between gains and losses, which he derives from a more fundamental asymmetry between human joy and sorrow: For anyone in health, prosperity, and good conscience little may be added to their welfare but:

“much may be taken from it. Though between this condition and the highest pitch of human prosperity, the interval is but a trifle; between it and the lowest depth of misery, the distance is immense and prodigious. Adversity, on this account, necessarily depresses the mind of the sufferer much more below its natural state, than prosperity can elevate him above it.” (TMS, p 64) 

And much later: 

“We suffer more, it has already been observed, when we fall from a better to a worse situation, than we ever enjoy when we rise from a worse to a better. Security, therefore, is the first and the principal object of prudence. It is averse to expose our health, our fortune, our rank, or reputation, to any sort of hazard. It is rather cautious than enterprising, and more anxious to preserve the advantages which we already possess than forward to prompt us to the acquisition of still greater advantages.” (TMS, p 311) 

In this restatement, observe that suffering is leveraged by social attitudes concerning rank and reputation, and not only health, prosperity, and conscience. The principle also indicates why human social psychology is biased much in favor of preserving advantages acquired and against new ideas and innovations with greater but uncertain advantages.

    The immediate consequence of Justice as security from injury is property: 

  • Protection from murder implies that the individual has property in their body;
  • Protection from theft and robbery implies that one has property in the products of their body and mind; 
  • Protection from violation of contract implies that individuals have property in each other’s promises. 


Justice as Victim Compensation in Weak Decentralized Governments

Since the greatest crime that can be done against any person is to be killed, in civilized countries for the crime of murder the “natural punishment is death, not as a compensation but a reasonable retaliation.” (LJ, p 476) 

But this had not been the case in early societies with weak central governments: Thus:

“amongst barbarous nations the punishment has generally been much slighter, as a pecuniary fine. The reason…was the weakness of government in those early periods of society, which made it very delicate of intermeddling with the affairs of individuals. The government therefore at first interposed only in the way of mediator, to prevent the ill consequences…which might arise from those crimes in the resentment of the friends of the slain. …The crimes themselves were already committed, there was no help for that; the main thing…society would have in view would be to prevent the bad consequences of it.” 

In particular, Smith is referring to the outbreak of violence between the family and friends of the deceased and those of the victim, and in managing these situations it was imperative that the authorities not “attempt by a punishment” a resolution that was un acceptable to the parties involved. (LJ, p 106)

“We find accordingly that it intermeddled…so that in the laws of all those nations there is a particular rate fixed for the atonement that shall be made for the death of persons of every rank in the state from the king to the slave, and this is called the wingild. This wingild varies according to the different ranks of the persons; for [those]…of higher rank their friends would be more powerful and consequently more difficultly appeased, as they would have the greater hopes of obtaining satisfaction.” (p 107)


Victim Compensation Evolved Into a Tax as Government Became Stronger

Continuing from LJ, Smith states that: “As the governments of Europe gain'd more and more strength, they thought themselves entitled to some gratuity for their trouble in interposing.”

Since their intervention was favorable to the criminal, in protecting him from “those who would take away his life and procuring him” a better:

“way of satisfying them, they thought themselves well entitled to some gratification for this protection. This was called the freedom-or-frank-guild…[which] was greater or less according to the dignity of the person within whose peace (that is, jurisdiction) the crime was committed. …By degrees the sovereigns came to consider, at least in practice, themselves as the persons chiefly injured. The addition therefore which was made to the punishment of the offenders was not to the composition or wingild due to the friends of the deceased, but to the frank-gild due to the king. …The sovereigns however in time found it more for their advantage, in order to keep peace and harmony amongst their subjects, to substitute a capitall punishment in the room of that frankguild which was due them. …Tho the king could pardon the capital punishment due to himself, as any other man can forgive debts due to himself, yet he could not pardon that satisfaction due to the friends of the deceased, any more than he could excuse them from any other debt due to them. For it is really and truly a debt as any other due from contract. In England, where the seeds of democracy were earlier sown, {Capital punishment here came in place not only of the frank guild due to the king, but also of the wingild or compensation due to the friends of the slain.} the relations had the power of prosecuting independent of the crown, and capital punishment followed on this prosecution as well as that derived from the king’s authority. When therefore the king assumed the right of pardoning, the relations of the deceased had still a [right of] prosecution after this pardon, under the name of an appeal of blood, and the capital punishment which followed on this the king could not pardon. This process still subsists but is very seldom attempted, because the legislature is very unfavourable to it and the least informality renders it void.” (pp 109-10)

There follows in LJ a long discourse on the interruption of this natural evolution of English government in implementing the emergent rules of justice. It was occasioned by the invasion of the Danish King Canute, who reigned as English King, 1016-1035. English hatred for the Danes took the form of “lying in wait” and killing them. So, King Canute introduced a law requiring punishment by death, thus substituting capital punishment for the customary authority of the victim’s family and friends. Following the Norman Conquest this rule evolved into “a composition” in which “the willful and premeditated killing of a man in whatever manner…[was] called murder and is always punished with death.” (LJ, p 110) 


In Conclusion

Capital punishment for the crime of murder, and for lesser crimes such as theft and robbery, are represented by Adam Smith as having evolved naturally in the pre-civil order, and account for the general forms taken by the rule-of-law in modern liberal states. So has the punishment for violation of contract, which is not criminal but may lead to compensation for damages, via a private transfer from defendant to plaintiff. This last principle is literally one of “victim compensation,” which was found natural also for criminal infractions in the first societies where governments were weak and decentralized. The authorities in these fledgling states were driven primarily by peace-keeping motives to prevent an outbreak of violence between the family and friends of victims and those of the perpetrators. Hence, when the authorities apprehended a criminal, they were presented to the family and friends of the victim to determine what was to be done. The purpose was to avenge the victim who tended always to be at the center of community sympathy; it was too late for talk of prevention, a prerogative much later of strong central governments, concerned only with punishing “crimes against the public,” including generally, but not specifically, the bereaved local neighborhood of family and friends of the victim. That public sympathy sides with these victims, is evidenced today in national demonstrations, riots, media coverage, calls for tighter gun controls, and for police accountability for the overuse of force in apprehending suspects. 

In these cases, everyone seems concerned with justice as punishment for the alleged wrongs committed, or for police reform, but the only victim compensation is in whatever satisfaction exists in seeing the perpetrators get their due. Although we imagine ourselves more compassionate than the brutes of old, it has not produced sentiment for a return to the principle that criminal punishment should include a sacrifice of their income or assets to help compensate the victim for harm done. 


[1] Smith of course had many precursors in Mandeville, Sir William Petty, the French Physiocrats, and the Spanish Fathers. As Mandeville put it in the Fable of the Bees: The very poor/ were richer than the rich before./ Greed is beneficial found/  when it’s by law rapt and bound. /The worst of all the multitude / did something for the common good.” But Smith brought it all together in a book read by scholars, political leaders and professionals in Europe and America. Moreover, the timing was perfect, coinciding with the American Revolution whose subsequent constitution reflected the English-Scottish development of classical liberalism. 

Author Biographies

Vernon L. Smith is a professor of economics at Chapman University’s Argyros School of Business and Economics and School of Law in Orange, California. He was awarded the Nobel Prize in Economic Sciences in 2002 for his groundbreaking work in experimental economics. He is also a research scholar emeritus at George Mason University Interdisciplinary Center for Economic Science, a fellow of the Mercatus Center, and a senior fellow at the Cato Institute, all in Arlington, Virginia.

Brianne Wolf is Assistant Professor of Political Theory and Director of the Political Economy minor at James Madison College at Michigan State University (JMC). She specializes in the history of political thought with a focus on the Scottish and French Enlightenments, liberalism, moral judgment, and the interaction between economics and politics. She did her undergraduate work at JMC, has an M.A. from the University of Chicago, and a Ph.D. in political science from the University of Wisconsin-Madison for her dissertation work on the relationship between freedom and aesthetic judgment in the modern age. She has published on Jean-Jacques Rousseau, Adam Smith, Alexis de Tocqueville, and Friedrich Hayek and this work can be found in History of Political Thought, Review of Politics, Polity, and edited volumes. Dr. Wolf is currently at work on a book length study of the role of taste in solving problems of individualism in the liberal tradition in the thought of David Hume, Jean-Jacques Rousseau, Adam Smith, and Alexis de Tocqueville titled “Beyond Rights and Price: Liberalism with Taste.” She is also working on other projects analyzing the connections between the history of political and economic thought.

Leonidas Montes is director of Centro de Estudios Públicos and Adam Smith Professor at Universidad Adolfo Ibáñez ( in Chile. He is the author of “Adam Smith in Context”, co-edited “New Voices on Adam Smith” with Eric Schiliesser and has published some articles on Adam Smith, on Hayek and his visits to Chile (with Bruce Caldwell) and on Milton Friedman and his visits to Chile (with Sebastian Edwards)

Caroline Breashears is a Professor of English at St. Lawrence University. She studied English at Girton College, Cambridge, graduated Summa Cum Laude from the University of Arkansas, and earned her PhD at The University of Virginia. She has published scholarly articles on authors such as Adam Smith, Jane Austen, Elizabeth Inchbald, and Ayn Rand, as well as a book about the memoirs of eighteenth-century scandalous women.  She has also written for outlets such as the Reading Room, Law & Liberty, AdamSmithWorks, and AIER. 

Peter S. Onuf, Thomas Jefferson Foundation Professor Emeritus in the Corcoran Department of History at the University of Virginia and Senior Research Fellow at the Robert H. Smith International Center for Jefferson Studies (Monticello). His work on Thomas Jefferson’s political thought, culminating in Jefferson’s Empire: The Language of American Nationhood (2000) and The Mind of Thomas Jefferson (2007) grows out of earlier studies on the history of American federalism, foreign policy, and political economy. Onuf is coauthor with Annette Gordon-Reed of “Most Blessed of the Patriarchs”: Thomas Jefferson and the Empire of the Imagination (2016) and author of Jefferson and the Virginians: Democracy, Constitutions and Empire (2018).

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