Adam Smith: Myths and Realities

August 16, 2020

August 17, 2020

English: Photo portrait by Phyllis Cerf. Published by Random House. / Public domain

Myth 5: Adam Smith was a libertarian.

Myth 5: Adam Smith was a libertarian.

Adam Smith is often identified with a libertarian approach to politics by which governments should interfere with our lives as little as possible, doing little more than defending our country against outside attackers, and preventing and punishing violence and fraud. But while it is certainly true that Smith opposed governmental micromanaging of the economy, and wanted individuals to have a lot of freedom in how they ran their lives, the idea that he held anything like a contemporary libertarian view of politics is a myth.

In the first place, Smith makes a number of explicit recommendations for governments to intervene in economic matters. In the second place, one of the three tasks that Smith says that governments should take up allows for the establishment of all sorts of social and economic institutions. And in the third place, what lies behind Smith’s anti-interventionist stance is very different from what lies behind the views of current-day libertarians.

The first of these points can be illustrated by the fact that Smith unworriedly accepts a role for government in setting standards for various goods and services. He regards the “publick stamp” that guarantees the quality of money to be essential to the prevention of fraud (WN I.iv.7, 40), and endorses, for the same reason, official stamps testifying to the size or quality of linen and woolen cloth (I.x.c.13, 138-9). He suggests, in the interest of restraining speculation, that private banks be prohibited from issuing promissory notes for small sums of money, comparing such a regulation to laws that require the building of walls to stop the spread of a fire (II.ii.91-4, 323-4). In the name of combating religious fanaticism, he also proposes that the state require that people study science and philosophy before being licensed to exercise any of the “liberal profession[s]” or to hold “any honourable office of trust or profit.” (V.i.g.14, 796).

There are thus a number of exceptions to Smith’s anti-interventionism. Some are justified by the very commitment to liberty that underlies his anti-interventionism. Lack of information reduces our freedom, after all, and fraud is universally seen as an offense against liberty. Other proposals are things that Smith acknowledges to be violations of natural liberty to some extent, but considers necessary for an important social purpose. The fact that Smith makes exceptions of this second type, especially, makes clear that his anti-interventionism is rooted in pragmatic concerns rather than moral principle.

Consider now Smith’s third task for government. Having said that governments must protect their citizens from external attack (the first task), and must protect each individual from “the injustice or oppression” of the others (the second task), Smith adds that they have a duty to

erect [...] and maintain[...] certain publick works and certain publick institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expence to any individual or small number of individuals, though it may frequently do much more than repay it to a great society. (IV.ix.51, 687-8)

Smith spends by far the largest chunk of his discussion of what governments should do on this task, and includes within it the making and maintaining of roads, canals, and postal services, support for education, anything the state does to protect or promote particular industries, and anything the state does to support or shape churches. Many of these projects Smith opposes, and he suggests that some of them can be well carried out on the basis of private funding (canals, for instance, and the education of middle-class and wealthy people). But others he thinks must be run and/or funded by governments, either because they will be carried out in an unsafe way otherwise (WN V.i.d.8, 726) or because the people they are meant to help will not be able to establish and maintain them on their own. This latter concern underwrites Smith’s proposal for a small public school system throughout Britain: something that would have involved a huge expansion of government spending at that time.

Smith’s distinction between what governments should and should not fund thus seems wholly pragmatic. There is no easily discernible unity either among the kinds of projects he favors — roads, a post office, public schools for the poor — or among the ones that he opposes, except that he thinks the former will not be adequately run by the private sector, while the latter will be. Smith says explicitly that both schools and churches can be “beneficial to the whole society” and that they can therefore be publicly funded “without injustice” (V.i.i.5, 815), but that that expense might “perhaps with equal propriety” be borne by those who benefit from them. His point is that governments may in principle fund these or any other institutions that benefit the whole society, but should in practice be wary of doing so if private sources can do the job as well or better.

Smith’s third task for government therefore leaves a hole in his anti-interventionist program large enough to drive a welfare-state-sized truck through. It’s unimaginable that he would have supported public health care in his own day — doctors were little more than quacks — but had he known of modern medicine, and been convinced that only the state could ensure that the poor have equal access to it, he might well have put health care, in some form, under his third task. As for public housing, food support, unemployment insurance: the question to ask in each case is whether these goods can be adequately be supplied to the poor by individuals or whether they will be adequately supplied only with the help of state funding. This is a pragmatic question, not a question of principle, and it may well be answered, in many cases, in favor of the welfare-statist view, not the libertarian one.

Of course, this point cuts in the other direction as well. If the question we need to answer is whether a good like housing or education or health care is most effectively made available to the poor by way of government action or by way of private markets, then it may turn out that the evidence supports the libertarian rather than the welfare-statist position. Or perhaps some such goods can be best provided by way of a public-private partnership. What follows from Smith’s pragmatism is that there is no a priori reason either to condemn or to commend government projects.Our answers instead must depend on detailed considerations about how they work, in a particular social and historical context.

We come now to the deepest difference between Smith and contemporary libertarians: he does not arrive at his anti-interventionism in anything like the way that they do. He does not, for instance, start from a belief that private property rights are sacred. There are just three mentions of “sacred” rights in the whole of WN, and two of them argue for a right to labor and exchange freely, rather than for a right to property. In the first, Smith takes for granted that his readers will believe in a right to property on more or less Lockean grounds, and uses that belief to argue for a more basic right to labor: “The property which every man has in his own labour,” he says, “as it is the original foundation of all other property, so it is the most sacred and inviolable” (WN I. x.c.12, 138). The second refers to “sacred rights of private property” in a more standard way (I.xi.c.27, 188), but the point is a minor one, tacked on to a generally utilitarian case against governmental obsessions with the mining of precious metals. And the third again describes, as “the most sacred rights of mankind,” just the ability of individuals to employ “their stock and industry” in the way they judge to be “most advantageous to themselves,” without mentioning property at all. (WN IV.vii.b.44, 582). Nowhere does Smith give property rights the foundational role that it plays in the libertarian conception of freedom.

Smith also does not promote the radical individualism of libertarians who take their cue from Ayn Rand. For Smith our very identity, as individuals, comes about only when we see ourselves through the eyes of others, and the main task of our moral lives is to develop our ability to aid, and feel with, our neighbors. “To feel much for others and little for ourselves, to restrain our selfish, and to indulge our benevolent affections,” he says, “constitutes the perfection of human nature.” (TMS I.i.1.5, 25) Rand would shudder. Smith is notable for his attempt to bring together individual freedom with a socially-structured conception of the self, and if he believes that governments should generally leave us alone, that is because he thinks everyday surveillance by our neighbors, and the approval or disapproval they administer to us, will suffice to ensure that we develop the virtues that our societies require of us. But the goal of Smith’s liberalism is quite clearly to foster virtues, not to help us pursue our self-interest.

In sum, even if Smith’s liberalism resembles libertarianism in some respects, it is aimed at very different ends, and grounded in very different moral and political views, than those of contemporary libertarians.

Read our previous #SmithMyths:

Comments

8/17/2020 Jon Murphy

Great stuff. I agree with the main thrust of your post, that Smith does not easily fit exclusively into the libertarian world view. He is a classical liberal, not a libertarian.

Where I think you and I will disagree, however, is where Smith would draw the line for proof of his exceptions. I certainly agree that Smith could, conceivably, support a welfare state outlook as opposed to a Randian outlook. But what sort of evidence would the sovereign need in order to intervene with propriety? I tend to read Smith as having a high burden of proof, akin to "beyond a reasonable doubt." In other words, the sovereign must show his intervention is not just on the "preponderance of the evidence" (ie a greater than 50% chance of being true), but beyond any reasonable doubt. At the risk of putting words in your mouth, Sam, I think you'd read Smith as having a lower burden of proof?

So, I agree that Smith did not have a Randian/libertarian point of view. But I do think he would have required a strong burden of proof to overcome the "natural system of liberty."

8/17/2020 Shanon FitzGerald

A powerful debunking of an all-too-common Smith myth. To this reader, at least, one more general lesson here is that we should all be wary of imagining that any one historical figure's politics/philosophy/worldview overlaps perfectly and harmoniously with our own (or that of our opponents, or anyone else living today)... for such imaginations--however popular-- are bound to distort historical intellectual realities, well covered in this case by Prof. Fleischaker.

3/3/2022 Peter Brown

I agree with previous posts that it is important to include the social and egalitarian aspects of Smith’s work.
For example whilst he comments that canals and roads can indeed be easily paid for by private tolls (and that it would seem to be a perfect balance between wear and tear caused and weight of goods), he then points out that this falls disproportionately on low value essentials like potatoes and coal and hardly touches luxury goods like spices and silk, therefore it is a charge which falls disproportionately on the least wealthy.
His desire for relatively unencumbered trade is repeatedly moderated by his desire for a fair and egalitarian system.