≡ Menu

Was Adam Smith the 18th-century’s Paul Krugman?

Here’s a letter to The American Conservative (HT Ross Mohan):

Reviewing Nicholas Phillipson’s new biography of Adam Smith, George Scialabba portrays Smith as having been less a proto-Milton Friedman and more a proto-Paul Krugman (“Das Capitalist,” March).  His portrait, alas, bears no resemblance to the real Adam Smith.

For example, while Mr. Scialabba is correct that “Smith roundly mistrusted businessmen,” such mistrust is a hallmark of market-oriented economics rather than evidence of its rejection.  Precisely because many business people are untrustworthy, competitive markets – free of government-granted privileges (such as the tariffs endorsed by Mr. Scialabba) – are necessary to give consumers and workers maximum possible scope to avoid dealing with business people who are either unethical or incompetent (or both).  Or so market-oriented scholars have argued for generations.

An even more farcical piece of evidence offered by Mr. Scialabba to support his notion that Smith was skeptical of free markets is Scaiabba’s observation that “Smith was firmly on the side of the workers, a robust partisan of full employment and high wages.”  Indeed he was.  (Mr. Scialabba apparently believes that the ranks of market-oriented economists are full of scholars who advocate unemployment and low wages.)  Smith sided with workers against government-protected monopolies and high tariffs, arguing that what he called “the obvious and simple system of natural liberty” would best promote the welfare of ordinary men and women far more surely than that welfare can be promoted by the prescriptions, proscriptions, taxes, and other intrusions into the market of the “man of system.”

Donald J. Boudreaux

This essay by Scialabba is stuffed with many more errors, misinterpretations, and half-truths than can be mentioned in a single letter.  Curious readers might seek them out and list these errors in the comments section.