David Friedman, writing in Reason, defends Adam Smith from the many attempts by today’s progressives to claim him as one of their own; Friedman also exposes Murray Rothbard’s carelessness (to put it mildly) in assessing Smith’s work. Two slices from Friedman:
Not only did Smith not endorse a progressive income tax, he did not endorse any sort of income tax. “Capitation taxes,” he warned, “if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man’s fortune varies from day to day, and without an inquisition more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must in most cases depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain.”
Noah Smith, of the Noahpinion newsletter, has offered this quote to claim that Adam Smith favored income redistribution: “Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many.” He neglects the sentences that follow: “The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security.…Where there is no property, or at least none that exceeds the value of two or three days’ labour, civil government is not so necessary.” Smith is not arguing against inequality. He is saying that inequality is what makes government necessary.
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)
People, however, who are protected by private property rights and the derivative right to contract, are united by the vast mutual benefits production and exchange with one another can make from our dramatic differences in interests and abilities. Instead of a zero-sum game, market competition produces an incredibly positive-sum “game” in which each benefits him- or herself by finding more and better ways to benefit others, which George Reisman recognized as producing a situation where “one man’s gain is positively other men’s gain.” And it comes through the ability to create and exchange with others, which Smith noted, is “common to all men, and to be found in no other race of animals,” which is why for man, “the greater part of his occasional wants are supplied by…treaty, by barter, and by purchase,” which, in turn, “gives occasion to the division of labor,” and the massive expansion of output that makes massive expansions of consumption possible.