Here’s a letter to the New York Times:
Editor:
Attempting to conscript Adam Smith into the ranks of protectionists, Oren Cass writes that “Smith was quite explicit: For the invisible hand to work, the capitalist must prefer ‘the support of domestic to that of foreign industry’ and ‘direct that industry in such a manner as its produce may be of the greatest value,’ which would also ‘give revenue and employment to the greatest number of people of his own country’” (“This Is What Elite Failure Looks Like,” July 7).
Cass misconstrues Smith, who explicitly rejects the position that Cass asserts Smith explicitly takes. In the quoted passage from the Wealth of Nations, Smith does explain that it is the invisible hand that leads a merchant to invest in the home market in ways that promote the public interest. But just before the famous term appears, Smith writes about this merchant that “he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”* Contrary to Cass’s assertion, Smith did not confine the operation of the invisible hand to domestic investment.
Smith is clear, in numerous passages in the Wealth of Nations, that he would wholly reject Cass’s case for protectionism and industrial policy – for example:
[E]very system which endeavours, either by extraordinary encouragements to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints, force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour.
All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.**
Adam Smith would be no more favorably inclined toward Oren Cass’s protectionist cause than was Abraham Lincoln toward Jefferson Davis’s Confederate cause.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), Book IV, Chapter II.
** Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), Book IV, Chapter IX.
