Here’s a letter to the Wall Street Journal.
Editor:
Glory Liu argues that, in reality, Adam Smith wasn’t as favorably disposed to free markets as Milton Friedman portrayed him as being (“Adam Smith Is Known for His ‘Invisible Hand’ Theory. The Truth Is More Complex.” September 13). Her evidence for this thesis is thin. While, for example, Alexander Hamilton did indeed advocate active government regulation of international trade, contrary to Prof. Liu’s suggestion, he found no inspiration for this position in Smith’s Wealth of Nation. As Douglas Irwin reports in his Clashing Over Commerce, Hamilton explicitly dismissed the Smithian case for free trade as “one of those wild speculative paradoxes, which have grown into credit among us, contrary to the uniform practice and sense of the most enlightened nations.”* Smith’s case for free trade was far too vigorous for Hamilton.
Also, although Prof. Liu correctly writes that Smith was “a defender of moral equality [and] a critic of concentrated wealth,” she incorrectly implies that being such a defender and critic means that Smith was skeptical of free markets of the sort endorsed by Friedman. For Smith (as for Friedman), free markets are unmatched at promoting moral equality and ensuring against concentrated wealth.
I encourage your readers to read Wealth of Nations in full to reach their own conclusion. But it’s a long book. This passage suffices to convey Smith’s attitude toward markets and attempts by governments to regulate them:
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.**
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* Douglas A. Irwin, Clashing Over Commerce (Chicago: University of Chicago Press, 2017), page 70.
** Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Fund, 1981 [1776]), page 687.
