There is a burgeoning movement afoot to redefine Adam Smith as a “liberal” of the contemporary, progressive sort, rather than as the icon of classical liberalism he is standardly taken to be. It has never been a secret that Smith was no anarchist, nor even, probably, a “minarchist.” He argued that the government should undertake principally three tasks: defense against foreign invaders (an army); defense against domestic invaders (police and a court system); and public works (those things from which everyone would benefit but from which no private investors would profit enough to provide).
This last task, in particular, is the edge of the proverbial wedge: left-leaning scholars who would like to knock Smith off his pedestal in the classical-liberal pantheon have argued that this criterion licenses — indeed, requires — a great deal more active government action than those who wear Adam Smith ties would care to admit.
Emma Rothschild’s Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment is the latest salvo in the battle to redefine Smith. Rothschild, director of the Center for History and Economics, King’s College, Cambridge, has written an investigation into the economic and political writings of the late eighteenth century. It is full of interesting facts and quotations, and analyzes texts in novel, illuminating ways. Although one cannot adequately address the book’s wideranging discussions in a short review, two of Rothschild’s central themes are of particular interest for people who want to understand Smith aright.
Rothschild’s first claim is that Smith intended his famous “invisible hand” remark in The Wealth of Nations as nothing more than a “mildly ironic joke.” The second is that Smith was not as committed to laissez faire as has been thought.
Consider the first. Rothschild begins by noting that Smith uses the phrase “invisible hand” only once in The Wealth of Nations — from which she concludes that it is unlikely he meant it to be the conceptual centerpiece of the book. Moreover, she shows that Smith’s contemporary and near-contemporary readers did not center on that idea as the most significant of Smith’s work. In fact, it took almost a century before people started claiming that the invisible hand was one of, if not the, most important ideas in his book.
Rothschild’s argument is provocative, but unpersuasive. The principal reason it fails is that one could grant each of her claims and they would still not contravene the crucial fact that the idea of an invisible hand, if not the phrase itself, pervades Smith’s argument. Over and over again, he makes reference to and relies in his argument on the claim that people acting only on their local, often selfinterested intentions can unwittingly give rise to a larger system that benefits both themselves and others.
I would argue that the invisible hand is perhaps the central notion in Smith’s book. Why else does Smith advocate free trade, the removal of government intervention in the market, protection of private property, and the abolition of state-granted privileges like monopolies? In each case they provide individuals the opportunities to satisfy their fundamental desire to “better their own condition,” which, in the doing, makes everyone better off.
The importance of the indivisible-hand notion for Smith’s argument also goes some way toward explaining why Rothschild overstates her other claim, namely, that Smith is less inclined toward laissez faire than was previously thought. It is true, as Rothschild reminds us, that Smith recommended state subsidy of public schools (though it should be noted that he argued they must be only partially state-funded, that competition was still necessary, and that they should cover only the elementary years). And it is also true that Smith was quite concerned with the well-being of the average laborer. Like Turgot, Rothschild argues, Smith wanted the government to take action to help the condition of the poor. She writes: “Smith’s discussion of scarcity has been of central importance to his posthumous reputation as a relentless proselytizer of free enterprise — as a theorist who promoted commerce, even in times of impending famine. Yet he was thought of during his lifetime as a friend of the poor.”
Those two things are not inconsistent! As is increasingly clear to us today, and was already clear to Smith in 1776, free markets are not incompatible with concern for the poor. In fact, as Smith saw, free markets are essential to making the poor better off — that is why he endorsed them.
Rothschild’s book is interesting for its extensive information about thinkers like Condorcet and Turgot, and about the political and intellectual climates in which they and Smith wrote. But in the end her understanding of Smith, as well as of free-market economics, leaves something to be desired.