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Saturday, June 27, 2015

Why Read Adam Smith Today?

[Ludwig von Mises wrote this essay as the introduction to The Wealth of Nations as pubished by Regnery in 1952.]

A popular legend calls Adam Smith the Father of Political Economy and his two great books—The Theory of Moral Sentiments, first published in 1759, and An Inquiry into the Nature and Causes of the Wealth of Nations, first published in 1776—epoch-making in economic history as well as in the evolution of economic thought. However, this is not quite correct.

Smith did not inaugurate a new chapter in social philosophy and did not sow on land hitherto left uncultivated. His books were rather the consummation, summarization, and perfection of lines of thought developed by eminent authors—mostly British—over a period of more than a hundred years. Smith’s books did not lay the foundation stone, but the keystone, of a marvelous system of ideas. Their eminence is to be seen precisely in the fact that they integrated the main body of these ideas into a systematic whole. They presented the essence of the ideology of freedom, individualism, and prosperity, with admirable logical clarity and in an impeccable literary form.

It was this ideology that blew up the institutional barriers to the display of the individual citizen’s initiative and thereby to economic improvement. It paved the way for the unprecedented achievements of laissez-faire capitalism. The practical application of liberal principles multiplied population figures and, in the countries committed to the policies of economic freedom, secured even to less capable and less industrious people a standard of living higher than that of the well-to-do of the “good old” days. The average American wage-earner would not like to dwell in the dirty, badly lighted, and poorly heated palatial houses in which the members of the privileged English and French aristocracy lived two hundred years ago, or to do without those products of capitalist big business that render his life comfortable.

The ideas that found their classical expression in the two books of Adam Smith demolished the traditional philosophy of mercantilism and opened the way for capitalist mass production for the needs of the masses. Under capitalism the common man is the much-talked-about customer who “is always right.” His buying makes efficient entrepreneurs rich, and his abstention from buying forces inefficient entrepreneurs to go out of business. Consumers’ sovereignty, which is the characteristic mark of business in a free world, is the signature of production activities in the countries of Western civilization.

The civilization is today furiously attacked by Eastern barbarians from without and by domestic self-styled Progressives from within. Their aim is, as one of their intellectual leaders, the Frenchman Georges Sorel,* put it, to destroy what exists. They want to substitute central planning by the government for the autonomy of the individual citizens, and totalitarianism for democracy. As their muddy and unwarranted schemes cannot stand the criticism leveled by sound economics, they exult in smearing and calumniating all their opponents.

Adam Smith too is a target of these smear campaigns. One of the most passionate advocates of destructionism had the nerve to call him, in the Introduction to an inexpensive edition of the Wealth of Nations, “an unconscious mercenary in the service of a rising capitalist class” and to add that “he gave a new dignity to greed and a new sanctification to the predatory impulses.” Other leftists resort to even still ruder insults.

As against such shallow opinions it may be appropriate to quote the verdict of wiser judges. The British historian Henry Thomas Buckle (1821–62) declared “that this solitary Scotchman has, by the publication of one single work, contributed more toward the happiness of man than has been effected by the united abilities of all the statesmen and legislators of whom history has presented an authentic record.” The English economist Walter Bagehot (1826–77) said about the Wealth of Nations: “The life of almost everyone in England—perhaps of everyone—is different and better in consequence of it.”

A work that has been praised in such a way by eminent authors must not be left on the shelves of libraries for the perusal of specialists and historians only. At least its most important chapters should be read by [135] all those who are eager to learn something about the past. There can hardly be found another book that could initiate a man better into the study of the history of modern ideas and the prosperity created by industrialization. Its publication date—1776, the year of the American Declaration of Independence—marks the dawn of freedom both political and economic. There is no Western nation that was not benefited by policies inspired by the ideas that received their classical formulation in this unique treatise.

However, a warning must be given. Nobody should believe that he will find in Smith’s Wealth of Nations information about present-day economics or about present-day problems of economic policy. Reading Smith is no more a substitute for studying economics than reading Euclid is a substitute for the study of mathematics. It is at best a historical introduction into the study of modern ideas and policies. Neither will the reader find in the Wealth of Nations a refutation of the teachings of Marx, Veblen, Keynes, and their followers.

It is one of the tricks of the socialists to make people believe that there are no other writings recommending economic freedom than those of eighteenth-century authors and that in their, of course unsuccessful, attempts to refute Smith they have done all that is needed to prove the correctness of their own point of view. Socialist professors—not only in the countries behind the Iron Curtain—withheld from their students any knowledge about the existence of contemporary economists who deal with the problems concerned in an unbiased scientific way and who have devastatingly exploded the spurious schemes of all brands of socialism and interventionism. If they are blamed for their partiality, they protest their innocence. “Did we not read in class some chapters of Adam Smith?” they retort. In their pedagogy the reading of Smith serves as a blind for ignoring all sound contemporary economics.

Read the great book of Smith. But don’t think that this may save you the trouble of seriously studying modern economics books. Smith sapped the prestige of eighteenth-century government controls. He does not say anything about the controls of 1952 or the Communist challenge.

  • Ludwig von Mises (1881-1973) taught in Vienna and New York and served as a close adviser to the Foundation for Economic Education. He is considered the leading theorist of the Austrian School of the 20th century.