Adam Smith: Economics can set you free

Smith told politicians to get out of the way and let people trade freely: Social and economic harmony did not need to be planned from the center. It emerged naturally as human beings struggled to find ways to live and work with each other. Freedom and self-interest did not lead to chaos but — as if guided by an “invisible hand” — to order and concord.

All that was needed was an open society and free markets, with rules to maintain that openness and freedom. But those rules, of justice and morality, would be general and impersonal, not for the benefit of minority cliques.

It was not ‘The Wealth Of Nations’ which first made Smith’s reputation, but a book on ethics, ‘The Theory Of Moral Sentiments.’ That book argues that the source of human morality is our natural sympathy for others (today we might say empathy). By seeing things from other people’s point of view, we learn how best to live happily alongside them.

Some wonder how the self-interest that drives Smith’s economic system can be reconciled with the sympathy that drives his ethics. But Smith understood that human nature is complex. The baker does not supply us with bread out of benevolence, but nor is it self-interest that prompts someone to dive into a river to save a drowning stranger. Self-interested human beings can — and do — live together, peacefully and productively.

So ‘The Wealth Of Nations’ is no endorsement of dog-eat-dog capitalism, as sometimes caricatured. Self-interest may drive the economy, but freedom is a force for good. Smith believes in free markets because the poor will benefit most from them. Only the rich and powerful benefit from other systems.

Now Smith dominates the main street of the city where he worked and, in 1790, died. Tourists from all over the world pose for pictures and guides use the prominent monument as a natural assembly point. Many wonder who Adam Smith was and why he deserves such prominence.

In an age when governments claim to be able to solve every problem, people will find his message refreshing: When we reject political interventionism and rely on natural liberty, we find ourselves, unintentionally but surely, in a harmonious, peaceful and efficient society.

Dr. Eamonn Butler is director of the Adam Smith Institute think-tank in London, which led the campaign for the new statue, and author of ‘Adam Smith — A Primer’ (2007, IEA, London).

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