526. Was Adam Smith Really a Right-Winger?

Episode Summary

Executive Summary: The episode examines how Adam Smith has been transformed from a complex moral philosopher into a symbol of free-market capitalism, especially through the Chicago School and later political uses in the U.S. and UK. It contrasts Smith’s actual writings on sympathy, commercial society, and government with modern conservative and libertarian readings, arguing that both left and right selectively appropriate him.

Main Topics: Adam Smith’s original ideas and moral philosophy (Priority: 5/5): The discussion begins with Smith’s The Theory of Moral Sentiments, emphasizing sympathy, moral judgment, and the tension between being admired and being truly praiseworthy. The Wealth of Nations and Smith’s critique of empire and trade restrictions (Priority: 5/5): Smith’s later work is presented as a critique of protectionism, mercantilism, and British imperial policy, including the colonies and trade controls. The rise of the Chicago School’s interpretation (Priority: 5/5): The episode traces how economists like Viner, Knight, Stigler, Friedman, and Hayek re-centered Smith around self-interest, price theory, and the invisible hand. The invisible hand as a misread symbol (Priority: 5/5): Scholars explain that Smith used the phrase sparingly and as an unintended-consequences metaphor, not as a blanket defense of market perfection or deregulation. Smith in British politics and Thatcherism (Priority: 4/5): The Adam Smith Institute and Margaret Thatcher are presented as key vehicles for turning Smith into a guide for privatization, tax cuts, and shrinking government. Left Smithians vs. right Smithians (Priority: 4/5): The episode highlights ongoing scholarly debate over whether Smith supports markets, welfare, regulation, or some combination of all three. Re-reading Smith through The Theory of Moral Sentiments (Priority: 4/5): Russ Roberts and others argue that economists often neglect Smith’s moral psychology, which can challenge narrow utilitarian and market-only interpretations.

Key Arguments: Smith was not simply anti-government; he distrusted politicians, but also supported public goods like education and recognized the dangers of private collusion and inequality. The Chicago School elevated one part of Smith’s thought—self-interest and the invisible hand—into a complete ideology, obscuring his broader moral and social concerns. The phrase 'invisible hand' in Smith is best understood as a metaphor for unintended consequences, not a claim that markets are always self-correcting or morally superior. Smith opposed protectionism, mercantilism, and empire because he saw them as costly, inefficient, and harmful to ordinary people. British Thatcherism and later free-market politics used Smith as intellectual cover for privatization, deregulation, and anti-bureaucratic reform. Left-leaning readers are not wrong to find support in Smith for public education, concern for the poor, and skepticism of merchant power. Many economists and policymakers cite The Wealth of Nations without having read The Theory of Moral Sentiments, producing a distorted view of Smith.

Data Points: UK government share of national income: 40% - Eamon Butler argues Smith would see current UK taxation as oppressive. Time between Smith’s major books: 17 years - Between The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). Smith’s age in 1759: mid-30s - He published The Theory of Moral Sentiments while teaching at Glasgow. Smith’s age when he tutored the duke: 17-year-old duke tutored - The traveling tutor role led him to Europe and major intellectual encounters. Invisible hand usage in Smith’s works: 3 times total; 1 time in The Wealth of Nations - Scholars emphasize its limited and contextual use. Quangos in the UK identified by the Adam Smith Institute: 3,068 - Used by the Institute to argue for bureaucratic cutting. Years since Smith’s death at time of Chicago influence: nearly 200 years - Stigler and Friedman helped modernize Smith’s reputation long after his death. Housing stock owned by local governments under Thatcher: one third - Butler cites this to justify right-to-buy privatization. Britons potentially preferring public ownership: more than three-quarters - A poll cited in support of renewed public ownership of utilities and rail. Chinese rural-to-urban migration: hundreds of millions - Used by Russ Roberts to illustrate market coordination and the 'invisible hand' metaphor. Length of Wealth of Nations: 900-plus pages - Used to explain why selective reading is common. Price of silver digression in Wealth of Nations: 90 pages - Cited as an example of the book’s length and difficulty. Liz Truss’s premiership length: 44 days - Used to illustrate UK political instability and market reaction.

Pivotal Quotes: "If the colonies, notwithstanding their refusal to submit to British taxes, are still to be considered as provinces of the British Empire... it is likely to cost immense expense without being likely to bring any profit." — Adam Smith (quoted via Glory Liu): Smith’s critique of British colonial empire in The Wealth of Nations. "By preferring the support of domestic to that of foreign industry... he is in this, as in many other cases, led by an invisible hand..." — Adam Smith (quoted via the transcript): The core passage used to discuss the limited, metaphorical meaning of the invisible hand. "The Chicago school picked up a few aspects of Smith's thought and made it the whole of Smith's thought." — Dennis Rasmussen: A central critique of how modern economics selectively uses Smith.

Implications: Listeners should treat Adam Smith as a complex thinker, not a free-market mascot. His work supports both market coordination and moral/social limits, which matters for debates over privatization, welfare, regulation, and how economists use history to justify policy.