This is one of a series of posts that will ask what the most pertinent question raised by a prominent influencer of political economy might have been, and what the relevance of that question might be today. There is a list of all posts in the series at the end of each entry. The origin of this series is noted here.
After the first two posts in this series, the topics have been chosen by me, and this is one of those. This series has been produced using what I describe as directed AI searches to establish positions with which I agree, followed by final editing before publication.
In this post, I give due attention to the supposed first economist of all, Adam Smith. I read Smith's Wealth of Nations in 1976, which year happened to mark the 200th anniversary of its publication. I still have that copy, although these days I find a Kindle edition more useful for searching, which I still do. Why? Because Smith was not the man most now claim him to be. He no doubt thought of himself as a moral philosopher, as that is what he was a professor of in Glasgow. The world has largely forgotten that. We should not have done so. Recalling it, the relevance of what Smith had to say remains significant today, but not in the way most people think.
Adam Smith is widely invoked by economists but rarely read. The modern right claims him as the father of the self-regulating market, the apostle of competition, and the patron saint of the “invisible hand.” But the real Smith — the moral philosopher of Kirkcaldy — is almost unrecognisable in these distortions. His first great work, The Theory of Moral Sentiments, argued that society rests on sympathy, mutual regard, and the capacity to imagine ourselves into the lives of others. Only on that moral foundation did he later examine markets in The Wealth of Nations, and even there, he was clear: markets are fragile, prone to monopoly, easily corrupted, and dependent on a well-governed society.
Hence the Adam Smith Question: if markets depend on moral sympathy, public virtue, and shared responsibility to function, why do we still pretend that economic life can be governed by self-interest alone?
Sympathy as the foundation of society
Smith begins not with trade but with sympathy, or the human capacity to feel with others, to imagine ourselves in their circumstances, and to respond with concern. He argued that without sympathy there could be no trust, no cooperation, and no social stability. Economic exchange presupposes moral exchange; markets rely on the character of those who enter them. Far from celebrating selfishness, Smith believed that individual flourishing was bound up with the well-being of others. The idea that he endorsed a world of isolated self-interest is a fiction created by those eager to strip markets of their moral obligations.
Markets require moral restraint
In The Wealth of Nations, Smith examined markets with curiosity but also with suspicion. He admired their capacity to allocate resources, but never suggested that they were naturally just or self-correcting. Indeed, he warned repeatedly that merchants and manufacturers, left to their own devices, would conspire to raise prices, reduce wages, and rig the system in their favour. Competition was not a natural state but a fragile achievement that required regulation, standards, and vigilance from the state. Smith's understanding was moral as much as economic: markets work only when participants behave with integrity, and only when society defends itself against the concentration of economic power.
The betrayal of public trust
Smith had little patience for those who used the language of free markets to justify private enrichment. He condemned monopolists, rentiers, tax-dodgers, and those who lived off the labour of others while contributing nothing to the common good. He believed that public officials had a duty to uphold justice, prevent exploitation, and ensure that economic arrangements served the whole community. In this respect, he was far closer to modern critiques of inequality than to the neoliberal ideologues who claim him as their own. For Smith, an economy that rewarded idleness at the top while punishing effort at the bottom was morally corrupt.
Wealth, virtue, and the danger of admiration
Smith observed something morally unsettling in commercial societies: people admired the wealthy not for their virtue but for their wealth. This admiration distorted moral judgment, encouraged vanity among the rich, and induced the poor to internalise feelings of inadequacy. Smith feared a society in which wealth became the measure of merit, and in which public respect shifted from character to possession. He understood that inequality was not merely a distributional problem but a moral one because it corroded sympathy, frayed social bonds, and undermined public virtue.
The limits of the invisible hand
Smith mentioned “an invisible hand” only once in The Wealth of Nations and once in Moral Sentiments, on both occasions in contexts far removed from the mythology built around them. He did not believe that markets magically transformed private greed into public good. Rather, he believed that, under certain conditions - moral, institutional, and social, as well as economic - self-interest could unintentionally contribute to wider prosperity. But those conditions were demanding, requiring stable institutions, fair taxation, justice, infrastructure, and a public realm strong enough to prevent corruption. The modern cult of the invisible hand strips Smith's argument of all complexity, and with it, all truth.
Smith the moral reformer
Smith was also no libertarian. He believed in progressive taxation, public education, regulation of financial markets, and state investment in infrastructure. He supported the enforcement of labour standards and condemned the imbalance of power between employers and workers. He was, above all, a moral reformer: someone who believed that economic systems should promote virtue, not vice, and that the wealth of a nation lay ultimately in the well-being of its people. The modern habit of reducing Smith to a slogan is therefore an act of intellectual vandalism.
What answering the Adam Smith Question would require
To take Smith seriously — the real Smith, that is, and not the invention of neoliberal commentary — would require:
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Rebuilding moral foundations, recognising that trust, sympathy, and social responsibility are prerequisites for any functioning economy.
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Taming concentrated power by enforcing anti-monopoly rules, regulating finance, and preventing corporate capture of the state.
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Revaluing public goods requiring investment in infrastructure, education, health, and justice as the supports that markets depend on but cannot themselves create.
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Challenging the moral prestige of wealth by confronting the cultural assumption that money is the measure of merit.
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Restoring fairness in labour markets, ensuring that wages, conditions, and bargaining power reflect the moral reality that workers create value.
These are not modern intrusions into Smith's philosophy; they are its continuation.
Inference
The Adam Smith Question invites us to recover the thinker we have lost. Smith believed that markets were useful but morally fragile, dependent on sympathy, fairness, and justice. He understood that economic life could not be separated from moral life, and that the strength of a society lay in its capacity for mutual regard. To answer his question is to reject the hollow doctrines that claim markets function best when stripped of moral responsibility. It is to recognise instead that freedom, prosperity, and trust depend on a shared ethical foundation.
Smith's work points us toward a simple truth, which is that an economy that neglects its moral basis will lose both its prosperity and its soul.
Previous posts in this series
- The economic questions
- Economic questions: The Henry Ford Question
- Economic questions: The Mark Carney Question
- Economics questions: The Keynes question
- Economics questions: The Karl Marx question
- Economics questions: the Milton Friedman question
- Economic questions: The Hayek question
- Economic questions: The James Buchanan question
- Economic questions: The J K Galbraith question
- Economic questions: the Hyman Minsky question
- Economic questions: the Joseph Schumpeter question
- Economic questions: The E F Schumacher question
- Economics questions: the John Rawls question
- Economic questions: the Thomas Piketty question
- Economic questions: the Gary Becker question
- Economics questions: The Greg Mankiw question
- Economic questions: The Paul Krugman
- Economic question: the Tony Judt question
- Economic questions: The Nancy MacLean question
- Economic questions: The David Graeber question
- The economic questions: the Amartya Sen question
- Economic questions: the Jesus of Nazareth question
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I have read The Wealth of Nations – I bought a copy for £2 then lockdown came……….
This one however is much easier reading
https://www.goodreads.com/book/show/20821053-how-adam-smith-can-change-your-life
So you dont need to deal with 18th Century prose
John, if you haven’t already read it, there’s a fine book by the American historian Professor Arthur L Herman – The Scottish Enlightenment – which sets out Smith’s thinking in detail and in the context of ideas being developed by his colleagues.
It’s currently in its 8th edition and has been updated by Prof Herman as new information comes to light and is available in paperback. The opening chapters may be of less interest as they explore pre-enlightenment events setting the scene for the sudden explosion of thinkers across numerous subjects which occurred later in Scotland.
Prof Herman comes across as a bit of a “Scotophile”, but it’s worth remembering that the has no familial connection with Scotland and the book results from years of research, which revealed that a small nation on the fringes of Europe was at the centre of European culture, thinking and enlightenment. This has clearly whetted his interest in Smith and his contemporaries. I suspect he is as angered as Richard with the present day distortions of Smith’s thoughts and works.
P.S. kudos to Richard for an excellent summation of Smith’s works.
Thanks, Ken
I note the suggestion. Dare I add another to my pile of books?
Well said – Smith understood that rapacious capitalism was a dead end, that benefited no one in the end.
This is the best appraisal of AS’s moral philosophy, IMHO.
What Eammon Butler (director AsI) has done in the Adam Smith Institute is an abomination to AS and Scottish History that would make the real AS turn in his grave. The dead can’t defend themselves.
I’ve asked Eammon Butler many times who funds the ASI, but no response. Seems the thing that is invisible is honesty and morality.
If not done someone or a group needs to launch the Real Adam Smith Insitute and put this post as its centre piece.
And restore the real AS to his rightful place of kindness and decency.
Thanks, and much to agree with.
A real Adam Smith Institute is a great idea – preferably located in Kirkaldy.
It should just be called The Adam Smith Institute and the outfit in Great Smith Street should be challenged to justify its abuse of his name
I have enjoyed reading your “Economics questions” series. It has led me to this conclusion – economics is the basis of society. With the exception of two (Hayek and Milton) all rest seem to accept some form of state control is required for a degree of equality, within a society. I also note that Hayek and Milton frame their position as one of personal freedom, above all else. The above might be a gross simplification, of course.
Based on the above, it seems to me that equality, in a society, is in some way proportional to the amount of state control, and that political direction, were it to focus on equality, would find it fairly easy to determine that amount of state control needed.
I am not sure how you think Hayek and Friedman were not about state control.
And I also do not follow your logic. Low state control usually means high freedom for a few and no protections for many.
I have long suspected you of trolling: now I think you are. This is pure far-right clap trap. Don’t call again.
If you will allow me a reply, Hayek and Friedman were all about personal freedom, so called free markets and limited state control.
“Low state control usually means high freedom for a few” – Indeed, the more state control you have the higher the equality, but lower the freedoms. You seem to have misunderstood my sentence.
“I have long suspected you of trolling: now I think you are. This is pure far-right clap trap. Don’t call again.” – Very amusing, but unsurprising.
You have used many identities to post here – and now you use another. It’s a classic far-right trolling technique, and now you have admitted it. Whatever name variation you now use you will be blocked.
I’m just reading “A Short History of Greece”. Most of the points made by Smith were made in the period 500 through to 300BC in Greece. Extremes of wealth bad etc etc. Thus the puzzle is why does humanity repeat the same errors time after time – given the overall outlines of what constitutes a “good” society were known +/- 2300 years ago. Clearly the temptations of great wealth & the power that goes with it drive a repetition of fundamental mistakes down the ages. Everybody starts off with the best of intentions ref democracy, then the grifters/demagogues get a grip and off we go down into the abyss. (ancient greeks were very keen on education – rationlising that education was a bulwark of a good society)
“In short, whom a person becomes is a co-construction of genes, gene expression from environmental effects, developmental plasticity, the ecological and cultural surroundings, the gifts of evolution, and the nature of the care received.”
The quote is from the book
“Neurobiology and the Development of Human Morality: Evolution, Culture, and Wisdom” written by the American psychologist and author Darcia Narvaez
In terms of cultural thinking if you understand that embedded in life is a back-up system that works on the basis if you can’t achieve well-being through individual effort (including competition) you can through cooperation then you are better placed not just materially but also psychologically. “Love thy neighbour as thyself” is the short version!
I don’t know if you have read Mike, Michel Hudson’s book from 2023 ‘The Collapse of Antiquity’? There are chapters in there on how Greek ‘democracy’ had the same problems we have now – a rich elite who are very badly behaved indeed, forcing one of the great philosophers of that period to take their own life to prevent a critical consciousness over this weakness in democracy – a weakness that Putin and his acolytes use as an excuse for themselves. Schofield would find it a good read too based on some of his recent posts.
Hudson also explores the undermining of the wisdom of Jesus in Christian Rome, and the emergence of the roman Catholic church.
What I have learnt is that money is a battle ground that seems to just go on and on and on.
Nope but have read: The Darkening Age by Catherine Nixey – same topic – very good book.
It was the first book on economics that I read (round about the same time as you). I wholly agree with your surmise of his intent and the basis of his writing. For it to be captured by neoliberals would cause Smith to turn in his grave.
I have always believed his intent to have been largely misrepresented by neoliberals and even in economics teaching.
His message is as important today – arguably more so – than it was in his time. We need a fair, equitable, moral approach to economics if it is to serve society at large well.
You have done Adam Smith proud. I salute you.
Thank you. I had no inclination to read Smith, based on out-of-context quotes and those who purported to cite him. Now I have a better idea of the man. Thanks also to readers for their book recommendations.
If I was still teaching History of Economic Thought, would definitely use this as a discussion document.
Doesn’t put in evidence the ideological burden on the young Smith to establish the compatibility od individual agency with any kind of moral order following the strong polarities established by Mandeville in his fable of the bees. That’s where radical individualism has its first expression in a discourse which pretends to social viability.
On the other end, the social process of moral sentiments needs to be arranged by Smith to sustain an evolving if not necessarily dynamic social order. Status competition plays an essential role here in a way appreciated by later social psychologists like David McClelland. But one can say that the individual need for social location referenced there isn’t necessarily hierarchical in the ways Smith was familiar with either in the Highlands or the Lowlands.
These summaries are really enlightening and are forming quite a reference library! Would I be wrong in thinking, though, that Smith was effectively advocating for the taming of the beast rather than transforming the beast? I don’t really believe people are naturally grasping although for a very long and thoughtful treatise on this I recommend Iain McGilchrist’s ‘The Matter With Things’.
We are of course capable of many things but in a society that is predicated on empathy and compassion for others it is quite possible that a market in the financial sense could be a thing of the past!
Correct: Smith was not saying what he saw was wrong: he argued it had to be controlled.
Thanks for this on Adam Smith. I have recently studied both the sources and your analysis confirms what I had arrived at. The modern description ‘father of capitalism’ is a nonsense beside his ‘Moral Sentiments’.
Maybe the problem is people haven’t the time to drill down into the foundations of his rather tourtuous writings of 250 years ago. But online digital search does help us now. Thanks for your clarity on the matter.
I have been reading Wealth Of Nations in little chunks this year. I find his style rather indigestible, but I like his way of making his points by thorough examination of real world examples. Indeed, it is mystifying why the contemporary right would take his name in vain as one of their heroes. He is most clearly what would have been called a Whig in his own time, and allowing for the huge changes between then and now, something approximating a modern social democrat. Yet nowadays, one throwaway figure of speech taken out of context gets taken as the foundation of much claptrap.
Thanks