The Importance of Adam Smith

September 23, 2018

I believe in the economic principles of Adam Smith; this is to believe in individual freedom and economic freedom. I think that it is clear that his arguments have created enormous wealth and social freedoms across large swathes of the world, since his death in 1790. Alas, this does not seem to be universally understood. Sadly, there appears to be a generational need to argue the benefits of his philosophical outlook, especially when compared to the inexplicable popularity of Socialism with the young.

 

The defining work of Adam Smith was The Wealth of Nations. The central theme of this book was that rational self-interest and competition can lead to economic prosperity. As Smith stated “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”

 

This idea may not appear revolutionary now but this is because they were initially espoused by Smith over 200 hundred years ago. His ideas have been integral to much of the success and growth of the global economy since that time. To fully appreciate how progressive his ideas were, it is vital to set them in the context of the prevalent alternative ideas of his day. It was an era steeped in the feudal norms of the previous centuries; Smith advocated individual freedom through the context of hard work and free trade. His ideas outright rejected the status quo of business people joining together to stifle competition and maintain agreed outcomes (often through high prices) and instead advocated the freedom of consumer choice and individual work ethic. By encouraging the principles of competition and freedom of choice, not only did Smith hope to increase the quality of the services provided, he also hoped to reduce their costs.

 

A core outcome of Smith’s ideas has been individual freedom. For Smith, rather than freedom being the stated end goal of his ideas it is instead the means by which people can sustain social order and property. A belief that again follows his initial premise that social order and economic prosperity can be best served by recognising the self-interest that lies within us all. Instead of making the lofty ideal of individual freedom his stated initial purpose, it is, instead a happy product of his actual desire for social order and economic expansion.

 

There is a clear irony to the fact that his ideas, without individual freedom being the stated initial goal and rather a means to his preferred end, have created so much more prosperity and freedom than other philosophies which have chosen to have individual freedom as their stated primary goal. In my view, this is because Smith recognises the natural propensity for individuals to make decisions based on their own self-interest whereas other schools of thought simply ignore this inconvenient truth.

 

Alas, there is an overall lethargy about the dramatic improvements this school of thought has provided the World and a concerning assumption from older generations that these arguments have been won. Unfortunately, this is not the case. Much of academia is now dominated by a very different school of thought about the virtues of Adam Smith. Instead of encouraging equality of opportunity, there is a pathological obsession with equality of outcome. A laudable aim but one that leads to a steady lessening of individual freedoms and a reduction of economic output. 

 

As such, it is now as important as ever to laud, educate and discuss the philosophy of Adam Smith with as many people as possible. If not, there is a real possibility that while we have grown up in a period of individual freedom created by an economic system that recognises self-interest; our children could grow up in a society with little or no personal freedoms, created by a social philosophy of “fair outcomes” and virtue signaling. 

 

Understanding the ideas and success created by Adam Smith are as important now as they have ever been.

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