Adam Smith is history’s most famous economist, yet people know precious little about what he wrote. Perhaps that is because the natural time to reflect on his contributions — the anniversary of his birth — is unknown. However, we do know that he was baptized on June 5, 1723, making the 5th an appropriate time hook to consider his work and insights.
Smith is memorable for the commitment to liberty he had in common with the Declaration of Independence, whose 1776 date The Wealth of Nations also shared, and for his articulation of how the “invisible hand” of market interactions can coordinate a society based upon liberty — i.e., private property rights and voluntary exchange — more effectively than can the coercive power of the state.
Seemingly everyone has heard of that invisible hand, by which market transactions lead people pursuing their own self-interest to advance the interests of others as well. (“By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”) Unfortunately, however, those in government and their political supporters talk of liberty, while legislating and regulating away the voluntary arrangements that comprise it.
That is why we must go beyond Smith’s discussion of the invisible hand, to his analysis of the clumsy visible foot of government, perhaps made clearest when he wrote “I have never known much good done by those who affected to trade for the public good. It is an affectation.” And that analysis is even more practical in application today, when government is exponentially more intrusive than when he wrote.
The reality of government:
“… [governments are] … without exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”
“The agents of the [government] regard the wealth of their master as inexhaustible; are careless at what price they buy; are careless at what price they sell; are careless at what expense they transport…”
“Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct…. Those unproductive hands … may consume so great a share of their whole revenue … that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.”
“There is no art which one government sooner learns of another than that of draining money from the pockets of the people.”
“After all the proper subjects of taxation have been exhausted, if the exigencies of the state still continue to require new taxes, they must be imposed upon improper ones.”
Government and the invisible hand:
“…the profusion of government must, undoubtedly, have retarded the natural progress…”
“The uniform, constant and uninterrupted effort of every man to better his condition … is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration … it frequently restores health and vigor to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor … it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.”
“In the midst of all the exactions of government … capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress…”
“…the frugality and good conduct of individuals seem to have been able … to repair all the breaches which the waste and extravagance of government had made in the general capital of the society. Let us not, however, upon this account rashly conclude that she is capable of supporting any burden, nor even be too confident that she could support, without great distress, a burden a little greater than what has already been laid upon her.”
The limited defensible role of government:
“…no human wisdom or knowledge could ever be sufficient [for] the duty of superintending the industry of private people, and of directing it towards the employment most suitable to the interest of the society.”
“The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would … assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”
“To judge whether [a workman] is fit to be employed, may surely be trusted to the discretion of the employers whose interest it so much concerns. The affected anxiety of the law-giver lest they should employ an improper person, is evidently as impertinent as it is oppressive.”
“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”
The invisible hand under limited government
“All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring both his industry and capital into competition with those of any other man.”
Adam Smith long ago recognized that a system of natural liberty needed at most a very small government. He was not far from H.L. Mencken’s view that “The ideal government of all reflective men, from Aristotle onward, is one which lets the individual alone — one which barely escapes being no government at all.”
But that is almost unimaginably far from the layers of American government that take trillions of dollars of taxes and impose innumerable regulations each year. If we are to restore the vision Adam Smith shared with our founders — providing the broadest possible canvas for human freedom — far less government is necessary. We need to rein in its overreaching, so that we can use the invisible hand of voluntary market arrangements more, and the clumsy visible foot of the government less.