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Why We Read Adam Smith

Erik W. Matson

This year marks three centuries since Adam Smith’s birth. Conferences have been convened, articles commissioned, and books published to celebrate the occasion.

It’s one thing to give symbolic tributes to Smith. But should we actually be reading him? His ideas were undoubtedly central to the development of modern economics, and he clearly influenced policy discussions in Britain and beyond. But does he still have something to offer us today?

Such questions aren’t limited to Smith. Writers, teachers, and scholars face continuing challenges to the relevance of older texts, especially so-called “Great Books.” Do these texts continue to deserve our attention? Or is the opportunity cost of reading them—in other words, time and effort that could be spent doing other things—simply too great?

Contrary to their reputation, many academics think the cost of reading classics is too great compared to the benefit, which is understood mainly as historical understanding. For example, in economics, the discipline in which I was trained, the history of economic thought has not been required in most American graduate programs for several decades. Token mentions of Smith, Ricardo, Malthus, Mill, Marx, Keynes, and Hayek are scattered throughout professional articles and textbooks. But the original texts themselves receive very little sustained attention. Few programs of study require students to read as much as a selection from The Wealth of Nations.

Perhaps this is for the best. Smith, for all his brilliance, misfired on some significant theoretical issues. We have progressed beyond his theory of value and price determination, his distinction between productive and unproductive labor, and his understanding of the role of capital accumulation in the growth process. His policy recommendations might have been appropriate in context, but some of them clearly require updating. They are not all obviously desirable or appropriate for our current situation. He endorsed, for example, interest-rate caps and restrictions on the issuance of small denomination bank notes. One could argue (although not convincingly, in my opinion) that these were prudent policy options in late eighteenth-century Britain. But they are not now.

Instead of spending time reading Smith, then, maybe we would be better off spending more time studying contemporary economic theory and empirical applications. We know more now than Smith did. The work to separate his legitimate scientific contributions from his blunders is a task for niche intellectual historians. It is not worth the effort for most of us—why devote time to Smith’s chaff? Steer straight toward the rational. To do otherwise is to inappropriately deify Smith and his texts. The modern scientific process has absorbed the wheat; let’s ingest it and be on our way.

The perspective I’ve just described is not limited to technical economists. It has been put forward recently, with respect to Great Books in general, in a Substack essay by Richard Hanania. Famous texts and authors might hold some historical interest, Hanania admitted. But, he added, “the idea that someone writing more than say four hundred years ago could have deep insights into modern issues strikes me as farcical. If old thinkers do have insights, the same points have likely been made more recently and better by others who have had the

advantage of coming after them.”

It is a perspective with which I disagree. In what follows I’ll make a case for the continued reading of Adam Smith. The case for reading Smith maps well but not perfectly onto the case for reading Great Books. With increasing pressure on universities and other educational institutions to show the practical benefits of study, it’s an argument that is very current even though it deals with old books.

In the spirit of self-disclosure, I admit I have a vested interest in people reading Smith. I am part of a cottage industry of academics and educators devoted to the study and teaching of Smith’s ideas—I’m the deputy director of a program named for Smith in the Department of Economics at George Mason University. A declining interest in Smith would probably not bode well for me professionally.

At a deeper level, though, I’ve spent a great deal of time thinking and writing about eighteenth-century moral philosophy and political economy. I want to believe that my intellectual efforts have been time well spent. A critic might argue that that want colors my analysis, and it probably does to some extent. As one cutting-edge psychologist noted:

"The opinion which we entertain of our own character depends entirely on our judgment concerning our past conduct. It is so disagreeable to think ill of ourselves, that we often purposely turn away our view from those circumstances which might render that judgment unfavourable."

But those self-reflections notwithstanding, I affirm that there is still value to reading Smith (and the Great Books generally), for both academics and lay persons. I’ll set out my case here in a series of points, roughly arranged from least to most significant.

Appeals to authority are unavoidable

The decision to read a book depends on your purpose. People have different callings, and there are returns to both intellectual and material divisions of knowledge and labor. If your goal is to learn the mechanics of price theory or monetary theory, the works of Smith might be an interesting historical touchstone; but they are not where you should spend your time. The same could be said of Euclid with respect to geometry and Newton with respect to physics. I would wager that most applied mathematicians and engineers have not read either and not obviously to their detriment.

If part of your calling or purpose involves participating in public discourse about economic and political affairs, however, and working to preserve and promote the principles of a free, flourishing society, then the case for Smith becomes stronger.

For one thing, despite his occasional ambiguities and possible lapses in policy judgment, Smith’s ideas remain highly relevant. His economic insights have been largely affirmed by what Pete Boettke calls the “mainline tradition” of economic thought in the centuries since he wrote. These insights include the following:

· The wealth of a nation lies not in money or stocks of precious metals, but in the goods and services that bring “the good cheer of private families,” to quote Smith.

· Material progress is made as the division of labor extends, which, by increasing the size of the market, enables specialization, justifies production at scale, and dramatically lowers average production costs.

· A flourishing economy requires a stable institutional framework—a society in which the rules of property and contract are respected among citizens, and where people have the freedom to truck, barter, exchange, and innovate as they see fit.

· A focus on national trade balances is misguided, for there is no clear relationship between so-called trade balances and national prosperity.

· Tariffs, subsidies, government-granted monopolies, and occupational licensing requirements generally serve the interest of existing market incumbents at the expense of ordinary workers and consumers. Such regulations are advertised as serving the common good, and often have popular support, but this is the result of an unfortunate confluence of state capture by said incumbents and economic illiteracy.

· Successful economic planning requires contextual knowledge of circumstances and opportunity costs, and regulators lack that knowledge.

The list could go on and the relevance of each point developed.

Of course, we don’t really need Smith to make these points. If our goal is public economic education, one might ask, why not recommend Economics in One Lesson (Henry Hazlitt), Capitalism and Freedom (Milton Friedman), or Basic Economics (Thomas Sowell)? These works present indispensable Smithian insights in economic policy, while paring away some of the more problematic theoretical aspects of The Wealth of Nations and what at least some take to be its ancillary historical details and narratives.

To answer the question, though, let us consider another: In the spirit of parsimony and clarity, why not do away with Hazlitt, Friedman, and Sowell and simply recommend a few good blog posts? One part of the answer is that Hazlitt, Friedman, and Sowell have—at least in conservative and libertarian communities—a good deal of moral authority. Appeals to ideas about school-choice via the work of Milton Friedman will, for better or worse, often be more effective than the logic of school choice itself. We naturally put more stock in a line of thinking if endorsed by a person we admire. Such is human nature.

There are some good reasons to embrace our attraction to authority and to consciously cultivate sympathies with great minds. These reasons are among the most important pieces of the case for Smith and Great Books generally, and I return to them below. But for now my point for is simply this: Smith’s name carries more authority (for good reasons) than Hazlitt, Friedman, Sowell, and others, and he is thus of greater weight in advancing sound economic and political principles—principles in line with what he called the “liberal plan of equality, liberty, and justice.”

Some might accuse me here of promoting a somewhat dangerous or at least irresponsible idea. To advocate using a thinker’s moral authority to speak on present affairs, one might argue, is to instrumentalize the past and lay the groundwork for shoddy intellectual history. There is something to be said for this reaction. We need to proceed with caution and maintain an awareness of the potential of our own ideological blinders when we deal with history. We each face the temptation to make our favorite philosophers in our image, as it were, and to round out the inconvenient facts and historical idiosyncrasies of their characters.

But the human habit of drawing past wisdom from great minds is unavoidable and, again, not altogether undesirable. Our ways of thinking are formed to a large extent by our teachers and intellectual exemplars (living or historical), whether we recognize it or not. “Madmen in authority,” Keynes said, “who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” To invoke and appeal to our exemplars explicitly as our fellow travelers and authorities is very often just to articulate something previously tacit in our thinking.

Reading authoritative texts protects against abuse

Many have claimed—and continue to claim—Smith for their causes. We have had many “Adam Smiths” over the years who have been invoked to support a wide range of contradictory policy positions. That there continues to be a live debate over the original meaning and present implications of Smith’s ideas attests to the prevalence of his moral authority and its continued weight.

The contradictory nature of various invocations of Smith can be explained in part by issues of historical context. That Smith advocated X, or didn’t, in 1789 (the year of the final edition of Wealth of Nations) does not necessarily mean that he would advocate X today, or wouldn’t. In student notes on his Glasgow lectures on jurisprudence, we find evidence that he believed trade guilds may have been warranted and beneficial in earlier phases of economic development, even though he clearly believed them to be inappropriate and harmful in his own time. The point is that we cannot simply copy Smith’s policy prescriptions out of their historical context and paste them into our own.

This does not, of course, mean that his policy judgments are not today relevant. It simply means that discerning the relevance requires interpretation. We must search the underlying principles and logic motivating Smith’s recommendations and meditate on the implications for our present context—that was then, this now.

There are people of good faith who disagree about aspects of the interpretive process. But in many cases, it seems people are uninterested in carefully exploring the present-day implications of the past and rest content to wield it for partisan ends. In 2013 then-President Obama, for example, invoked Smith’s advocacy of high wages as supporting “non-ideological” legislation to raise the legal minimum wage—a position which clearly does not follow from the context of cited passage in Smith’s text. Recently some influential voices on the new right have cited Smith to make a case—strangely enough—against free trade and in favor of limiting international capital flows. That case also clearly does not follow from Smith’s discourse.

In reading Great Books we can at least partially inoculate ourselves from unfounded appeals to authority, which, like it or not, will continue to pervade our discourse. Further, a familiarity with the past positions us to counter such appeals on factual and interpretive grounds. This, I take it, is one of the main social functions of intellectual history. As we take the past seriously, we preserve historical knowledge and wisdom, and we also contribute to an intellectual bulwark against mischief. We do well, as Edmund Burke argued, to “avail [ourselves] of the general bank and capital of nations, and of ages” through the reading of historically significant and focal works.

Great minds teach us practical wisdom

Some might find the previous two points trivial. They are expedient points, elaborating a rhetorical use of intellectual history and pointing towards some modest public benefits. Let us then turn to deeper issues.

Smith should be read for his practical wisdom in melding together ethical, political, and economic considerations and for his prudential applications of theories to practical issues. We can make a similar case for great minds generally. In fostering a sympathetic admiration for the work of great minds, we cultivate practical judgment and the difficult art of synthesis—an indispensable art, not just for social and political affairs, but for scientific practice generally.

The point of science and philosophy generally is to bear some kind of practical fruit, even if the fruit is only an invisible change in the way the philosopher views an aspect of the cosmos and her place therein. That does not mean science and philosophy should cut corners for the sake of expediency. To the contrary, the intellectual enterprise often needs to shift concerns of practicality to a subsidiary level for the sake of the enterprise. A philosopher who is only interested in present application and lacks a curiosity and passion for truth itself will not be a very useful figure. But whether it is subsidiary or focal, all knowledge pursuits tacitly have a normative goal.

The normative dimension of knowledge implies that even pursuits of the most technical knowledge cannot be completely isolated from extra-disciplinary considerations. Models and analytic lines of reasoning aim to illuminate reality. But the leap from a model or analytic conclusion to reality will always require judgment or synthesis, and that requires practical judgment on many fronts. The leap cannot possibly be codified into a precise rule, set of exact principles, or algorithms.

There seem, therefore, to be two options for the scientist: (1) totally abandon claims of usefulness or relevance, or (2) cultivate practical wisdom, prudence, and ethical intuitions about the application of his conclusions outside their formal boundaries. Option (1) is intuitively undesirable, and the scientist or philosopher cannot here simply claim that his work is just “theoretical.” If one claims to be a “theorist” doing “theoretical work,” he is presumably theorizing about something, and that something will necessarily be outside the formal bounds of his theories themselves. The meaning of theories will always have to be articulated in broader, intuitive terms.

It might at first seem like we can turn to the division of labor to solve the problem of applications and interpretation. Some can build models and others can apply them. There is of course an important role for divisions along those lines, but it does not solve the problem. It simply alters its distribution, for someone at some point will have to take the results of a theoretical model and make the interpretive leap in applying it to external phenomena. If the model builder claims to have nothing at all to say about matters of interpretation and application, she leaves them to those who lack insight into what they are interpreting and applying.

How is practical wisdom concerning the relevance of one’s analysis developed? In the first instance, it develops by observing our teachers. Graduate school, I was once told, is akin to an apprenticeship. We observe and emulate the scientific and professional practice of our professors and mentors. We can consciously extend our prudential training through a study of the practice and advice of exemplars in our fields.

These exemplars don’t need to be physically available or even alive, though. Some of the great minds from whom we can learn judgment, synthesis, and principles of application are now deceased, but we commune with them through reading and philosophical reflection. This I think is an important part of the case that economists should spend at least some time studying the history of economic thought.

In political theory and political economy, the study of great minds is arguably even more valuable. The political economist needs to deal with the problem of synthesizing theories with application; but he also needs to consider political practice. “He must,” said Keynes, “contemplate the particular in terms of the general, and touch the abstract and concrete in the same flight of thought…He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.” An aspiring political economist who neglects the conscious development of sound judgment and ethical intuition neglects an essential part of his field.

More importantly, he shirks his social responsibility. The man who is “only an economist,” according to Hayek, “is likely to become a nuisance if not a positive danger.” The task of the political economist, rightly understood, is not simply to pursue technical knowledge. It is to responsibly bring technical considerations to bear on matters of social import, a task requiring a broad interdisciplinary base of knowledge and insight. In treating a topic or issue, the scientist must develop a feeling for the most important things bearing on the topic or issue.

The successful practice of political economy therefore calls for conversation across disciplinary borders. This is the impetus behind interdisciplinary societies and academic majors, like PPE programs. We learn from conversation with others in different intellectual traditions and academic disciplines. But again, we can also learn by studying the discourse of great minds. Interest persists in Locke, Smith, Rousseau, Burke, Ricardo, Mill, Marx, Keynes, Hayek, etc., not just because of their historical significance, but because they are grounds for learning the art of synthesizing complex ethical, political, economic, and cultural considerations. They are case studies, in a sense, of ways to see, ways to bridge the gaps between technically incommensurable considerations of efficiency and equity, justice and beneficence, conservatism and progress, freedom and virtue.

Let’s use Smith to briefly illustrate the point. Generations of scholars since the early nineteenth century have wrestled with the relationship between his two great works, The Theory of Moral Sentiments (TMS) and The Wealth of Nations (WN). In both subject matter and rhetoric, they appear to be quite different. The old view that the books rely on different theories of human nature has been successfully rebutted, but tensions persist. Smith, for example, repeatedly warns in TMS that the pursuit of wealth can lead to misery. Why then does he celebrate commercial life in WN?

Smith clearly viewed—and presented—his two works as of a piece, parts of a unified program of practical ethics. He announced as much in the final pages of TMS. In delving into the framework of his thought and striving to connect his psychological and ethical principles, economic analysis, and policy judgment, we might not always find easy answers; nor should we automatically presume that Smith provides us with the resources to resolve all the tensions we might uncover in his ideas. But we will find the opportunity to reflect on enduring and inescapably broad questions alongside one of the great minds of the modern era. In our efforts to enter into and assess his thinking, we develop tacit principles of moral judgment and intuition that inform our own interpretations in the complicated spheres of political and economic life.

Great Books teach us about the human condition

In his Substack essay, Hanania makes a general argument against Great Books. He puts forward a curious analogy:

[The case against Great Books] isn’t an issue of thinking every previous generation was dumb. Imagine hearing that we just discovered a tribe in the Amazon that previously had no contact with other humans. Nonetheless, this group developed a writing system. Living among them is an individual who they consider the world’s greatest philosopher. Being part of an isolated tribe, this philosopher has had no formal education or exposure to any modern ideas. He doesn’t know about evolution, has never logged on to the internet, has learned nothing of human history outside of the oral tradition of his tribe, and doesn’t even know whether the world is round or why the seasons change. Would it be plausible to believe that this Amazon philosopher had something to teach us about the way our government should be organized or whether the US should adopt protectionist trade policies? Most people would probably say "no", regardless of how smart he is. We might be fascinated by the Amazon philosopher, but wisdom one can learn from requires some baseline level of knowledge. If you reject the possibility that the Amazon philosopher has great insights into the modern world, on what basis would you trust Ancient Greece?

One problem with Hanania’s analogy is that the posited Amazon philosopher, isolated as he has been by assumption, has not contributed in any way to the rise of modern Western civilization, nor to the culture or worldview to which I belong. Ancient Greek thinkers have. The ideas and norms undergirding our Western civilization owe an enormous debt to Greek philosophy, especially fused as it was with ancient Hebraic thought to produce Christianity. Whether or not I “trust” Zeno or Plato or Aristotle, it is a matter of fact that elements of their thought have been embedded in Western thought over generations. Simply on the grounds of cultivating self-awareness, then, they are probably worth reading, for they contributed in a deep way to the cultural-intellectual paradigm I inhabit.

Beyond that, there is in fact good reason to think that ancient minds have wisdom to impart to the present. Hanania notes that “wisdom one can learn from requires some baseline level of knowledge.” True enough. But he is quite mistaken to suppose that even our Amazonian philosopher—let alone Plato—lacked the sufficient baseline knowledge. Of course Plato and the Amazonian wrote before the development Condorcet’s Jury Theorem and the formulations of public choice economics, and so we should take their comments about democratic politics with a grain of salt. But what both Plato and the Amazonian did have access to was themselves. They had what we all have—the potential for introspective and reflection on our enduring nature as human beings; the ability to ponder eternal questions of meaning, community, and the good.

It’s notable that Hanania does not specify what the Amazonian philosophized about. Was it the nature of matter? Or the purpose of criminal justice? Or the proper arrangement of families? To deny a hearing to Plato and Aristotle, who have been judged by generations of thinkers to have profound insights into the human condition, by citing their unfamiliarity with recent scientific developments seems to me absurd.

I do not deny the tendency to idolize customary modes of thinking, nor do I believe that we should focus our intellectual energies solely (or even mostly) on great historical texts. One could make arguments about the pitfalls of scholastic sects, seeking truth only within a narrow canon. But the continued resonance of the ideas of certain minds across generations, and the extent to which those minds continue to serve as touchstones for intellectual discourse, suggests their persisting relevance for insight into the human condition and indeed warrant considering them “great”.

The “Adam” and the “Smith” of Economics

Let us conclude with Adam Smith. Kenneth Boulding wrote of him as both the “Adam” and the “Smith” of economics. He was the “Adam” because before his work, Alexander Gray remarked in 1923, “there had been much economic discussion” but “with him we reach the stage of discussing economics.” He was the “Smith” because his “liberal plan” has inspirited generations of intellectuals and reformers.

At the tercentenary of his birth, he remains a great mind worthy of our attention and conversation in our continued efforts towards understanding and improvement.

Economists and political scientists should still certainly read Smith for his many underappreciated insights, for example on the creative and beneficial potentials of free markets, the epistemic limitations of regulation, and the perennial dangers of cronyism. They should also read him as an exercise on bridging the gap between art and science, ethics and economics in practice.

The Wealth of Nations was not written simply as a theoretical treatise. It was also a political tract attempting to reform and liberalize British political economy for the sake of the common social good. Again, we might not agree with every one of Smith’s policy judgments. But in attempting to understand them, in connection with his theoretical principles, ethics, and historical context, we can learn to ask better questions as we strive to better the condition of self and neighbor in the twenty first century.

Erik Matson is a senior research fellow at the Mercatus Center at George Mason University and a lecturer at the Busch School of Business, The Catholic University of America.


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