Adam Smith, one of the most celebrated thinkers of the modern era may very well have had more influence over the social institutions of the western world than any other thinker in social philosophy. He penned what would become the emblem of free market principles, An Inquiry Into the Nature and Causes of the Wealth of Nations (WN) and became known as the “father of economics” due to the enormous impact his treatise made upon the field. According to Murray Rothbard in his two set volume on the history of economic thought, by the turn of the nineteenth century, WN had influenced economic thought in the western world in a way few other thinkers could ever have dreamt of doing. His work would go on to influence some of the worlds greatest free market thinkers including J.B. Say and Fredrick Hayek, both who identified themselves as proteges of Smith, elaborating and systematizing upon what had already been produced by the master himself. Likewise, Smith’s moral theory developed in The Theory of Moral Sentiments (TMS) was influential to some of the worlds greatest philosophical minds including Immanuel Kant who said TMS was his very favorite “moral sense theory”. Not so explicitly developed by Smith, but certainly residing within both WN and TMS is Smith’s political theory, most concisely defined by Smith as his natural system of liberty. Scholars like James Otteson have long interpreted Smith’s natural system of liberty to be quite ingenious and highly compatible and influential upon the classical liberalism and limited government tradition that was quickly rising to prominence in the west. Yet despite Otteson’s interpretation of Smith, I propose a closer examination of Smith’s ethics, economics, and political theory for the purposes of displaying what I believe are internal inconsistencies within the context of Smith’s understanding of justice and his argument for public works. I intend to show upon what grounds Smith justifies state intervention and the problems such justifications present for the public works role of government within Smith’s very own understanding of economics. Although I give credence to the contributions made by Smith, I finish my paper by proposing caution, in light of my argument, for just how prominent we should make Smith in our ongoing contemporary debate in normative political theory. The volume of libertarian passages that can be found in Smith’s work is strikingly impressive and forward thinking, in many cases anticipating the later works of Bastiat, Hayek, and other similar minded thinkers of the tradition. There is certainly much that could be pulled out in isolation from Smith’s writings that paint our author as the true classical liberal or proto-libertarian. In fact, I propose that a fair interpretation of Smith’s work could be made that Smith himself would have argued that he falls within the classical liberal camp and that a normative argument for limited government was indeed interwoven within the summation of his work. Furthermore, I would think it probable that the marxist and socialist critiques of capitalism that utilized Smith’s own work would have been quite shocking and bothersome to Smith, had he been alive to see them. Yet the intentionality of Smith’s work is of secondary importance to the theoretical grounding of his system in which I think there exists an in-congruency between Smith’s natural system of liberty and the proposition of positive state power for the creation of public works within this maxim.
First, it is crucial for a comprehensible understanding of Smith’s political theory that we make a careful examination of the emphasis Smith puts upon the importance of justice. Smith states that: “Justice… is the main pillar that upholds the whole edifice [human society]. If it is removed, the great, the immense fabric of human society, that fabric which to raise and support seems in this world, if I may say so, to have been peculiar and darling care of nature, must in a moment crumble into atoms”.
This pivotal virtue of justice is best defined by the composition of its violation, which is any inflicted injury which “does real and positive hurt” to the one whom the action is directed at. Within Smith’s own socially derived system of moral sentiments we are told that we have rational access to the general rules of justice in the highest degree in which no modifications or exceptions exist. Unlike the rules that direct our comprehension of what is sublime and elegant, which Smith tells us are “loose, vague, and indeterminate”, the rules of justice are as precise as those of grammar. While these rules still derive themselves from the initial perceptions and feelings of any given situation, the inductive process by which we form justice is most intelligibly constructed. Smith further elaborates upon justice, establishing it as the mechanism for determining when it is appropriate to interfere within the lives of any person via the state and when it is not. He posits his system of natural liberty as the fundamental grounding upon which state power is proper, stating:
“… 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 his own way” Smith’s system of natural liberty implies what I like to call, the justice maxim, which grounds and defines the whole concept. The system of natural liberty is definitionally grounded by the laws of justice which defines all actions that are appropriate for both individuals and states to engage in. While, as we shall see below, there exists three duties for government that are supposedly derived from this natural system of liberty, the passage above quite clearly seems to put limits upon any state power in which one must violate the rules of justice in order for any state justification to interfere with the pursuits of anyone exists. The system of justice seemingly imposes a stringent restriction to refrain from harming one another that even overrides the utility such actions could possibly bring; for even when the benefit from harming another is greater than the harm itself, Smith tells us that we must refrain from engaging in such actions.
As was the case with many of the classical liberals during this period, even the libertarian framework within Smith’s natural system of liberty implies some powers which government has a legitimate right to possess. Smith argues that: “According to the system of natural liberty, the sovereign has only three duties to attend to… first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting… every member of the society from the injustice or oppression of every other member of it…” These first two powers are inherently tied with the enforcement of justice, a military to protect us from potential harm inflicted upon us by foreign countries and a police force to protect us from the potential harms inflicted upon us by our neighbors.
Smith though, does not stop at these two powers of governance, but provides us with a third: “…the duty of erecting and maintaining certain public works and certain public institutions”. In book V of WN, Smith argues that when an institution, needed for the encouragement of commerce, is too expensive for any one man or private institution to build or maintain, there resides an obligation upon the state to subsume the duty. In what follows in Book V of WN, Smith justifies state created roads, bridges, communication infrastructure, schools, religious institutions and other public works on the basis of being “beneficial to the whole society”, all of which can be legitimately funded by public taxation. Although Smith does argue that those using public goods may be charged a user fee or toll to help assist with the construction and maintenance of the public works, it is still permissible to utilize the “public treasury” if it is foreseeable that all benefit from it.
It is here that the genesis of our problem begins to arise, for it must be asked how we are to overcome the awkward juxtaposition of Smith’s comments on justice with his proposition for all three positive governmental functions? For if we are to be left free to pursue our own interest, our own way, than how is government justified in taxation for the purposes of directing economic resources towards the creation and maintenance of military, police, and public works? Smith argues in WN that: “To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind” (emphasis mine)
Elsewhere we are told that the hindering of one from using their own labor “is a plain violation of this most sacred property” and an “encroachment upon the just liberty” of all. The problem becomes clear once we understand the nature of coercively extracting the fruits of ones labour through taxation, which for all intensive purposes is logically equivalent to prohibiting one from making all that they can of every party of their own produce or hindering one from utilizing all of their own labour. It stands to reason that whatever is taxed from ones income, can no longer be used by that individual in a way they deem most advantageous for themselves. If the money taxed from one were indeed the most advantageous action, it would be done voluntarily. The involuntary nature of taxation though seemingly implies the opposite, that it is not the most advantageous use of ones resources and on this account, it seems to violate the most central maxim of Smith’s natural system of liberty in which no one can be interfered with unless they violate the rules of justice.
It is here that I believe a rebuttal to my inquiry exists within the pragmatic nature of Smith’s entire philosophy. For Smith certainly did think that exceptions to his limited government system, grounded within the justice maxim, were necessary for the security of human wellbeing; a far more important end which not only overrides the justice maxim, but gives normative value to justice in the first place. Otteson argues that “[Smith] also sees, however, that human life is messier than many theorists would have it, and so sometimes exceptions to the principles are warranted for the benefit of the individuals or the local society involved”. Even those regulations which are blatant violations of a persons most fundamental natural liberties, according to Smith, such as forbidding the acceptance of promissory notes from banks are justifiable if a “greater good” can be contrived from it. The issue at hand is the “pragmatic” nature of Smith’s liberalism which comes to us as more of a generic recommendation to be discarded when needed, than any sort of principled stance. What resides as the ultimate end for Smith, is the propagation of human well-being and happiness. The individual holds no sort of “rights” which exists contrary to the wellbeing of the whole. Smith, in fact, says something very near to this when he states that “when the preservation of an individual is inconsistent with the safety of the multitude, nothing can be more just than that the many should be preferred to the one”.
Otteson himself argues that while it is true that Smith sometimes seems contradictory in relation to his system of natural liberty and defense of certain state powers, the confusion is alleviate once we understand that the maxims for limited government exist pragmatically and are not absolute. This does not make justice irrelevant though, for Smith still posits the justice maxim and its limiting imposition upon the state as positively beneficial to human wellbeing in most cases. The justice maxim, which grounds the natural system of liberty, still acts as a the default state of society which can only be overridden in specific cases where human wellbeing can further be improved in other ways, for example with the creation of the military and police apparatus. Furthermore, Otteson argues that Smith provides stringent guidelines for when the maxim of justice can be overruled, which Otteson thinks can very rarely be met. Otteson points towards some passages in which Smith does indeed seem hesitant or downright against positive state intervention in the lives of its citizens. In TMS, we are provided with the “man of system” who erroneously engages in treating his subjects like chess pieces upon a chessboard moving them according to his own will. Smith argues that this man of system will quite possibly fail at his task because he doesn’t take into account the independent principles of motion each member of society holds which may be different to that of the sovereign.
Certainly Smith does provide a relatively conservative tone upon use of positive governmental power in his man of system argument and some other places throughout both TMS and WN, but I think Otteson over exaggerates just how conservative these examples truly are. For Smith not only argues that positive state power provides a legitimate possibility for societal improvement, but in some cases such power exists as an imperative for human wellbeing. Even in Smith’s famous man of system argument, we are only told that directing public policy in congruence with the individual principles of motion is difficult; but it can be accomplished, and when it is “human society will go on easily and harmoniously, and is very likely to be happy and successful”. Smith’s pragmatic liberalism though, does not resolve the problem, for the issue is not about the relative conservatism that exists within Smith’s works, but with the logical incoherency between Smith’s natural system of liberty, positive state powers, and the entirety of his economic theory.
The rebuttal to my original inquiry argues that it is only when a governmental action is beneficial to all and would not exists independent of the state that there exists justification for violating the justice maxim and taxing the public for its creation and maintenance. This argument, I do believe, provides adequate grounding, on the basis of internal consistency, for the military and police functions of the state; for since both implicitly exist to enforce the justice maxim, and since the rules of justice are so precise, we can easily discern their benefit to human wellbeing and how to best achieve it via these institutions. But with public works we run into an issue, for in Book IV of the WN Smith argues that no statesmen can ever know if the artificial direction they move individuals and economic resources towards will be “more advantageous” than if they had refrained from such actions in the first place. This thinking by Smith was an excellent insight into the problem of central planning that F. A Hayek would later use in the elaboration of his “knowledge problem”, but it presents a issue for Smith. If we don’t ever know if the artificial direction of resources by the state will be more economically beneficial, then it must be pondered how are we are ever justified in violating the justice maxim to engage in the practice? Otteson shrugs off a similar critique to this stating that it is reasonable for thinkers to inappropriately apply their concepts from time to time. Although Smith may have presented us with ideas for public works that don’t fulfill the criteria made by Smith himself, this for Otteson doesn’t negate the entirety of the principle in general. What Otteson doesn’t understand is that Smith’s proposed public works examples are not the issue, but the public works concept in itself. Since we cannot ever know if any artificial direction of resources for the production of public works will be beneficial, then the justification to override the justice maxim doesn’t exist. Although Smith has made it quite clear that the violation of individual rights and liberties is acceptable, if we find that doing so improves human wellbeing; our fallibility and brazen inability to ever know, even post facto, if building any public works will benefit the aggregate of society denies us the justification needed to violate the justice maxim residing within Smith’s natural system of liberty for such purposes. Smith’s third justification for government, the creation of public works, just doesn’t exist coherently within the context of the rest of his work, and on account must be rejected.
It is not the purpose of this paper to provide a normative imputation upon Smith’s economics or its possible alleviation through positive government action. Only that we cannot accept both the grounding for his natural system of liberty and the normative requirement for the state to engage in tax funded public works. This paper does not simply reside within the scope of scholarly interest for Adam Smith, for I think the implications of my argument are further reaching. Adam Smith has long been held as the “father of capitalism” and also to be among the great liberal thinkers of the past. This reputation stacks the deck against free market and limited government advocates though, whom may ground their beliefs in far better philosophical theories on the subject then Smith’s. Smith’s erroneous juxtaposition of the justice maxim and positive government powers for instituting public works just cannot be made compatible so long as we remain ignorant to the economic consequences of our actions. But unless this becomes as prominently understood as Smith’s reputation as the free market gatekeeper currently is, his work will continue to act as the logical equivalence of a straw man for free market ideas which redirects an interesting and much needed debate away from where it is most productive. Smith must be put into proper perspective, for he provides much historical and practical significance to the debate, but he is far from the role model libertarianism or free market advocates need or should want.