ESSAYS IN REGULATION
Adam Smith’s Wealth of Nations (“WoN”) is a foundational book in the social sciences and one of the classic works of human civilization, but like many classics it is rarely read. Its influence has been profound, but that influence has come largely via the work of Smith’s successors who, in their own writings, have frequently cherry picked the text in ways that have served their own, particular purposes in a range of different, later contexts. In consequence many of Smith’s own points have been lost or distorted. There are, for example, widespread beliefs, not least among economists, that Smith’s invisible hand metaphor was used to signify the self-coordinating or self-balancing properties of an unregulated market economy and, further, that he was an advocate of laissez faire economic policies. Neither of these beliefs is correct.
Correcting misconceptions is one possible reason for reading the book itself. Another is that, as can be the case when listening to a great scholar give a lecture, the side comments can be highly illuminating. They give insights into the ways of thinking, the ways of framing issues and questions, the ways of seeing or imagining things, of a Master at work. Such know-how is difficult to transmit in textbooks and summaries, but reading the original text takes us one step closer to the author.
A third motivation is that substantial parts of the reasoning and analysis to be found in Smith’s work have retained a striking relevance for policymaking throughout the quarter of a millennium since the publication of the WoN, right down to the present day. His work covered a wide range of areas, including: evolutionary theories; the philosophy of science; social and moral psychology; the behaviour of complex, adaptive systems; jurisprudence; as well, of course, as more specifically economic, social and political issues and challenges.
The WoN, however, is a long work, written in the 18th century in an 18th century linguistic style and with extensive sections that focus on specific issues of the day. These sections are full of factual material unlikely to be of interest other than to specialists in the period. Notwithstanding Smith’s lucid prose, taken in its entirety it is a hard read.
Fortunately, two features of the WoN provide an easier access to material sufficient to give the non-specialist reader a broad appreciation of some central themes which are foundational for all else that follows. First, Smith’s style is to put his most striking propositions and reasoning right up front, leaving the subtleties to be developed later. Second, the first four chapters of the WoN are relatively self-contained and set out what is, in effect, an evolutionary theory of economic development.
What follows therefore is a commentary on those first four chapters, both for the general reader and for students of economics of all ages who may have not been exposed to this type of political economy in the more formalized, university economics courses that are today’s norm. For the latter in particular, the commentary seeks not only to link the material to later developments in the subject, but also, looking back with hindsight, to identify an unfortunate (for posterity) gap in Smith’s analysis: it failed to give an account of the development of one of the institutional pillars central to the functioning of today’s commercial societies, namely markets.
The relevant text in the commentary is taken from one of several of the original editions of the WoN that are freely downloadable online. Smith made changes to the book over time, but where these are substantive they tend to be concentrated in the later sections of the work and do not have major implications for the more foundational Chapters 1-4.
I have made no attempt to ‘modernise’ the language save for a very small number of changes of word where original 18th century expressions are so different from modern usage that they would be jarring and potentially misleading to the reader. The changes are intended to convey the original sense of the points, not to adjust that sense in any way.
The Introduction and Plan of the Work is included in the commentary even though it covers the whole book, not just the first four chapters. This is (a) to give a sense of how the early chapters fit into the wider framework of the WoN and (b) to afford an opportunity, in commenting on it, to point out just how radical and critical Smith’s thinking was. As Gavin Kennedy put it, much of it became a ‘lost legacy’.
Part of the reason for the loss may be that, in a number of areas, Smith was far ahead of his time, but another contributing factor is likely to have been a later tendency to read and interpret the WoN as a stand-alone work, without due recognition of it being the culmination of a lifetime’s intellectual endeavour. There is, though, much in his prior work that has bearing on what Smith says in the WoN and, to give sight of these historical linkages, the commentary is preceded by a brief introduction to his three major works, taken in sequence.
In the commentary itself Smith’s text is shown in italics, the comments are in standard typeface.
15 October 2021