The Adam Smith Myth

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is an excerpt from Chapter
 of An
Austrian Perspective on the History of Economic Thought
Vol. I and II, Edward Elgar, 1995; Mises Institute 2006.)

Smith (1723–90) is a mystery in a puzzle wrapped in an enigma.
The mystery is the enormous and unprecedented gap between Smith’s
exalted reputation and the reality of his dubious contribution to
economic thought.

reputation almost blinds the sun. From shortly after his own day
until very recently, he was thought to have created the science
of economics virtually de novo. He was universally hailed
as the Founding Father. Books on the history of economic thought,
after a few well-deserved sneers at the mercantilists and a nod
to the physiocrats, would invariably start with Smith as the creator
of the discipline of economics. Any errors he made were understandably
excused as the inevitable flaws of any great pioneer.

words have been written about him. At the bicentennial of his
magnum opus, An
Inquiry into the Nature and the Causes of the Wealth of Nations

(1776), a veritable flood of books, essays, and memorabilia poured
forth about the quiet Scottish professor. His profile sculpted
on a medallion by Tassie is known throughout the world. A hagiographic
movie was even made about Smith during the bicentennial by a free
market foundation, and businessmen and free market advocates
have long hailed Adam Smith as their patron saint.

Smith ties’ were worn as a badge of honour in the upper echelons
of the Reagan Administration.

the other hand, Marxists, with somewhat more justice, hail Smith
as the ultimate inspiration of their own Founding Father, Karl
Marx. Indeed, if the average person were asked to name two economists
in history whom he has heard of, Smith and Marx would probably
be the runaway winners of the poll.

we have already seen, Smith was scarcely the founder of economic
science, a science which existed since the medieval scholastics
and, in its modern form, since Richard Cantillon. But what the
German economists used to call, in a narrower connection, Das
AdamSmithProblem,[i] is much more severe than that. For the problem
is not simply that Smith was not the founder of economics.

problem is that he originated nothing that was true, and that
whatever he originated was wrong; that, even in an age that had
fewer citations or footnotes than our own, Adam Smith was a shameless
plagiarist, acknowledging little or nothing and stealing large
chunks, for example, from Cantillon. Far worse was Smith’s complete
failure to cite or acknowledge his beloved mentor Francis Hutcheson,
from whom he derived most of his ideas as well as the organization
of his economic and moral philosophy lectures. Smith indeed wrote
in a private letter to the University of Glasgow of the ‘never-to-be-forgotten
Dr. Hutcheson,’ but apparently amnesia conveniently struck Adam
Smith when it came time to writing the Wealth of Nations
for the general public.[ii]

though an inveterate plagiarist, Smith had a Columbus complex, accusing
close friends incorrectly of plagiarizing him. And even though
a plagiarist, he plagiarized badly, adding new fallacies to the
truths he lifted. In castigating Adam Smith for errors, therefore,
we are not being anachronistic, absurdly punishing past thinkers
for not being as wise as we who come later. For Smith not only contributed
nothing of value to economic thought; his economics was a grave
deterioration from his predecessors: from Cantillon, from Turgot,
from his teacher Hutcheson, from the Spanish scholastics, even oddly
enough from his own previous works, such as the Lectures
on Jurisprudence (unpublished, 1762–63, 1766) and the Theory
of Moral Sentiments

mystery of Adam Smith, then, is the immense gap between a monstrously
overinflated reputation and the dismal reality. But the problem
is worse than that; for it is not just that Smith’s Wealth
of Nations has had a terribly overblown reputation from his
day to ours. The problem is that the Wealth of Nations
was somehow able to blind all men, economists and laymen alike,
to the very knowledge that other economists, let alone better
ones, had existed and written before 1776. The Wealth of Nations
exerted such a colossal impact on the world that all knowledge
of previous economists was blotted out, hence Smith’s reputation
as Founding Father. The historical problem is this: how could
this phenomenon have taken place with a book so derivative, so
deeply flawed, so much less worthy than its predecessors?

The answer is
surely not any lucidity or clarity of style or thought. For the
much-revered Wealth of Nations is a huge, sprawling, inchoate,
confused tome, rife with vagueness, ambiguity and deep inner contradictions.
There is of course an advantage, in the history of social thought,
to a work being huge, sprawling, ambivalent and confused. There
is sociological advantage to vagueness and obscurity. The bemused
German Smithian, Christian J. Kraus, once referred to the Wealth
of Nations as the ‘Bible’ of political economy. In a sense,
Professor Kraus spoke wiser than he knew. For, in one way, the Wealth
of Nations is like the Bible; it is possible to derive varying
and contradictory interpretations from various – or even the
same – parts of the book. Furthermore, the very vagueness and
obscurity of a work can provide a happy hunting ground for intellectuals,
students and followers. To make one’s way through an obscure and
difficult tract, to weave dimly perceived threads of a book into
a coherent pattern – these are rewarding tasks in themselves
for intellectuals. And such a book also provides a welcome built-in
exclusion process, so that only a relatively small number of adepts
can bask in their expertise about a work or a system of thought.
In that way they increase their relative income and prestige, and
leave other admirers behind to form a cheering section for the leading
disciples of the Master.

Smith did not found the science of economics, but he did indeed
create the paradigm of the British classical school, and it is
often useful for the creator of a paradigm to be inchoate and
confused, thereby leaving room for disciples who will attempt
to clarify and systematize the contributions of the Master. Until
the 1950s, economists, at least those in the Anglo-American tradition,
revered Smith as the founder, and saw the later development of
economics as a movement linearly upward into the light, with Smith
succeeded by Ricardo and Mill, and then, after a bit of diversion
created by the Austrians in the 1870s, Alfred Marshall establishing
neoclassical economics as a neo-Ricardian and hence neo-Smithian
discipline. In a sense, John Maynard Keynes, Marshall ‘s student
at Cambridge, thought that he was only filling in the gaps in
the Ricardian-Marshallian heritage.

Into this complacent
miasma of Smith-worship, Joseph A. Schumpeter’s History
of Economic Analysis
(1954) came as a veritable blockbuster.
Coming from the continental Walrasian and Austrian traditions
rather than from British classicism, Schumpeter was able, for virtually
the first time, to cast a cold and realistic eye upon the celebrated
Scot. Writing with thinly veiled contempt, Schumpeter generally
denigrated Smith’s contribution, and essentially held that
Smith had shunted economics off on a wrong road, a road unfortunately
different from that of his continental forbears.[iii]

Schumpeter, historians of economic thought have largely retreated
to a fallback position. Smith, it is conceded, created nothing,
but he was the great synthesizer and systematizer, the
first one to take up all the threads of his predecessors and weave
them together into a coherent and systematic framework. But Smith’s
work was the reverse of coherent and systematic, and Ricardo and
Say, his two major disciples, each set themselves the task of
forging such a coherent system out of the Smithian muddle. And,
furthermore, while it is true that pre-Smithian writings were
incisive but sparse (Turgot) or embedded in moral philosophy (Hutcheson),
it is also true that there were two general treatises on economics
per se before the Wealth of Nations. One was Cantillon’s
great Essai which, after Smith, fell into grievous neglect,
to be rescued a century later by Jevons; the other, and the first
book to use political economy in its title, was Sir James Steuart’s
(1712–80) outdated two-volume work, Principles of Political
Oeconomy (1767). Steuart, a Jacobite who had been involved
in Bonnie Prince Charlie’s rebellion, was for much of his life
an exile in Germany, where he became imbued with the methodology
and ideals of German ‘cameralism.’ Cameralism was a virulent form
of absolutist mercantilism that flourished in Germany in the seventeenth
and eighteenth centuries. Cameralists, even more than western
European mercantilists, were not economists at all – that
is, they did not analyse the processes of the market but were
technical advisers to rulers on how and in what way to build up
state power over the economy. Steuart’s Principles was
in that tradition, scarcely economics but rather a call for massive
government intervention and totalitarian planning, from detailed
regulation of trade to a system of compulsory cartels to inflationary
monetary policy. His only ‘contribution’ was to refine and expand
previously fleeting and inchoate notions of a labour theory of
value, and to elaborate a proto-Marxian theory of inherent class
conflict in society. Furthermore, Steuart had written an ultramercantilist
tome just at the time when classical liberal and laissez-faire
thought was rising and becoming dominant at least in Britain and

though Steuart’s Principles was out of step with the emerging
classical liberal Zeitgeist, it was no foregone conclusion
that the work would have little or no influence. The book was
well received, highly respected, and sold very well, and five
years after its publication, in 1772, Steuart won out over Adam
Smith in acquiring a post as monetary consultant to the East India

reason that the Schumpeter view of Smith shocked the economics
profession is that historians of economic thought, similar to
historians of other disciplines, have habitually treated the development
of science as a linear and upward march into the truth. Each scientist
patiently formulates, tests and discards hypotheses, and thereby
each succeeding one stands on the shoulders of the one who came
before. What might be called this ‘Whig theory of the history
of science’ has now been largely discarded for the far more realistic
Kuhnian theory of paradigms. For our purposes the important point
of the Kuhn theory is that a very few people patiently test anything,
particularly the fundamental assumptions, or basic ‘paradigm,’
of their theory: and shifts in paradigms can take place even when
the new theory is worse than the old. In short, knowledge can
be and is lost as well as gained, and science often proceeds in
a zig-zag rather than linear manner. We might add that this would
be particularly true in the social or humane sciences. As a result,
paradigms and basic truths get lost, and economists (as well as
people in other disciplines) can get worse, and not better, over
time. The years may well bring retrogression as well as progress.
Schumpeter had heaved a bombshell into the temple of the
Whig historians of economic thought, specifically of the partisans
of the Smith-Ricardo-Marshall tradition.[iv]

have thus posed our own version of the Das AdamSmithProblem:
how did so badly flawed a work as the Wealth of Nations
rapidly become so dominant as to blot out all other alternatives?
But before considering this question, we must examine the various
aspects of Smithian thought in more detail.

life of Smith

Smith was born in 1723 in the small town of Kirkcaldy, near Edinburgh.
His father, also Adam Smith (1679–1723), who died shortly
before he was born, was a distinguished judge advocate for Scotland
and later comptroller of customs at Kirkcaldy, who had married
into a well-to-do local landowning family. Young Smith was therefore
raised by his mother. The town of Kirkcaldy was militantly Presbyterian,
and in the Burgh School in the town he met many young Scottish
Presbyterians, one of whom, John Drysdale, was to become twice
moderator of the general assembly of the Church of Scotland.

indeed, came from a customs official family. In addition to his
father, his cousin, Hercules Scott Smith, served as collector
of customs at Kirkcaldy, and his guardian, again named Adam Smith,
was to become customs collector at Kirkcaldy as well as inspector
of customs for the Scottish outports. Finally, still another cousin
named Adam Smith later served as customs collector at Alloa.

1737 to 1740, Adam Smith studied at Glasgow College, where he
fell under the spell of Francis Hutcheson, and imbibed the excitement
of the ideas of classical liberalism, natural law and political
economy. In 1740, Smith earned an MA with great distinction at
the University of Glasgow. His mother had baptized Adam in the
Episcopalian faith, and she was eager for her son to become an
Episcopalian minister. Smith was sent to Balliol College,
Oxford, on a scholarship designed to nurture future Episcopalian
clerics, but he was unhappy at the wretched instruction in
the Oxford of his day, and returned after six years, at the age
of 23, without having taken holy orders. Despite his baptism and
his mother’s pressure, Smith remained an ardent Presbyterian,
and returning to Edinburgh in 1746, he remained unemployed
for two years.

in 1748, Henry Home, Lord Kames, a judge and a leader of the liberal
Scottish Enlightenment and a cousin of David Hume, decided to
promote a series of public lectures in Edinburgh to educate lawyers.
Along with Smith’s childhood friend, James Oswald of Dunnikier,
Kames got the Philosophical Society of Edinburgh to sponsor Smith
in several years of lectures on natural law, literature, liberty
and commercial freedom. In 1750, Adam Smith obtained the chair
in logic at his alma mater, the University of Glasgow,
and he found no difficulty in the requisite signing of the Westminster
Confession before the Presbytery of Glasgow. Finally, in 1752,
Smith had the satisfaction of ascending to his beloved teacher
Hutcheson’s chair of moral philosophy at Glasgow, where he was
to remain for 12 years.

Edinburgh and Glasgow lectures were very popular, and his major
stress was on the ‘system of natural liberty,’ on the system of
natural law and laissez-faire which he was then advocating
with far less qualification than later in his more cautious Wealth
of Nations. He also managed to convert many of the leading
merchants of Glasgow to this exciting new creed. Smith also plunged
into the social and educational associations that were beginning
to be formed by the moderate Presbyterian clergy, university professors,
literati, and attorneys in both Glasgow and Edinburgh. It is likely
that David Hume attended Smith’s Edinburgh lectures in 1752, for
the two became fast friends shortly thereafter.

Smith was a
founding member of the Glasgow Literary Society the following
year; the society engaged in high-level discussions and debates,
and met diligently every Thursday evening from November to May.
Hume and Smith were both members, and at one of the first sessions,
Smith read an account of some of Hume’s recently printed Political
Discourses. Oddly enough, the two friends, clearly the brightest
members of the Society, were extremely diffident, and never said
a word in any of the discussions.

his diffidence, Smith was a busy and inveterate clubman, becoming
a leading member of the Philosophical Society of Edinburgh and
of the Select Society (Edinburgh), which flourished in the 1750s,
and met weekly, bringing together the moderate power elite from
the clergy, university men, and the legal profession. Smith was
also an active member of the Political Economy Club of Glasgow,
the Oyster Club (Edinburgh); Simson’s Club of Glasgow; and the
Poker Club (Edinburgh), founded by his friend Adam Ferguson, professor
of moral philosophy at the University of Edinburgh, specifically
to promote the ‘martial spirit.’ As if this were not enough, Adam
Smith was one of the leading contributors and editors of the abortive
Edinburgh Review (1755–56), dedicated largely to the
defense of their friends Hume and Kames against the hard-core
evangelical Calvinist clergy of Scotland. The Edinburgh
Review was founded by the brilliant young lawyer, Alexander
Wedderburn (1733–1805), who was to become a judge, an MP in England,
and finally Lord Chancellor (1793–1801). Wedderburn was so latitudinarian
as to favour the licensing of brothels. Other luminaries on the
Edinburgh Review were top moderate leaders: the politician
John Jardine (1715–60), whose daughter married Lord Kames’s son;
the powerful Rev. William Robertson, and the Rev. Hugh Blair (1718–1800),
professor of rhetoric at the University of Edinburgh.

intensity of Adam Smith’s Presbyterianism, even though not fundamentalist,
may be seen in his relationship to Hugh Blair. Blair, the minister
at the High Kirk, Greyfriars, was in constant hot water with the
orthodox Calvinist clergy, who repeatedly denounced him to the
Glasgow and Edinburgh Presbyteries. In the Wealth of Nations,
Adam Smith delivered the following encomium to the Presbyterian
clergy: ‘There is scarce, perhaps, to be found anywhere in Europe,
a more learned, decent, independent, and respectable set of men
than the greater part of the Presbyterian clergy of Holland, Geneva,
Switzerland, and Scotland.’ To which his old friend Blair, though
himself a leading if embattled Presbyterian clergyman, commented
in a letter to Smith: ‘You are, I think, by much too favorable
to Presbytery.’

Smith published his moral philosophy in his Theory of Moral
Sentiments (1759), his increasing fame won him a highly lucrative
position in 1764 as tutor to the young duke of Buccleuch. For
three years of tutoring, which he spent with the young duke in
France, Smith was awarded a lifetime annual salary of £300,
twice his annual salary at Glasgow. In three pleasant years in
France, he made the acquaintance of Turgot and the physiocrats.
His tutorial task accomplished, Smith returned to his home town
of Kirkcaldy, where, secure in his lifetime stipend, he worked
for ten years to complete the Wealth of Nations, which
he had started at the beginning of his stay in France. The fame
of the Wealth of Nations led his proud erstwhile pupil,
the Duke of Buccleuch, to help secure for Smith in 1778 the highly
paid post of commissioner of Scottish customs at Edinburgh. With
a pay of £600 per annum from his government post, which
he kept until the day of his death in 1790, added to his handsome
lifetime pension, Adam Smith was making close to a £1000
a year, a ‘princely revenue,’ as one of his biographers has described
it. Even Smith himself wrote in this period that he was ‘fully
as affluent as I could wish.’ He regretted only that he had to
attend to his customs post, which took time away from his ‘literary

yet his regrets were scarcely profound. In contrast to most historians,
who have treated Smith’s customs post embarrassedly as virtually
a no-show sinecure in reward for intellectual achievements, recent
research has shown that Smith worked full-time at his post, often
chairing the daily meetings of the board of customs commissioners.
Moreover, Smith sought the appointment and apparently found
the position enjoyable and relaxing. It is true that Smith spent
little time or energy on scholarship and writing after his appointment;
but there were leaves of absence available which Smith showed
no interest in pursuing. Furthermore the groundwork for Smith’s
quest for the appointment was not so much his intellectual attainments
as a reward for his advice as consultant on taxes and the budget
to the British government since the mid-1760s.[v]

division of labour

is appropriate to begin a discussion of Smith’s Wealth of Nations
with the division of labour, since Smith himself begins there
and since for Smith this division had crucial and decisive importance.
His teacher Hutcheson had also analysed the importance of the
division of labour in the developing economy, as had Hume, Turgot,
Mandeville, James Harris and other economists. But for Smith the
division of labour took on swollen and gigantic importance, putting
into the shade such crucial matters as capital accumulation and
the growth of technological knowledge. As Schumpeter has pointed
out, never for any economist before or since did the division
of labour assume such a position of commanding importance.

there are more troubles in the Smithian division of labour than
his exaggerating its importance. The older and truer perception
of the motive power for specialization and exchange was simply
that each party to an exchange (which is necessarily two-party
and two-commodity) benefits (or at least expects to benefit) from
the exchange; otherwise the trade would not take place. But Smith
unfortunately shifts the main focus from mutual benefit to an
alleged irrational and innate ‘propensity to truck, barter and
exchange’, as if human beings were lemmings determined by forces
external to their own chosen purposes. As Edwin Cannan pointed
out, Smith took this tack because he rejected the idea of innate
differences in natural talents and abilities, which would naturally
seek out different specialized occupations. Smith instead took
the egalitarian-environmentalist position, still dominant today
in neoclassical economics, that all labourers are equal, and therefore
that differences between them can only be the result rather
than a cause of the system of the division of labour.

addition, Smith failed to apply his analysis of the division of
labour to international trade, where it would have provided powerful
ammunition for his own free trade policies. It was to be left
to James Mill to make such an application in his excellent theory
of comparative advantage. Furthermore, domestically, Smith placed
far too much importance on the division of labour within
a factory or industry, while neglecting the more significant division
of labour among industries.

if Smith had an undue appreciation of the importance of the division
of labour, he paradoxically sowed great problems for the future
by introducing the chronic modern sociological complaint
about specialization that was picked up quickly by Karl Marx and
has been advanced to a high art by socialist gripers about ‘alienation’.
There is no gainsaying the fact that Smith totally contradicted
himself between Book I and Book V of the Wealth of Nations.
In the former, the division of labour alone accounts for
the affluence of civilized society, and indeed the division of
labour is repeatedly equated with ‘civilization’ throughout the
book. And yet, while in Book I the division of labour is hailed
as expanding the alertness and intelligence of the population,
in Book V it is condemned as leading to their intellectual as
well as moral degeneration, to the loss of their ‘intellectual,
social and martial virtues’. There is no way that this contradiction
can be plausibly reconciled.[vi]

Smith, though himself a plagiarist of considerable dimensions,
also had a Columbus complex, often accusing other people unfairly
of plagiarizing him. In 1755 he actually laid claim to having
invented the concept of laissez-faire, or the system of
natural liberty, asserting that he had taught these principles
since his Edinburgh lectures in 1749. That may be: but the claim
ignores previous such expressions by his own teachers as well
as by Grotius and Pufendorf, to say nothing of Boisguilbert and
the other French laissez-faire thinkers of the late seventeenth

1769, the contentious Smith levied a plagiarism charge against
Principal William Robertson, upon the occasion of the publication
of the latter’s History of the Reign of Charles V.
It is not known what the topic of the literary theft was supposed
to be, and it is difficult to guess, considering the remoteness
from Smith’s work of the theme of the Robertson book.

most famous plagiarism charge hurled by Smith was against his
friend Adam Ferguson on the question of the division of labour.
Professor Hamowy has shown that Smith did not break with
his old friend, as had previously been thought, because of Ferguson’s
use of the concept of the division of labour in his Essay on
the History of Civil Society in 1767. In view of all the writers
who had employed the concept earlier, this behaviour would have
been ludicrous, even for Adam Smith. Hamowy conjectures that the
break came in the early 1780s, because of Ferguson’s discussion
at their club of what would later be published as part of his
Principles of Moral and Political Science in 1792. For
in the Principles, Ferguson summed up the pin-factory example
that constituted the single most famous passage in the Wealth
of Nations. Smith had pointed to a small pin-factory where
ten workers, each specializing in a different aspect of the work,
could produce over 48,000 pins a day, whereas if each of these
ten had made the entire pin on his own, they might not have made
even one pin a day, and certainly not more than 20. In that way
the division of labour enormously multiplied the productivity
of each worker. In his Principles, Ferguson wrote: ‘A fit
assortment of persons, of whom each performs but a part in the
manufacture of a pin, may produce much more in a given
time, than perhaps double the number, of which each was to produce
the whole, or to perform every part in the construction of that
diminutive article’.

Smith upbraided Ferguson for not acknowledging Smith’s precedence
in the pin-factory example, Ferguson replied that he had borrowed
nothing from Smith, but indeed that both had taken the
example from a French source ‘where Smith had been before him’.
There is strong evidence that the ‘French source’ for both writers
was the article on Epingles (pins) in the Encyclopaedie
(1755), since that article mentions 18 distinct operations in
making a pin, the same number repeated by Smith in the Wealth
of Nations, although in English pin factories 25 was the more
common number of operations.

Adam Smith broke up a longstanding friendship by unjustly accusing
Adam Ferguson of plagiarizing an example which, in truth, both
men had taken without acknowledgement from the French Encyclopaedie.
The Rev. Carlyle’s comment that Smith had ‘some little jealousy
in his temper’ seems a vast understatement, and we are informed
by his obituary notice in the 1790 Monthly Review that
‘Smith lived in such constant apprehension of being robbed of
his ideas that, if he saw any of his students take notes of his
lectures, he would instantly stop him and say, ‘I hate scribblers’.[vii] While there is also evidence that Smith allowed
students to take notes, the point about his crabbed temper and
Columbus complex is well made.

use of an example of a small French pin-factory rather than a
larger British one highlights a curious fact about his celebrated
Wealth of Nations: the renowned economist seems to have
had no inkling of the Industrial Revolution going on all about
him. Although he was a friend of Dr. John Roebuck, the owner of
the Carron iron works, whose opening in 1760 marked the beginning
of the Industrial Revolution in Scotland, Smith showed no indication
that he knew of its existence. Although he was at least an acquaintance
of the great inventor James Watt, Smith displayed no knowledge
whatever of some of Watt’s leading inventions. He made no mention
in his famous book of the canal boom which had begun in the early
1760s, of the very existence of the burgeoning cotton textile
industry, or of pottery or of the new methods of making beer.
There is no reference to the enormous drop in travel costs that
the new turnpikes were bringing about.

contrast, then, to those historians who praise Smith for his empirical
grasp of contemporary economic and industrial affairs, Adam Smith
was oblivious to the important economic events around him. Much
of his analysis was wrong, and many of the facts he did include
in the Wealth of Nations were obsolete and gathered from
books 30 years old.

unproductive labour

of the physiocrats’ more dubious contributions to economic thought
was their view that only agriculture was productive, that only
agriculture contributed a surplus, a produit net,
to the economy. Smith, heavily influenced by the physiocrats,
retained the unfortunate concept of ‘productive’ labour, but expanded
it from agriculture to material goods in general. For Smith, then,
labour on material objects was ‘productive'; but labour on, say,
consumer services, on immaterial production, was ‘unproductive’.

bias in favour of material objects amounted to a bias in favour
of investment in capital goods, since a stock of capital goods
by definition has to be embodied in material objects. Consumer
goods, on the other hand, either consist of immaterial services,
or they get used up – consumed – in the process of consumption.
Smith’s imprimatur on material production, therefore, was an indirect
way of advocating investment in an accumulation of capital goods
as against the very goal of producing capital goods: increased
consumption. When discussing exports and imports, Smith realized
full well that there was no point to amassing intermediate objects
except that they eventually be consumed, that the only goal of
production is consumption. But as Professor Roger Garrison has
pointed out, and as we shall see further on the question of usury
laws, Adam Smith’s Presbyterian conscience led him to value the
expenditure of labour per se, for its own sake, and led
him to balk at free market time-preferences between consumption
and saving. Clearly, Smith wanted far more investment towards
future production and less present consumption than the market
was willing to choose. One of the contradictions of this position,
of course, is that accumulating more capital goods at the expense
of present consumption will eventually result in a higher standard
of living unless Smith prepared to counsel a perpetual and accelerated
shift toward more and more never-to-be-consumed means of production.


[i] Das AdamSmithProblem referred
to only one of the numerous contradictions and puzzles in the
Adam Smith saga: the big gap between the natural rights – laissez-faire
views of his Theory of Moral Sentiments, and the much
more qualified views of his later and decisively influential
Wealth of Nations.

[ii] In an illuminating article on
‘Adam Smith’s Acknowledgements,’ Professor Salim Rashad writes:
‘It is stated by Schumpeter that this [not acknowledging one’s
sources] was the practice of his age. This is incorrect. If
we turn to some of the works quoted in the Wealth of Nations,
such as Charles Smith’s Tracts on the Corn-Trade or John
Smith’s Memoirs on Wool, we shall find them scrupulous
in acknowledging their intellectual debts. Among Smith’s contemporaries,
Gibbon is well-known for the care with which he provided references
and the same is true of the best-known agricultural writer of
Smith’s day, Arthur Young.’ Salim Rashad. ‘Adam Smith’s Acknowledgements:
Neo-Plagiarism and the Wealth of Nations,’ Journal of Libertarian
Studies, 9 (Autumn 1990), p.11.

[iii] The first and most consistent
piece of modern Smith revisionism came a year earlier in two
excellent and illuminating articles by Emil Kauder: ‘Genesis
of the Marginal Utility Theory: From Aristotle to the End of
the Eighteenth Century,’ in J. Spengler and W. Allen (eds.),
Essays in Economic Thought (Chicago: Rand McNally and
Co., 1960), pp. 277–87; and ‘The Retarded Acceptance of
the Marginal Utility Theory,’ Quarterly Journal of Economics
(Nov. 1953), pp. 564–75. But Schumpeter’s revision was
far more influential.

[iv] Unfortunately, since the mid-1970s
celebration of Smith’s bicentennial, a counter-revisionist trend
has set in to try to restore the hagiographical attitude dominant
before the 1950s. See our bibliographical essay below.

[v] For a new view of Smith’s tenure
at the customs house based on original investigation into the
handwritten minutes of the board of customs commissioners, 1778–90,
as well as on Smith’s numerous letters to customs collectors
at the outports, see the important article of Gary M. Anderson,
William F. Shughart II, and Robert D. Tollison, ‘Adam Smith
in the Customhouse,’ Journal of Political Economy, 93
(August 1985), pp. 740–59.

[vi] Griping about alienation had
begun with the influential Essay on the History of Civil
Society (1767), written by Smith’s friend Adam Ferguson.
A similar theme, however, had appeared in Smith’s unpublished
Glasgow lectures of 1763. On Ferguson’s influence, see M.H.
Abrams, Natural Supernaturalism (New York: W.W. Norton,
1971), pp. 220–21, 508.

[vii] Quoted in Ronald Hamowy, ‘Adam
Smith, Adam Ferguson, and the Division of Labour’, Economica
(August 1968), p. 253.

N. Rothbard
(1926–1995) was the author of Man,
Economy, and State
, Conceived
in Liberty
, What
Has Government Done to Our Money
, For
a New Liberty
, The
Case Against the Fed
, and many
other books and articles
. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report

Rothbard Archives

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