Challenging the clichés: How recent scholarship refreshes the interpretation of Adam Smith’s oeuvre

1.1 Festive Mood in Scotland

The year 2023 has been a year of Smith festivities. Adam Smith was born 300 years earlier, in June 1723, in the small Scottish port town of Kirkcaldy, located just opposite Edinburgh on the Firth of Forth. The son of a lawyer and customs commissioner (who had died before his son’s birth) became a great Scottish Enlightenment thinker with a wide range of interests. He gained global fame primarily for his writings in moral philosophy and political economy. These consist of his “Theory of Moral Sentiments” (TMS, Smith 1982a), first published in 1759, and his “Inquiry into the Nature and Causes of the Wealth of Nations” (WN, Smith 1981), first published in 1776. During his lifetime, Smith repeatedly revised and expanded both works. WN played a crucial role in the establishment of economics as a separate academic discipline.

Smith scholarship has benefitted enormously from the two sets of student notes taken during his “Lectures on Jurisprudence” (LJ, consisting of LJ(A) and LJ(B), Smith 1982b) at the University of Glasgow, only discovered in 1895 and 1958. Considerable parts of this material can be considered a precursor to WN. In addition, there are the “Lectures on Rhetoric and Belles Lettres” (LRBL, Smith 1985), also student notes, and the early essay on the “History of Astronomy” (HA) published in the volume assembling Smith’s “Essays on Philosophical Subjects” (EPS, Smith 1987, pp. 33–105). Both provide important keys for understanding Smith’s oeuvre in its systematic appeal to “common sense” and in the epistemology undergirding it (see, among others, Fleischacker 2004, chapter 2, and 2021, chapter 2).^[1]

Whether in Kirkcaldy, Edinburgh (where Smith served as customs commissioner at a more mature age), Glasgow (where he said to have spent his happiest years at the university holding the chair of moral philosophy (Smith 1982b, p. 309)), or even nearby St. Andrews: Smith bustle broke out everywhere on the occasion of the anniversary. A ceremony in the Old Kirk at Kirkcaldy, where Smith was baptized on June 5, 1723 (according to the Julian calendar),^[2] an exhibition, academic workshops, international conferences, lecture series, summer schools for young scholars, online reading groups, and much more was on the programs organized by various institutions. Even the committee for the history of economics within the German Economic Association (Verein für Socialpolitik) traveled to Scotland for its annual meeting – the meetings usually take place in German-speaking territory.

From a German perspective, specifically, Smith’s oeuvre holds quite a particular fascination. Its important practical influence has been amply documented. Even Gustav Schmoller, the longtime chairman of the Verein für Socialpolitik, mentions that Smith “nowhere found greater and more unconditional followers” than in Germany (and in the United States), “for the great men who rebuilt the Prussian state in 1808–40 could only do so by creating a free ‘commercial society’” (Schmoller 1913, p. 134, my translation). Despite considerable differences in the conception of the state (see Priddat 2019), Smith’s recommendations provided a decisive impulse for the Stein-Hardenberg reforms that transformed Prussia from an absolutist corporate agrarian state to an enlightened industrial nation state. This owed much to the freedom of trade now introduced, the equality of citizens, and the broader access to education (see, i. a., Rae 1895, p. 360, Deecke 2015, and Oz-Salzberger 2016).

Bismarck carried on with this policy “because the political unity of Germany could only be achieved with economic freedom at home” (Schmoller, ibid., my translation). Even the welfare state arguably owes much to Smith’s new, egalitarian view of the poor. These historical impulses continue to have an effect to this day. At literally the same time, however, the pervasive notion of an “Adam Smith problem” arose in the German-speaking world. In the second half of the 19th century, this legend gave rise to a great deal of misunderstandings. But as a beneficial side effect, it also set in motion a first wave of more intensive Smith research. But more on this later.

1.2 Where are the economists?

The impressive even number “300” (years) alone cannot explain the festive mood, at least not in academic circles. Indeed, the importance given to the anniversary has more to do with the rare phenomenon that Smith’s oeuvre, in its unusual density, still poses a wealth of challenges today. It invites interpretation again and again, including from the perspective of economics. Smith set an agenda that guides the discipline to this day (see Sandmo 2016, p. 231), and he also created the conceptual framework within which the discourse has evolved ever since (Aspromourgos 2009a, p. 6).

Contrary to what one might think, Smith’s oeuvre is far from “exhausted” – not even from an economic perspective. Beyond his preoccupation in WN with classical topics such as the division of labor, capital accumulation, trade, growth, price, and value, Smith’s oeuvre provides challenges that can contribute to both the self-positioning of the discipline and the broadening of its horizons. Political economy, for Smith, was a branch of philosophizing that could be spun off in the intellectual division of labor but was nonetheless far from autonomous (see Aspromourgos 2009, 2011). Reading Smith always opens up perspectives for dealing with current issues – e. g., questions about navigating between positive and normative analysis, the appropriate role of the scholar in relation to politics, good methods for communicating theoretical knowledge, the appropriate stance to take, the best way to address politics and the public, and the effectiveness of policy advice.

But today, economists are dramatically neglecting their ancestor. In the academic world, there is often only time and space for an intensive study of the founder of the discipline at the end of an academic career, when one wishes to gain a bird’s eye view of one’s own subject. Some authors only fall back on Smith when it suits them ideologically, notwithstanding that they usually feel committed to value-free, positive theory. They then sort of hide behind him normatively. Or they remember him when a quotation from his oeuvre offers itself as a neat opening phrase, according to the motto: “As Smith already knew … .”

The “ancestral ally” (Blaug 1990, p. 35) thus appropriated is then used to authenticate one’s own view. “Smith is often treated like the Soviet central Committee of the Communist Party treated Marx, as a deep well of expressions (taken out of context) that one can dip into in order to justify the next Five Year Plan,” scoffs the economist Jerry Evensky (2015, p. 5, footnote 13). That this inevitably comes with “uses and abuses” (Sen 2011) is obvious. Such a treatment, however, threatens to turn Smith into a really “dead economist” (Buchholz 1990) who may still occasionally beckon from afar, but who is no longer trusted to speak to the discipline he shaped.

Yet Smith is not quite so “dead.” Rather, he continues to belong to our “extended present,” to that “historical range within which active communication is taking place,” to use the term coined by the economist Kenneth Boulding (1971, p. 227). Or, as the economist Maria Pia Paganelli, current president of the International Adam Smith Society (IASS), states: “We still pose questions to Adam Smith. And he still answers” (Paganelli 2015, p. 363). “Smith can successfully be used, even if out of context, to help us understand questions we face today” (Paganelli 2011, p. 246).

Smith’s oeuvre has an evolutionary potential for theorizing that is far from depleted (Boulding 1971, p. 230). “[O]ne can still go back to Adam Smith even after many rereadings and find insights which one has never noticed before and which may have a marked impact on one’s own thought” (ibid., p. 231). This will be particularly fruitful for economists if they stop feeling that Smith talks to them only through WN. It pays to take in Smith’s entire oeuvre, i. e., also TMS, LJ, LRBL, and EPS (as well as CAS). All this may be understood as a coherent project that can be continued today.

1.3 An interdisciplinary renaissance

Economics has long relinquished its leadership role in the debate about Smith. But Smith scholarship as a whole has experienced a new flowering for some years now, partly in response to the distortions that crept in during the long reception history. The younger interdisciplinary research crowd, a colorful international community with a large proportion of spirited revisionists, has now taken up their intellectual arms against this. The abundance of their publications is overwhelming; which of course confirms the public choice theorist Gordon Tullock’s laconic comment (1969, p. 287): “One of the more immutable of the immutable economic laws is that every sentence in the Wealth of Nations will eventually become a book.” Yet, this modern scholarship is no longer just about WN, but about Smith’s complete oeuvre.

It is not easy to quantify the wealth of the recent publications with precision. The results of a search in online library catalogs may only give a rough idea. A query in the WorldCat bibliographic database, for example, reveals that the keyword “Adam Smith” has been entered no fewer than 95,470 times since the turn of the millennium, for books, essays, and contributions to anthologies. Of those books alone, no less than 2,649 bear the name “Adam Smith” in the title.^[3]

A query in the digital library JSTOR, which unlike WorldCat does not strive to list all existing publications but makes selected journals and books available, gives a first impression of the distribution of disciplines.^[4] Since the turn of the millennium, 198 scientific articles bearing the name “Adam Smith” in their title can be found here, as well as 278 contributions to anthologies. Of the 198 articles thus made available, 89 are assigned to “Economics,” 66 to “Business,” 38 to “Philosophy,” 43 to “Political Science,” 11 to “Sociology,” and 21 to “History.” But these numbers are deceptive, since multiple assignments are possible. On closer inspection, most of the articles classified under “Economics” are not written by economists, but are contributions by scholars from neighboring disciplines devoted to an economic topic.^[5]

From the point of view of economics, one may regret the withdrawal of this discipline from such a vibrant scholarly effort. But one can also choose to appreciate the development as a promising turn of events: the analysis of Smith’s oeuvre is now embedded in a broad discussion within the social sciences and the humanities, which is usually a great advantage. Economics can only benefit from this. In order to decipher Smith’s concepts and understand them in their broader context, economists today need support from philosophy, political science, history, and even theology. The interdisciplinary division of labor also offers a most useful corrective against a risk, or tendency, that one all too easily succumbs to: to read (primarily) the (contemporary) concerns of one’s own discipline into Smith.

For economists, moreover, interdisciplinarity opens up the chance to return to “political economy” as Smith understood it, i. e., to economics as a discipline concerned with government, a “branch of the science of the statesman or legislator” (WN IV.1).^[6] As Heinz Kurz (2016, p. 22) paraphrases it, according to Smith, this discipline has not only the task of correcting wrong ideas in economic policy, but also of dispelling the erroneous claim that self-interest automatically promotes the common good. It also aims to develop a regulatory framework for markets and other institutions so as to overcome preexisting conflicts of interest and thus ensure the continuity of society. In such a very broad discipline, economic, political, and legal aspects are interwoven (see also C. Smith 2020, p. 173). As the economist Tony Aspromourgos (2009a, p. 259) points out, such a genuinely interdisciplinary perspective differs substantially from the reductionist application of the rational choice approach to topics in neighboring disciplines otherwise common in economics today.

An interdisciplinary approach suits Smith best anyway. He is a universally interested philosopher who always develops the economic perspective from the ethical one, who underpins his economic and political argumentation with historical evidence and develops it in vivid, accessible narratives, and who combines all this with sociological, psychological, and legal considerations. The very fact that his oeuvre addresses the human condition probably explains part of the great fascination that it arouses today, when, ironically, as a result of the academic division of labor, this capacity is in danger of being lost.

Recent Smith scholarship offers a welcome counterweight to this development, with a wealth of original and sometimes no less than sensational contributions from a variety of disciplinary perspectives. Such interdisciplinarity also characterizes the authorship in the Adam Smith Review, published under the wing of the IASS (founded in 1995), as well as in the great handbooks and collections of essays published in the past two decades (see, i. a., Haakonssen 2006b, Young 2010, Berry, Paganelli, and Smith 2013, Hanley 2016, and Montes and Schliesser 2006).

1.4 Outline

The aim of this paper is to provide an overview of the interdisciplinary professional debate surrounding Adam Smith’s oeuvre, based on some topics of particular interest to economists.^[7] In doing so, I wish to show what has happened in this field, which errors and clichés have been crushed, dispelled, or at least been shaken, how much inspiration recent Smith research holds today – and, of course, how rich, stimulating, and relevant Smith’s oeuvre itself still is (see also Sen 2013 and Horn 2009). I focus here, as in the database queries, on scholarly works since the turn of the millennium; this is just a pragmatic, arbitrary demarcation without any particular significance. In view of the overwhelming abundance of material, this overview only offers a subjective selection and is not even close to complete. But perhaps it can serve as a stimulus and guide for the reader to recent literature on the selected main topics.

In preparation, section 2 asks how classical oeuvres such as Smith’s can be engaged with meaningfully today, i. e., what kind of approaches to the history of ideas^[8] are available. In section 3, I then present some recent treatments of Adam Smith, man and work; these include biographical writings, introductions, analyses of the reception history, and also some major overall accounts. In section 4, I explore a variety of issues in which economists have recently engaged with Smith, partly entering the interdisciplinary discourse. The issues are so diverse as to include cooperation, war and peace, and foreign trade. In section 5, I focus on interdisciplinary work about the understanding of equality in Smith’s oeuvre. Recent revisionist scholarship paints a predominantly egalitarian picture of Smith that differentiates between material, moral, and analytic equality and incorporates Smith’s theory of justice.

In section 6, I turn to the discussion about “Das Adam Smith Problem”, the alleged incompatibility of TMS and WN – as it is indeed still known in international research, including this German designation. In essence, it is about how Smith thinks about the nature of man and how he therefore models human beings in his theory (the “image of man”) – and how we do this in his wake. Even though this “problem” may be regarded as historically refuted, according to the predominant opinion, it can still provide a springboard for discussion at the intersection of ethics and economics if one chooses to detach it from Smith’s writings. In section 7, I discuss another stereotypical stumbling block in Smith reception: the metaphor of the “invisible hand,” the role of divine providence, and the “natural harmony” associated with it (or not). In section 8, I look at the literature on Smithian liberalism. What does it consist of? The usual distorted image according to which Smith was a proponent of laissez-faire quickly breaks down. Nevertheless, there is agreement that he remains a liberal – just in a more complex way than the cliché suggests. Section 9 contains a brief conclusion.

2 Approaches to the History of Ideas

As the historian of economic thought Mark Blaug mockingly remarked, quite a few economists suffer from severe “cliophobia” – a sort of anxiety disorder with respect to the history of their own discipline (Blaug 1990, p. 27, see also Blaug 2001). Some economists, however, may not so much be tormented by fear. Rather, they simply reject the history of ideas, in line with Alfred N. Whitehead’s (1929, p. 162) infamous dictum that a science which hesitates to forget its founders is lost. “Let us not despise those ancient philosophers,” one would like to say to counter him, quoting Smith from his History of Ancient Physics (EPS, 6).

In any case, the underlying assumption that there might be unexploited potential in classical works should be sufficient to admit that the history of ideas is of interest for economists, whatever their specializations. This assumption is simply grounded in the non-linearity of scientific progress and in the ensuing insight that there is no good reason to expect the current state of research to have incorporated everything that is useful and productive. Such an overly optimistic attitude, derided as “whig history” for almost a century (Butterfield 1931), nevertheless still found support in the late 1980s by one of the great thinkers in the field, the 1970 winner of the Nobel Prize in economics, Paul Samuelson (1987) – and it is still widespread today.

But the “market for ideas” is not perfect in the sense that the best findings inevitably spread and become part of the general body of knowledge. One can assume that intellectual fashions will always tie up productive capacity without yielding much notable return (Boulding 1970). And what prevails depends not only on academic competition, but also on the environment, especially on the extent to which research results are able to answer pressing questions and how, if at all, they are taken up by policy makers. This is particularly true for economics, or “political economy.”

Some ideas may survive although they lead to dead ends, and others may be set aside although they would have much to offer in solving today’s questions. The crux of the “endogenous past,” or intellectual path dependence, exacerbates the danger that promising ideas will be buried (Boettke, Coyne, and Leeson 2014, p. 541). The charm of the history of ideas lies in the fact that it offers an opportunity to track down these ideas and make them fruitful again. And besides: “One would like to meet these giants on whose shoulders one stands” (Heinz Rieter in Horn 2020c, p. 45).

Any engagement with a multifaceted, dense, and temporally distant oeuvre such as Smith’s usually begins with sheer curiosity, i. e., with the present scholar asking what it is that the great Scot has to say about some particular topic. Once one has tracked down and gathered the material, the question of its precise meaning arises, and this requires, in a second step, what is called a “closer reading” (which should actually be a matter of course): for “the solution is in the text” (Labio 2006). In Smith’s case, a return to the sources along these lines has for some time now produced rather large-scale revisionist interpretations that aim to dismantle previous understandings.

The urgent need for this with regard to Smith’s oeuvre is summed up by the political scientist Paul Sagar (2022) in his splendid, ambitious, and intellectually gripping book “Adam Smith Reconsidered.” He wants Smith to be read not from the perspective of moral philosophy and economics alone, as usual, but also from a vantage point of political theory, so that Smith’s significant theoretical contribution in this dimension will finally be recognized. As he laments, “[…] at present, the scholarship on Smith is bedeviled by fundamental and widespread misunderstandings of central aspects of his thought” (ibid., p. 6). At the same time, it is clear that the modern revisions are not immune to misunderstandings either. Ideology may play a role in both old and new interpretations, which may produce an overshoot. One example is how the appropriation of Smith by radical libertarians prompted a counterattack that led to an interpretation which makes Smith a social democrat by today’s standards. Neither does him justice.

Following the philosopher Richard Rorty (1984), one can distinguish four elementary approaches to the history of ideas. These approaches all serve the goal of getting a better grasp of a work; to put it bluntly, this is simply figuring out what it is that the author wants to tell us (and which we often no longer get at the first glance). An approach from intellectual history (“Geistesgeschichte”), first, identifies the central questions of an author and then explores contextually why these specific questions became central at the time. This is not too far from a “historical reconstruction.” Such a historical reconstruction, secondly, takes the scholar on an intellectual journey through time: It requires an abstraction from one’s own accumulated stock of methods and knowledge, so as to look at the writings of classical thinkers in the way their contemporaries would have. The advantage of this approach is that one can immerse oneself completely in a work and appreciate its specific cosmos; the disadvantage, however, is that the required abstraction can usually only be mastered to a limited extent (see Blaug 1990, p. 30).

The “rational reconstruction” in turn, thirdly, translates classical theories into modern scientific language so that they can be tested for consistency and expandability. The advantage lies in the immediate connection to modern theory; the disadvantage, however, is that precisely because the classics did not yet possess today’s level of formalization, not everything can be translated into modern scientific language. On the way, some things do get lost. In addition, such an approach can create sort of a temptation toward hunting the “mistakes” of the ancients, instead of resorting to interpretative charity. Such charity is however in one’s very own interest, as it allows one to use the as yet undiscovered potential of the classics. Given this, it seems necessary to proceed with caution and respect; only then one can say: “Use of a little algebra may assist, and need not cause harm” (Aspromourgos 2009a, p. 6).

Rorty’s fourth category is “doxography,” a variant of Whig history. This is what we are confronted with when, over time, all authors in a field are presented as if they were talking about the same problem which, however, has only been clearly grasped in the present. Maybe more relevantly for the case of Smith scholarship, doxography is also present when the different writings of one author are treated as if they were by necessity inherently coherent, to the effect that existing tensions are not taken seriously or not even noted in the first place. When such blindness occurs, it is often accompanied by a tendency to impute intentions to the author in question, be it out of personal dislike or, to the contrary, of “wishful thinking” – intentions that cannot, however, so clearly be inferred from the texts (see Brown 2003).

Doxography is generally regarded as an aberration. The other three approaches have their pitfalls as well, and it is not always easy to draw a line between them (Blaug 2001). However, with due insight into their respective limitations, they can be put to good use and have therefore been used extensively in recent Smith research.

The second derivative of these approaches to the history of ideas, so to speak, is to relate different oeuvres to one another. With one’s knowledge on Smith, for example, one may probe the differences in the argumentation by contemporaries like David Hume, and then proceed to discuss the advantages and disadvantages of each. This has been undertaken, e. g., by the philosopher Dennis C. Rasmussen (2017), using the (sadly sparse) surviving correspondence and the published writings of the two.

Finally, the elementary aim to be pursued in the history of ideas – to read a work with great precision, to understand it as well as possible, to contextualize and evaluate it in an informed way – can be supplemented by a creative element, too: One may then “play” with the now more manageable terms, concepts, methods, and theories of a classical author, so as to recombine them and use them for developing one’s own thinking. Here, the goal is to make a classical work directly fruitful for modern theory.

Thus, the history of ideas is no one-way street, no backward-looking “antiquarian exercise” (Evensky 2001, p. 497), no mere “l’art pour l’art.” Rather, the intellectual journey into the past can transform the present and the future. For example, one may perhaps recognize the full implications of Smith’s policy recommendations only after a rational reconstruction of his theory through the lens of modern political economy, and then, in turn, receive further inspiration for modern political economy from Smith. As Blaug (2001, p. 153) illustrates: One learns to understand today’s phenomenon of competition better by looking at Smith’s remarks about competition through the lens of modern process-theoretic analysis, and modern process-theoretic analysis in turn can benefit from taking up Smith’s insights and processing them in a creative way. Is it possible to think of a branch of economics in which this should not be possible?

3.1 Biographical Writings

The first piece on Adam Smith was printed just four years after his death in 1790: a eulogy penned by Dugald Stewart (1794), a professor of moral philosophy at the University of Edinburgh. He had gathered as much information about Smith as was probably available at the time. Then Walter Bagehot wrote an essay on “Adam Smith as a person” in 1876. It was not until a good century later that a real biography was published that went a bit further, enriched with personal anecdotes. The author, journalist John Rae (1895), had accessed archives and used information that had been circulated in the meantime. In the same year, the first set of LJ notes from 1766 – LJ(B) – was found, which changed the perception of the “great Scotsman whose economic teachings became the creed of liberalism and of many great liberal and conservative statesmen for a hundred years and more” (Schmoller 1913, p. 126, my translation). This shaped the biography undertaken by William Robert Scott (1937).

From that point on, at the latest, one might think, the world knew what there was to be known about Smith as a private person; there should not have been much left to explore, since there were next to no personal papers to analyze. Nevertheless, the efforts of posterity to get an idea of Adam Smith as a man and to reach a better understanding of his oeuvre against the background of his private life have not diminished to this day. One reason for this unquenched curiosity is certainly the very lack of material; another reason may lie in the simple but self-reinforcing effect of time passing, which heightens the need for historical explanation.^[9]

Since the turn of the millennium, another major and much-praised biography has been out in print, “Adam Smith – An Enlightened Life.” The author, the historian Nicholas Phillipson (2010), an expert on the Scottish Enlightenment, shifts the emphasis toward a contextual and intellectual biography. In the best tradition of the humanities, he elaborates on the early influences that set Smith’s thinking on its course; the most that can be objected to is that it all seems a bit overdetermined. Phillipson convincingly characterizes Smith’s oeuvre as a coherent project of research into social life; he joins the phalanx of those who recognize the “Adam Smith problem” as a chimera, at least with respect to its involuntary eponymist.

This is also where the philosopher Gerhard Streminger (2017) stands, portraying Smith in his intellectual development. He begins his German-language biography in a superbly illuminating – and even chronologically appropriate – way by dealing with Smith’s epistemology before turning to his moral philosophy (a term which has less to do with morality than with human behavior, as he emphasizes; ibid., p. 46) and, ultimately, to his political economy. Streminger seeks to liberate Smith from his reputation as a laissez-faire propagandist and instead paints him as a market critic.

The economists Alain Alcouffe and Philippe Massot-Bordenave (2020) as well as Reinhard Blomert (2012) literally follow in Smith’s footsteps. In their books, they take a closer look at Smith’s travel itinerary with Henry Scott, the Third Duke of Buccleuch, who was entrusted to Smith as a pupil on a “Grand Tour” in the 1760s. This trip, for which Smith gave up his chair at the University of Glasgow, began in early 1764 and lasted until October 1766; it took him to France and to what was then the Republic of Geneva.^[10]

Alcouffe and Massot-Bordenave (2020) draw from archives a wealth of background material about the cultural, economic, political, and social conditions that Smith encountered on the hitherto not well explored southern French part of the journey, between Toulouse, Montpellier, Bordeaux, and the resort town of Bagnères in the Pyrenees. In the book “Adam Smith in Toulouse and Occitania” one learns, i. a., with whom Smith met on his expeditions – from Montesquieu’s son to Richelieu – and what he was interested in. Despite some inaccuracies, the book has a lot to please historians. It proves that Smith owed experiences and ideas not only to the Paris salons, but also to this more bucolic part of his journey. After his return to Britain, he incorporated them into later versions of TMS and drew on them for WN.

Blomert (2012) agrees, but pursues a different goal in his detail-packed German-language booklet on Smith’s journey to France. He aims at “the correction of an image of Adam Smith that has been distorted since the nineteenth century, when the famous Scottish moral philosopher was declared to be the forefather of a radical Darwinian understanding of the market” (ibid., p. 7, my translation). He sees the key to this endeavor in the trip to France and Geneva, where Smith entered into deeper conversations with the Physiocrats and closely observed economic events. Blomert’s narrative contrasts with Phillipson’s, according to whose speculation the main features of Smith’s economic thinking were already established in the 1750s.

Smith’s trip to France and Geneva, by the way, remained an exception; he never left the island again and Scotland only rarely. The political scientist Fonna Forman-Barzilai (2010b, p. 63) playfully interprets Smith’s rootedness as a psychological inheritance: “something of the Scottish highlanders remained in him. Their emphasis on Stoic austerity, independence and civic virtue resonated in Smith’s sensibility.”

A great deal of archival work also underlies a monograph written by the historian Brian Bonnyman (2014), which bridges economic history and the history of ideas. “The Third Duke of Buccleuch and Adam Smith” illuminates another long unexplored aspect of Smith’s biography: how in later years he served as an advisor to the Duke, with whom he remained on friendly terms throughout his life and from whom he received a generous life annuity. He helped the Duke reform the management of his vast Scottish estates, in an endeavor to implement his own moral and economic teachings. As Bonnyman explains, this paternalistic “improvement” was designed to reconcile duty to the community and patriotism with the pursuit of personal gain. Bonnyman also brings to light fascinating details, e. g., about the spectacular collapse of the Ayr Bank in 1772 – covered in WN – in which the Duke was a partner. The bank’s liquidation took more than 40 years (see also Kosmetatos 2014).

Dennis C. Rasmussen’s (2017) aforementioned book on Smith’s close friendship with Hume also belongs in the “biography” department, as a sort of second derivative. Grippingly written, almost an intellectual novel, “The Infidel and the Professor” clarifies the ideal of a philosophical friendship that the two thinkers aspired to and achieved. It also allows one to see how they benefited from each other in terms of philosophical reasoning; where they agreed and where divergences remained. For example, in his “Treatise of Human Nature” (1739), Hume had emphasized what Smith later developed into a more complex theory in WN: that it is the division of labor that allows wealth to increase dynamically by way of an increase in productivity, rather than some mercantilist economic policy. Hume’s perhaps unreserved enthusiasm, Rasmussen argues, however, may have prompted Smith’s caveat that the routines accompanying specialization can have a stultifying effect that deeply harms people – and this, in turn, can in the worst case endanger public order.

3.2 Overall Accounts and History of Reception

In addition to these writings at the intersection of biography, economic (and political) historiography, and the history of ideas, quite a few notable overall accounts of Smith’s life and work have been published since the turn of the millennium. These include introductory books such as those by Heinz D. Kurz and Richard Sturn (2012, 2013) in German or by Jonathan Conlin (2016) and Craig Smith (2020) in English.^[11] The economists Kurz and Sturn (2013) portray Smith as a “pioneer of modern economics,” thus placing their focus on WN. This book, they argue, was “all about formulating a regulatory framework that would stimulate growth and increase labor productivity” (Kurz and Sturn 2013, p. 236, my translation). In WN, Smith “established an institutionally balanced regulatory blueprint of liberalism grounded in economic science [that] has lost none of its appeal to this day” (ibid., p. 228, my translation).

Conlin, a historian, acknowledges Smith as a forerunner of various modern branches of economics such as behavioral economics, economic ethics, and distribution theory. But he goes further, taking a holistic interdisciplinary view of Smith’s oeuvre by locating it within major contemporary debates (especially those with the philosophers Jean-Jacques Rousseau and David Hume). C. Smith (2020), in turn, a historian of ideas specializing in the Scottish Enlightenment, places the emphasis on the way in which the writings of his namesake explain unintended consequences of human action. This explanation, together with Smith’s understanding of the nature of the social sciences, opens up a “Smithian way of understanding the world” (ibid., p. 2).

Even more comprehensive and challenging, actually quite an intellectual deep dive, is Samuel Fleischacker’s excellent overall account (2021), in which the philosopher addresses not only his peers but also those economists, political scientists, and historians of ideas who have read Smith but never engaged with him philosophically. Fleischacker deals only cursorily with biography; he really focuses on the ideas of the “broadly curious Enlightenment humanist” (ibid., p. 17), drawing on the wealth of his own research. The philosopher and political scientist Eric Schliesser (2017) takes a similar road. His highly challenging volume brings into an overall perspective his essays on Smith written over many years. Schliesser approaches the Scotsman as a systematic philosopher whose work was guided by one primary goal: to improve the lives of the worst-off members of society. Schliesser thus ties Smith’s political and economic theories back to their moral purpose and philosophical underpinnings.

No longer part of the life story, but still part of the “afterlife” of an author and his work, is the history of its reception. The echo that Smith’s teachings found in academia and politics has been studied early on for many countries. For Germany, this was done more than 150 years ago by Wilhelm Roscher (1867). Until recently, however, the reception of the Scot’s oeuvre in the United States was little analyzed, which is quite astonishing given that Smith is regularly claimed by a great number of Americans as their ideological forefather. Moreover, he had written WN (first published in the year of the Declaration of Independence) with the Americans in the back of his mind, at least to some extent: Great Britain’s relationship with its (then still) overseas colony, in bad need of change, takes up a lot of space in WN, including the problem of slavery. The political scientist Glory Liu (2022a) has now filled that gap. In her immensely detailed, fascinating study “Adam Smith’s America,” she traces how generations of Americans read the Scotsman’s work, interpreted and reinterpreted it, and used it as a weapon in their own political discourse. Today’s image of Smith is a historical creation.

Liu does not waste her time bemoaning this misinterpretation. Instead, she seeks to elucidate who in this reception history had an interest in instrumentalizing Smith – and why. Understanding this is relevant not only for an accurate picture of Smith, but also for analyzing discourses in politics and economics more generally (ibid., p. 7). In the quarter century after the publication of WN, the perception of Smith was still reasonably faithful, as she explains, because Smith’s theories on the social effect of sympathy,^[12] the division of labor, and finance served the Founding Fathers well: TMS and WN were used as “guidebooks for enlightened statesmanship” (ibid., p. 17, see also Fleischacker 2002 and Hochgeschwender 2019).

But this changed in the 19th century. During the tariff disputes in the run-up to the War of Secession, Smith became a heraldic figure for the Southern states. The fact that he was celebrated there as a free trader, in turn, gave the North a reason to demonize his teachings; after all, the South earned its trade profits on the backs of slaves (something Smith had greatly disapproved of). By the 20th century, only a distorted image remained. In his textbook “Economics,” Paul Samuelson spread the cliché of Smith as an advocate both of selfishness and of the mystical invisible hand (Samuelson 1948, p. 36; for a fiery critique see Kennedy 2010). Representatives of the younger Chicago School used Smith as a shorthand for the belief in the scientific rationality of economic markets as opposed to the incurable irrationality of politics.

The more Smith’s economic legacy was transformed into a political weapon over time, however, the greater became public doubts about the objectivity and relevance of the science of which he was considered to be the founder. Ideologizing Smith thus did a disservice to economics. Liu recognizes a historical irony in the fact that it is precisely this ideological truncation that played an important part in triggering a renaissance of Smith scholarship, basically since the 1970s, the very heyday of Chicago. The scientific pendulum has been swinging back. It is thanks to interdisciplinary revisionism that the American “Chicago Smith” is now increasingly giving way to the more deserving “Kirkcaldy Smith” (see also Evensky 2005b, Liu 2020, as well as Kaufman 2016, who even considers it possible that Smith, if he lived today, would approve of a minimum wage).

Research on reception history is more advanced in Europe (see Lai 2000). With respect to Germany, the focus has consistently been on the Historical School’s interpretation and critique of Smith.^[13] The historiographical account of how the topic of an Adam Smith problem came up, provided by the economists Leonidas Montes (2003, 2004, 2008) and Keith Tribe (2008, 2015), almost develops the gripping appeal of a detective story (see also Tribe 2002 and Oz-Salzberger 2016). The same is true of Tribe’s (2015, pp. 115 f.) findings concerning France: the 1802 version of the French WN edition was preceded by a “reading aid” that restructured – and thus distorted – the book. Translated into English, this version then made its way back to Britain and influenced the discourse from there (Faccarello and Steiner 2002).^[14]

4.1 Cooperative and Uncooperative Behavior

Vernon L. Smith’s approach may be regarded as an important exception to this rule. For the experimental economist and 2002 Nobel laureate, the oeuvre of his Scottish namesake has for many years provided an impulse to allow for more complexity in his research. It led him to model humans as learning social beings. According to him, many theoretical puzzles can be solved if one softens the neoclassical assumption of rationality and uses the Smithian sympathetic process instead (based on the ability of humans to imagine themselves in other people’s shoes, on the desire for praise, praiseworthiness, and harmony, and on mutual feedback, as described in TMS). This helps explain some counterintuitive results in experimental economics, which then may prompt useful tweaks in the experimental design (V.L. Smith 2003, 2008, 2008, 2010, 2016, and Smith and Wilson 2015).

The prelude to this expanded research program by the now 96-year-old scholar was his engagement with Adam Smith ahead of his 1997 Distinguished Guest Lecture at the Southern Economic Association. In his talk, Vernon Smith related the fact that cooperative and uncooperative behavior can coexist, as demonstrated in laboratory experiments, to the Scot’s assumption – both an empirical observation and an analytical axiom – that human nature is both “self-regarding” and “other-regarding,” i. e., that human beings are simultaneously motivated by self-preservation and a genuine direct interest in others.

That people’s behavior is less motivated by self-interest than modeled in neoclassical theory need not be surprising: this is in fact “much ado about nothing,” as bluntly affirms Witztum (2016, p. 551). But the relevant question for economists, according to Vernon Smith (1998), is ultimately whether transactions occur, i. e., whether economic exchange is possible at all. And here, he argues, exists a major difference between personal exchange in the small group that relies on reciprocity, on the one hand, and impersonal exchange in the anonymous, competitively structured large society, on the other hand. “In impersonal markets, people behave noncooperatively, and this maximizes the gain from exchange” (V.L. Smith 1998, p. 15). Smith has chosen to call his approach “humanomics” (V.L. Smith 2012, 2022, as well as V.L. Smith and Wilson 2019; see also Paganelli 2011, 2013 and McCloskey 2016).^[16]

4.2 Historical Processes of Change

Smith’s oeuvre also lends itself to an interpretation along the lines of the research program developed by the 1993 Nobel laureate Douglass C. North together with John J. Wallis and Barry R. Weingast, which aims to explain historical processes of change. This approach takes the economic and political institutions of the social order as well as human “belief systems” into account (North, Wallis, and Weingast 2009). It is through this lens that the economist and political scientist Weingast (2019) reads Smith’s WN and extracts from it, i. a., an analysis of why many countries remain poor in the long run and only a minority of countries become prosperous. Although the division of labor, savings, capital accumulation, and good economic policies are important, they cannot exist without the necessary condition of overcoming the “violence trap.”

When a country is stuck in this trap, widespread violence makes property rights, savings accumulation, investment, and innovation insecure. But if a way out of the trap is found, then the transition from a “limited-access” society to an “open-access” society becomes possible. According to the conceptualization by North, Wallis, and Weingast (2009), “open-access” societies are more democratic and have far greater adaptive efficiency. Weingast interprets Book III of WN as a historical narrative about feudalism and the rise of cities by which Smith aims to show how the violence trap is practically overcome: through the city rights wrested from the king. As he explains, this meant a triple revolution. It created liberty (along with justice and the security of property rights), trade (and thus growth), and security (Weingast 2019, p. 76).^[17]

4.3 Markets and Competition

In the work of Heinz D. Kurz (see Kurz 2019 a, b as well as 2016), one typically encounters a mixed strategy of closer reading and rational reconstruction. A prolific scholar in countless subfields of the history of ideas, Kurz reads Smith, translates what he reads into the modern formal theoretical language of economics, and then works out the parallels with the contemporary conceptual world.

One example is Kurz (2016), where he traces Smith’s view of markets and competition. Among other things, he shows that Smith was aware that information is asymmetrically distributed, which was and still is a problem, especially in banking. Even though “moral hazard” and “adverse selection” are more recent terms and concepts, early traces of them can be found in Smith. “[…H]ad Smith’s analysis of the banking and financial system been absorbed into the mainstream, the recent financial crisis would not have been met with surprise and disbelief in large parts of the economics profession,” Kurz writes (ibid, p. 4; see also Rockoff 2011, 2013, Goodspeed 2016, and Paganelli 2016). He pays particular attention to Smith’s distinction between market price and natural price as well as to the gravitation of the former toward the latter (which is where stability problems arise).^[18]

The philosopher Eric Schliesser, however, does not think that Smith expected the two prices to converge anyway. He reads the distinction primarily as a reminder that there is a gap between abstract theory (the natural price) and reality (the market price) because of pre-existing institutions and interventions in market activity. He argues that the task now consists of improving the existing institutions (Schliesser 2017, p. 301). The historian Buchan (2006b, p. 102) specifies the nature of such institutions and interventions: “corporation or guild privileges, grueling statutes of apprenticeship, or old-fashioned settlement laws that barred a laborer from moving parish, and even […] remnants of indentured slavery.”

4.4 War and Peace

Written under the shock of Russia’s imperialist attack on Ukraine in 2022, Kurz’s (2023) treatment of Smith’s analysis of war and peace is of great current interest. To a large extent, it parallels the reading by the economists Maria Pia Paganelli and Reinhard Schumacher (2019). Of course, times are different – Smith did not live in the nuclear age, and wars therefore did not yet threaten to wipe out humanity. Still, there is a lot to learn from Smith’s analysis. He makes national defense a top priority in his list of government duties in Book V of WN,^[19] and in view of this he justifies, contrary to his otherwise pronounced free-trader attitude, the Navigation Act, a protectionist piece of legislation that gave domestic ships a monopoly in maritime trade. His words leave no room for doubt: “Defence is of much more importance than opulence” (WN IV.ii.30).

After a detailed analysis of the advantages and disadvantages, Smith argues for a professional standing army, which may be supplemented by a militia. His argument centers on the martial spirit of defense forces and plain efficiency. As Kurz points out (like Montes 2009), Smith combines the ethical with the economic perspective here, as usual. He worries that the “impartial spectator,” the conscience mechanism at work in the ethical judgment of every human being, loses its impartiality in war. Thus, hatred can escalate in a nation, and justice gets lost (see also Hill 2009, p. 73).

For Smith’s main concern in WN, the increase of general prosperity, war is a threat. Trading societies of the “commercial age,” according to Smith, quite unintentionally produce this threat themselves, as Kurz (2023, p. 5) elaborates. Such states are a favorite victim of external attack precisely because they are prosperous. And since the industriousness of the population is directed toward the increase of wealth, they lack the military competence to defend themselves. Their strength makes them weak.

In any case, as Paganelli and Schumacher (2019) point out, according to Smith, one can no longer realistically rely on the romantic thesis of “doux commerce,” i. e., on the peacemaking effect of trade – even if, like Smith himself, one ardently wishes for it. Rather, in Smith’s account, the flawed mercantilist thinking that was widespread in trading states had driven nations into a logic of rivalry that eroded peace. It was their prosperity that had reduced the relative opportunity costs of wars, which therefore lasted longer than they otherwise would have. Also, the ability of developed states to raise money via public debt obscured the expense of waging war in the eyes of the population. Therefore, a business sector that courted new markets and monopolies, arguing in terms of mercantilist economics, virtually pushed the government into war. Smith therefore “saw war as primarily an artifact of mercantilism rather than as an inevitable consequence of human relations” (Hill 2009, p. 75). This is another reason why Paganelli and Schumacher (ibid., p. 795) read Smith’s remarks as a warning: “While defending and promoting trade, Smith warns us not to take peace for granted.”

4.5 Stages of Development

Kurz (2023) as well as Paganelli and Schumacher (2019) directly follow Smith in his account of the progressive stages of societal development without looking at these in more detail. This is not unusual. In the reception of Smith’s oeuvre, the highest of these stages, the “age of commerce,” has typically been regarded as a synonym for the present widely understood. The description of the more primitive stages – the ages of hunters, shepherds, and agriculture (see also LJ(A) i.27, LJ(B) 149, among others) – has mostly been understood as an instance of “conjectural history”: a reasonable description of how things may have been, without any claim to full historical exactness, however, for lack of data.^[20] Some difficulties are associated with such an understanding, though. Among other things, no answer is provided to the important question whether the four stages are rooted in some historical law of development or progress, i. e., whether there is some determinism at work here.

The political scientists Christopher J. Berry (2013) and Paul Sagar (2022) as well as the economist Maria Pia Paganelli (2022b) offer a reading according to which, for Smith, the stages of development are based neither on a law of development nor on some conjectural history.^[21] They argue that the stages serve as a pedagogical heuristic, a model or thought experiment describing an anticipated developmental path that individual societies may take if there is no political disruption (Sagar 2022, pp. 16, 23). Moreover, the stages of development represented a classic motif in the Scottish Enlightenment (C. Smith 2006). Smith presumably adopted it because he could assume that his readers were well acquainted with it.

Paganelli emphasizes that Smith himself does not speak of “stages” at all, but of ages and “states,” and that he presents historical evidence that predominantly refutes a strictly progressive development. As she summarizes, “[t]he four stages are a taxonomy of different relations between means of production and social, moral, political and legal institutions, not a model of development from one stage to another” (Paganelli 2022b, p. 98; critically Ahiakpor 2023). And when Smith describes the “natural progress of opulence” (WN III.i), this is a ceteris paribus projection, and therefore neither a historical observation nor a necessity.^[22] The utility of this exercise is counterfactual: the thought experiment makes it easier to understand a posteriori why the development in a particular case took a path that differed from the “natural” one (see Sagar 2022, p. 21).

Sagar (ibid., pp. 10–53) also denounces the often careless, indiscriminate use of the terms “commercial age” and “commercial society” in Smith scholarship, stirring up quite a hornet’s nest. For it is precisely the notion of “commercial society” that a broad segment of the more recent literature is centered on. Political scientists, philosophers and others regularly use the term as a synonym for (the nowadays much-criticized system of) capitalism (see, among others, Alvey 1998, Hanley 2008, 2009, 2018, Rasmussen 2008 and 2016, Hill 2006 and 2017, Harkin 2005, Herzog 2011, Boucoyannis 2013, Naz 2014, and Smith 2017; critically of this practice, Hont 2015, p. 3, who, however, also uses the term himself).

Yet Smith knew neither the term nor the phenomenon. His “commercial society” is a technical and very precise term, as Sagar explains; Smith uses it to describe the internal structure of societies based on trade, at whatever time or era: “an advanced stage of economic interdependence where direct personal toil on the products of subsistence […] has been superseded by exchanges in webs of market relations” (ibid., p. 13). As Hont (ibid.) clarifies, the point is that people relate to each other as traders, and that social interaction is thus governed by the usefulness that market relations both require and yield. Such a structure allows for very different forms and is therefore not limited to a specific era. “Commercial societies” in this sense already existed in antiquity.

How such a society is to be judged ethically depends on its exact characteristics in the individual case; a generally valid, conclusive judgment cannot be derived from Smith’s treatment. “What matters to Smith is how the specific politics of specific commercial societies are organized, not whether or not one lives in a commercial society simply in and of itself,” emphasizes Sagar (ibid., p. 52). He sees Smith as particularly concerned about the influence of interest groups on politics, which are detrimental to the common good. But Smith has nothing to do with the modern assumption that a commercial society fatally distorts people’s ethical judgments per se (ibid., p. 182).

4.6 Foreign Trade

Smith is considered a theorist not only of the division of labor but also of free trade (see Irwin 2016, among others). However, his argument for the elimination of trade barriers is nowhere as dogmatic as often portrayed (see, critically, Magnusson 2004). Moreover, the textbook notion persists according to which Smith’s foreign trade theory is deficient, since he did not recognize “comparative cost advantage.” This insight owes its origin to David Ricardo (1817, see Zhang 2008, p. 3, among others). Schumacher (2012, 2013, 2017) however dispels this account. It is a typical case of doxography, he writes; moreover, it is not only wrong but it also distracts from the fruitful originality of Smith’s argument. In WN, Smith derives the usefulness of international trade from his theory of the division of labor: people are endowed with a natural inclination to exchange; the division of labor increases productivity; and from this then results an increasingly specialized economy. A self-reinforcing dynamic thus emerges because a supplier with more productivity can serve a larger market area, which creates an incentive to increase productivity even further by specialization. The division of labor is then limited only by the size of the market (WN I.iii.1).

In describing this process, Smith assumes that people are “natural equals,” which is reflected in the famous WN passage where he writes that the philosopher and the street porter were once very similar as helpless infants (WN I.ii.4). He proceeds in the same way when he broadens the scope and considers trade between states: International trade does not occur because countries are inherently different in their production costs; rather, it is trade that leads to specialization and thus to differences. As Schumacher points out, Smith endogenizes the differences between people or countries in his approach (see also Sturn 2019, p. 176), while Ricardo’s theory is limited to comparative statics (see Buchanan and Yoon 2002).^[23]

Smith does not ask how long, given the differences in production costs, foreign trade between states will be advantageous. Instead, he is interested in the process by which these differences arise. As Schumacher points out, Smith does not even begin to make the neoclassical trade theory assumptions that are commonly attributed to him. For example, he neither assumes a complete mobility of production factors nor does he abstract from transport costs. In short, neoclassical foreign trade theory “has nothing in common with Smith’s actual ideas” (Schumacher 2012, p. 72).

In this context, it is also worth mentioning Paganelli’s (2022) closer look at Smith’s “Digression on silver” – an overlong discursion in WN on foreign trade, so lavishly underpinned with narrated historical evidence that it is likely to be skimmed over by hurried readers (Smith, WN I.xi.e–n, pp. 195–260). Yet, Paganelli sees nothing less than a centerpiece of WN in this very passage in which Smith analyzes the relative price changes associated with growing wealth and concludes, after sifting through the available statistical data, that land rents are rising. Paganelli’s judgment rests on the fact that Smith makes a special effort here to denounce mercantilism (or at least his own caricatural view of it^[24]) and to reject the claim attributed to its proponents that the more silver is in circulation, the greater prosperity will be.

5.1 Material Inequality

Smith’s WN is guided by the question how prosperity in society comes about – a prosperity, i. e., that includes the weakest. There are early elements of this question in LJ and TMS as well. That Smith was anything but an advocate of the rich is undisputed in research today. In a painstaking textual analysis, the economist Christopher Martin (2021) searches relevant key words in Smith’s writings, taking stock of the picture that Smith draws of the rich and the poor. He finds that Smith’s partisanship for the poor is more than evident. Statements like the following underpin this: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable” (WN I.viii.36, see among others Salter 2012).

Fleischacker (2004, pp. 203 ff.) contextualizes this partisanship, explaining that in the pre-modern world, the poor were considered a reprehensible class. Until the late 18th century, people believed that God had provided a hierarchical structure for society. For them, the problem of the poor consisted more in preventing criminal attacks than in helping the poor get out of their misery. Even those people who did provide some assistance considered it an undeserved mercy.

Smith dispelled that notion. “More than anyone else before him, Smith urged an attitude of respect for the poor, a view of them as having equal dignity with every other human being, and without this view, the notion that they deserve not to be poor could not have gotten off the ground,” writes Fleischacker (2004, p. 205; see also Fleischacker 2013). This set the course for modernity: “Smith helped bring about the peculiarly modern view of distributive justice: the view according to which it is a duty, and not an act of grace, for the state to alleviate or abolish poverty” (ibid., p. 226).

At this point, however, C. Smith (2013) parts company with Fleischacker: Smith’s theory of justice is essentially negative, he argues, and it is therefore hardly suitable for a conception of distributive justice. Smith’s skepticism towards the rulers also does not exactly make government a preferred addressee of justice claims. Thus, says C. Smith, his theory cannot in good conscience be used to develop normative criteria of social justice in view of redistribution (in contrast, Verburg 2010).

Fleischacker does recognize that Smith shows with his economics that improvement is possible, simply by way of an economic policy no longer designed to keep the poor miserable. The political scientist Deborah A. Boucoyannis (2013, p. 1052) reinforces the understanding according to which, for Smith, material inequality is often the result of misguided policies that exhibit excessive deference to interest groups – a problem that is clearly still relevant today. As she reads Smith, this problem can be addressed through proactive legislation and regulation that prevents collusion among powerful businesses, and also through redistributive taxation.

In line with this, the philosopher Elizabeth Anderson (2016, p. 169) points out that in Smith’s time, virtually all government intervention worked in favor of the rich. Against this background, she argues, Smith’s plea for a freer market was entirely consistent with a concern for greater material equality. Similarly, in the interpretation provided by the economist Satoshi Niimura (2016), economic growth and equality are not fixed opposites for Smith despite certain tensions. According to the historian of economic thought Benoît Walraevens (2021), this is true so long as inequalities are purely merit-based and everyone benefits from the economic dynamism that they generate. The philosopher Lisa Herzog (2014) adds that with such an understanding in mind, one is called to reflect on the institutional design of markets.

In Smith’s view, poverty represents a fundamental evil, but it is also an obstacle to economic progress as well as, not least, a problem for public order and general morality, as Horn (2022a) elaborates. Obviously with the Hobbesian horror of a “war of all against all” (Hobbes 1651/1970, p. 115) in the back of his mind, Smith realizes that when “[…] some have great wealth and others nothing, it is necessary that the arm of authority should be continually stretched forth, and permanent laws or regulations made which may ascertain the property of the rich from the inroads of the poor […]” (LJ A iv.22). Meanwhile, people’s tendency to avoid unpleasant feelings leads to a heedlessness towards the poor that further increases their misery.

In addition to economic policies that help increase prosperity and end unjust regulations (such as restrictions on freedom of establishment, WN I.x.c.59), Smith argues for good education to counteract the stultifying effects of specialization (WN V.i.f.49). He calls for public support and, if necessary, the introduction of compulsory education. As for taxes and levies, he urges that the ability-to-pay principle be applied (WN V.ii.b.3), and he has no problem with a progressive (expenditure-driven) incidence of an otherwise proportional tax schedule (WN V.ii.e.6).

One might be irritated by Smith’s brilliant literary parable of the “poor man’s son,” “whom heaven in its anger has visited with ambition,” and who toils away all his life without becoming one iota happier (TMS IV.I.10). For Smith, in this tragic parable, still finds warm words for the underlying vanity and self-deception: “And it is well that nature imposes upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind” (TMS IV.I.10, see Rasmussen 2006). One might find this judgment downright cynical. But this conclusion would be erroneous, as the political scientist Ryan Hanley (2009, p. 106) warns. Smith, he writes, only describes, as ever so often, a favorable side effect of an action that at first glance appears to warrant a negative assessment. But Smith does not stop there. Rather, as Hanley reminds the readers, Smith adds a clear educational point in the chapter on virtue ethics in TMS: “The great secret of education is to direct vanity to proper objects” (TMS VI.iii.46). If this succeeds, one need not, at the end of one’s arduous existence, lament the futility of all striving, despite the undeniable progress made. Instead, one can rejoice in one’s own virtue and bliss – i. e., in a successful life.

And what about Smith’s claim that the rich, despite their selfishness and greed, share with the poor the fruits of their investments? How realistic is that? Isn’t this “optimism gone wild” (Buchan 2006b, p. 6), an early version of the trickle-down theory, now much criticized in some circles? It is in this context, by the way, that the notion of the “invisible hand” is used in TMS: “They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species” (TMS IV.I.10). The promise of a (nearly) equal distribution refers merely to the “necessaries of life,” as one sees on close reading. These however encompass more than the subsistence minimum, according to Smith: all that belongs to the necessaries of life which “the custom of the country renders it indecent for creditable people, even of the lowest order, to be without” (WN V.ii.k.3).

The historian Emma Rothschild and the economist and philosopher Amartya Sen (2006) even build a bridge from here to Sen’s own modern capabilities approach (see, among others, Sen 1999). It is quite important to realize, however, that Smith’s counterfactual here describes anything but an economically lush situation. It is a “natural state,” a merely imagined situation long before the “commercial age,” i. e., where people have not even begun to increase common wealth through trade and specialization (see also Schliesser 2017, p. 243). The prediction is thus much more moderate than it first appears. It is however proof of just how urgently Smith seeks to coax and convince the reader.

5.2 Moral and Analytical Equality

Not only does Smith side with the poor, but his entire system, as recent research has found, is underpinned by a fundamental egalitarianism (see, i. a., Fleischacker 2004, 2006, Cremaschi 2016, and Anderson 2016). The 1986 Nobel laureate James M. Buchanan (2004, 2005) points out that it is only because Smith thinks of people as “natural equals” that he can conceive of an endogenous, cumulative, self-sustaining process of expanding prosperity (and the limits of the market) through the division of labor. “In Smith’s world of natural equals, the distribution of specializations observed emerges from the responses to the demands of the market rather than from any natural distribution of personal capacities” (Buchanan 2004, p. 4).^[25]

Indeed, Smith describes how differences between people emerge only over time, i. e., in the course of their lives, personal experiences, education, habituation to customary mores, and vocational specialization (WN I.ii.4). This description is however controversial (see Fleischacker 2006, p. 8, as well as Peart and Levy 2008, p. 2), and it is not even clear that it is necessary for his argument. Differences in talent can very well be reconciled with the concept of natural equality if one interprets the situation in terms of people being equal in their dependence on each other, which leads them into exchange relations (see Braham 2006, p. 15).

In the “natural equals” one can also recognize a theoretical modelling strategy, a basic technical assumption that by no means stands or falls with its realism, but ensures as a heuristic that a certain causality comes into focus without interference. The economists Sandra J. Peart and David M. Levy (2008, pp. 1–12) see it this way and speak of Smith’s “analytic egalitarianism” which deliberately abstracts from the undeniable inherent differences between individuals. In a similar way, most political philosophies assume (and must assume) the equality of all people in order to derive a robust basis of legitimacy for democratic systems. Behind this, one usually does find a normative (meta-)position, but, first of all, it serves an analytical purpose. This does not mean that Smith is unaware of differences between people. His theoretical reason for the emergence of the state is based precisely on this (see Darwall 2004, Crampton and Farrant 2008, Debes 2012, Sturn 2019, p. 176, and Horn 2020a).

An actual normative egalitarian underpinning of Smith’s theory, however, opens up in a different, indirect way, namely through the “impartial spectator” in TMS, according to the interpretation provided, i. a., by the philosophers Samuel Fleischacker (2004, 2006) and Sergio Cremaschi (2016). In describing the process of individual ethical judgment, Smith supplements the corrective formed by the immediate, external reaction of other people to our actions (the “external spectator”) with an internal “impartial spectator.” This figure of thought raises human judgment to a more abstract level and allows the individual to set aside for a moment the distortions that self-love brings about. One then takes a step back, as it were, and observes oneself and the others from a more distant, more objective standpoint. The ethical ideas that apply at this level are themselves the result of an interactive feedback process. Fleischacker (2006, p. 3) nevertheless rejects the evolutionary interpretation by the philosopher and political economist James Otteson (2006).

The impartial spectator, “whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it […]” (TMS III.3.4). According to Cremaschi (2016), taking a moral stand in this way already implies that everybody matters. In line with Fleischacker (2004, 2006), the philosopher Matthew Braham (2016, p. 12) formulates the egalitarian corollary: “We are all of the same moral worth.” This egalitarianism is also consistent with the doctrine of the Stoics, which occasionally resonates in Smith (though not as pervasively as it has long been held), and according to which all people ought to be thought of as rational beings, equals by nature. In sum, “Smith’s work is a milestone in the history of egalitarianism” (Anderson 2016, p. 169).