Thinking Like Adam Smith

This article aims to correct a number of popular misconceptions about the man who wrote The Theory of Moral Sentiments as well as The Wealth of Nations—notably, that the unfettered pursuit of self‐interest and personal liberty is a reliable prescription for prosperity, and that regulatory constraints on market forces are unnecessary or unimportant. Viewed in its entirety, Smith's work is seen as a lifelong attempt to design social institutions— government agencies as well as families, churches, schools, and joint‐stock companies—so as to harness “destructive passions” and channel self‐interest in ways that lead to the greatest public good. Although the workings of the market are viewed as the main engine of prosperity, one of Smith's purposes in writing The Wealth of Nations was to encourage politicians to resist the pressures of economic groups attempting to use political power to advance their own interests. And Smith himself is described as pursuing a “program of cultivating men of public spirit who would be moved to participate in government”—men who, armed with Smith's science of political economy, would recognize not only the role of markets in securing the greatest public good, but also the importance of an extensive framework of public services to allow markets to function effectively.