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Thinking Like Adam Smith

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  • Jerry Z. Muller

Abstract

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. Copyright Copyright (c) 2009 Morgan Stanley.

Suggested Citation

  • Jerry Z. Muller, 2009. "Thinking Like Adam Smith," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(1), pages 90-95.
  • Handle: RePEc:bla:jacrfn:v:21:y:2009:i:1:p:90-95
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    5. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    6. Edwin Mansfield & John Rapoport & Anthony Romeo & Samuel Wagner & George Beardsley, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, Oxford University Press, vol. 91(2), pages 221-240.
    7. Nelson, Richard R & Wright, Gavin, 1992. "The Rise and Fall of American Technological Leadership: The Postwar Era in Historical Perspective," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1931-1964, December.
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