Another Inaccurate Claim About Adam Smith and Charles Darwin

W.C. Hayward, Editor of the Blog, Undismalization (‘towards a rational, constructive, non-ideological dialogue on economics and pubic policy') HERE
writes (14 July):

“The Flaws of Quasi-Darwinist Arguments for a Pure Laissez-Faire System”

“Adam Smith, having published The Theory of Moral Sentiments, in which the theory of “the invisible hand” first appears, precisely a century before Darwin’s Origin of the Species, created a model involving a “selection process” in the realm of commerce that could be said, from an analogous perspective, to anticipate Darwin’s theory of natural selection in the realm of biology.”

“Since Darwin, however, links between laissez-faire and Darwinist thinking have appeared frequently, at least in popular parlance, with the survival-of-the-fittest concept supporting the premise that a pure laissez-faire system is more efficient because it is more natural.”

Comment
Adam Smith did not have a ‘theory of an invisible hand’ in his Moral Sentiments (nor anywhere else). Whether such a non-existent theory by analogy ‘anticipated’ Charles Darwin’s theory of ‘natural selection in the realm of biology’ is also suspect.

As is ‘at least in popular parlance, with the survival-of-the-fittest concept supporting the premise that a pure laissez-faire system is more efficient because it is more natural.”

Natural selection is by definition ‘natural’, but ‘laissez-faire’ is certainly not, at least in the common understanding of being ‘natural’. Laissez-faire is anything but ‘natural’. Like Hobbes’s ‘state of war’ of ‘all against all’, laissez faire has never existed, anywhere on the planet throughout the history of the human race, at least as far as we can judge, even deep into pre-history; it certainly left no traces found by anthropology, so far.

Adam Smith was quite critical of Dr Quesnay , the French economiste, whom he admired so much, on the subject of what is often taken to be about laissez-faire (though Smith, familiar with the term laissez-faire never used the term at all):

“Some speculative physicians seem to have imagined that the health of the human body could be preserved only by a certain precise regimen of diet and exercise, of which every, the smallest, violation necessarily occasioned some degree of disease or disorder proportioned to the degree of the violation. Experience, however, would seem to show that the human body frequently preserves, to all appearances at least, the most perfect state of health under a vast variety of different regimens; even under some which are generally believed to be very far from being perfectly wholesome. But the healthful state of the human body, it would seem, contains in itself some unknown principle of preservation, capable either of preventing or of correcting, in many respects, the bad effects even of a very faulty regimen. Mr. Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered that, in the political body, the natural effort which every man is continually making to better his own condition is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political œconomy, in some degree, both partial and oppressive. Such a political œconomy, though it no doubt retards more or less, is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. In the political body, however, the wisdom of nature has fortunately made ample provision for remedying many of the bad effects of the folly and injustice of man, in the same manner as it has done in the natural body for remedying those of his sloth and intemperance.”
(WN IV.ix.28: 674-5)

What Smith is saying is that an economy can tolerate quite severe distortions in its purity of function without collapsing into disaster and that if a society, as most were and are, was supposed not to prosper unless if enjoyed ‘perfect liberty and perfect justice’ the evidence of the history human societies contradicts the assertion because ‘there is not a nation in the world which could ever have prospered’.

In short, perfect liberty and perfect justice – about as close as we can get to what now passes for laissez-faire – does not support “the premise that a pure laissez-faire system is more efficient because it is more natural”. It isn’t natural; indeed it would be most unusual, even unnatural, should laissez faire be established anywhere and anytime.

Attempts to link laissez-faire to Darwin’s natural selection, of which there has been a spate of them recently, falls at the first essential hurdle of empirical evidence.

The rest of W.C. Hayward’s piece makes an interesting case about the current condition in the USA (follow the link to see how much of it you agree with), but that is separate from his assertions about Darwin’s and Smith’s ideas.

Darwin’s books and notes form a formidable body of evidence for natural selection (he didn’t get everything quite right, but he took major steps forward before the world knew anything about inheritance, genetics and the genome).

Attempts to forge a link with Darwin and Adam Smith on the grounds quoted above ultimately fail because they create so-called analogies with their ideas, mostly fanciful.

There is a connection however; both took an evolutionary approach to change and in a future post I shall discuss the forms that they took.

Adam Smith on Exchangeable Value

Art Carden, assistant professor at Rhodes College, who teaches, inter alia, 'Classical and Marxian economics', and posts today on “David Harvey on Karl Marx”, on the authoritative and excellent economics blog, Division of Labour, HERE:

Less interested in Karl Marx, I noted this interesting paragraph:

“In fairness to Marx, he derived his erroneous value theory from Adam Smith and David Ricardo, but in fairness to the classical economists, they did not try to build an entire theory of history and social change on so sandy a foundation as the proposition that labor alone is the source of value. As I read Adam Smith, his endorsement of the "obvious and simple system of natural liberty" does not derive from his value theory".

Comment
In this statement we see the drift in meaning that led to both the Ricardo-Marx error, which was picked up by the modern economists on its own terms and continued the drift, until we are no longer talking about the same things.

Smith’s ‘exchangeable value’ became ‘value’, as if the two are synonymous and value is something ‘intrinsic’ (a misreading that even Oscar Wilde didn’t realise).

Admittedly, Smith wrote a muddled presentation of his basic ideas and it takes some effort to disentangle them. I have a draft paper on my disentanglement which I must finish sometime soon.

The idea of ‘exchange value’ is central to Adam Smith’s analysis of commercial society and how it evolved from the time when humans were predominantly, even exclusively, gatherer-hunter/scavengers. There was no idea of property except in the ability of humans to ‘pick fruit’ (which Smith erroneously dismissed as ‘hardly imployment’ in his Lectures on Jurisprudence, 1762-3) and to track and kill animals, in the forest and open land owned by nobody. There were no landlords or stock holders, or tax collectors, with whom they shared the fruits of their gathering or hunting.

Smith looked for a basis by which the products of the labour of people could be exchanged freely among them (summarized in his ‘beaver and deer’ parable in Lectures on Jurisprudence 1762-3, and reproduced in Wealth Of Nations, 1776).

He deduced exchange value as being the labour time taken to acquire products for exchange. It was in exchange that products acquired their exchangeable value; outside exchange, products did not have value in any intrinsic sense. The word ‘exchangeable’ is important because it defines value related to the act of exchange, and not to some notion of common views of their ‘intrinsic’ value. That was the extent of his pure theory of exchange value in the first age of mankind.

But beyond the forest, when humans settled in permanent locations and when ‘herding’ wild animals and gathering plant food in relative abundance from accidentally or deliberately farming the land, property was extended from the labour of people to the ‘ownership’ of land and all that was on it. With property human life changed for ever.

It did not matter whether property was held in common by the band or larger tribe, or ‘nation’ of tribes, or by the head of a family, or by private individuals. Property was held by the ‘what we have, we hold against all comers’ basis, which became the first ‘law’ of human society, enforced by those strong enough to enforce it.

In those parts of the world where property emerged in land and resources, separate from the labour of producing them, about 11,000 years ago initially, and then spread, the new property relations set the necessary conditions for permanent settlements with their growing populations able to reap (unequally) the benefits of growing productivity through exchange relationships fostered by specialisation and divisions of labour.

The singular characteristic of these early property-based societies was that the products of labour were shared among those who laboured and those who owned property. Smith acknowledges this important difference between the beaver-and-deer hunters’ parable, with which he opened his analysis of exchangeable value. The beaver hunters, etc., now had to share the exchange value of their prey with the owner of the land on which the beaver were found, and the owner of the wherewithal by which he sustained himself and his family by the necessary subsistence and tools, themselves extracted from somebody’s, or some tribe’s, claim to the ownership of land and natural resources.

Unfortunately, in jumping from one mode of subsistence (primitive hunting in the ‘open’ land) to another (property in labour, land and resources), a process that took millennia, not decades) to get underway, and more millennia to spread across Europe ad the Near East, and those other parts of the world, though not necessarily contiguous in either time or territory, Smith, without the basic knowledge common today in an Anthropology 101 class or text, in compressing the process, he constantly gets into a muddled exposition, switching back and forwards between what we now know were different periods with their much varied local circumstances.

Hence, Wealth Of Nations on exchangeable value is a challenge to disentangle, much like primitive, ancient maps of the world, where imagination often informed their authors, but which are barely recognizable to a modern eye, familiar with maps of the entire planet in different forms of projection, and which are embedded in instantly recognizable shapes and proportions when shown North to South.

Smith’s exchangeable value for commercial society specifically includes the requirement that the (much higher) product of labour is shared between the three owners with their claims to their shares: the labourer, the owner of land, and the owner of stock (formed from resources for subsistence and tools). From this point on, for these people, but not for those who stayed as hunter-gatherer-scavengers, labour alone ceased to have the sole claim of the (lower) product of labour.

Smith’s clear acknowledgement of the significance of these changes, and, what was in effect, if not stated too clearly, his repudiation of the labour theory of early exchange value, became and remains one of the most enduring misreading of Wealth Of Nations since it was published in 1776 (and of much older vintage than the modern myth of the ‘invisible hand’, which only dates from the 1950s).

This problem today was prompted too by the misreading of Smith’s statement about ‘toil and trouble’ being the 'real cost' (or value to the indvidual)of anything, which can be read as a return to labour as the source of exchange value (clearly is demarked elsewhere in Wealth Of Nations as determined by Market prices, which may coincide or be close to Natural prices), when in fact it relates to one of the benefits of the division of labour, namely that by acquiring products through exchange, the receivers save themselves the ‘toil and trouble’ of making those products themselves. In short, it is a psychological advantage of a commercial economy from the plethora of products to which people have access, should they choose to pay (or have) the market (money) price for them. It was not a labour theory of value!

A last point where Art Carden is right: Adam Smith’s ‘endorsement of the "obvious and simple system of natural liberty" does not derive from his value theory’. Theories of Natural Liberty come from the philosophical theory of ‘Natural Law’, from such philosophers as Grotius, Pufendorf, Carmichael, and Hutcheson, which Smith learned while a student at Glasgow University, where Natural Law jurisprudence was taught to him and which his writings are sprinkled with throughout. In turn, these ideas are often confused with laissez-faire, but that's another story...

Nice Contrasting Quotations

Diane Gaston write for the Risky Regencies blog HERE:

“Though Samuel Johnson described a smuggler as "A wretch who, in defiance of the law, imports or exports goods either contraband or without payment of the customs,” many would prefer the definition of Adam Smith—himself a Customs commissioner: "A person who, though no doubt highly blamable for violating the laws of his country, is frequently incapable of violating these of natural justice and who would have been in every respect an excellent citizen had not the laws of his country made that a crime which nature never meant to be so."

Comment
I liked the selected quotation because it links ‘natural justice’ – a universal law in Natural Liberty – with actual laws of a country.

Tariffs and duties were an essential source of government revenue in Smith’s time, which is why he thought it wise to remind readers who would favour Britain ideally becoming a free port for the world’s trade, that unless another source of government revenue was to become practical, there would always be a need to have some tariffs. (Smith was not an ideologue

Also, Smith and Samuel Johnson did not get on very well, ever since Smith criticised Johnson's dictionary for its incorrect grammar, illustrated by the word 'But'!

If they ever discussed smuggling, I suspect they might have argued their differences, with Smith, the moral philosopher, presenting the Natural Law theory of jurisprudence and Johnson sounding like someone in a Church of England Pulpit.

Adam Smith Not an Advocate of Laissez-Faire

Sir Courtney N Blackman’s speech is reported in the Trinidad and Tobago Review , entitled

“THE GLOBAL FINANCIAL CRISIS AND THE COLLAPSE OF THE NEO-LIBERAL PARADIGM”, HERE: which contains the following paragraph:

“Neo-Liberalism is the direct descendant of the laissez-faire paradigm inaugurated by Adam Smith’s The Wealth of Nations in 1776 and elaborated by successive Classical economists, culminating with Alfred Marshall’s Principles of Economics in 1920. The Classical paradigm failed to deal effectively with the Great Depression of the 1930s and was superseded by the Keynesian paradigm.”

Comment
Laissez-faire did not feature in Adam Smith’s Wealth Of Nations. He did not agree that laissez-faire was an appropriate policy – that came from some of the French Physiocrats – and identified many areas where it should not apply in a commercial society.

I posted the following list last month (from Jacob Viner), but its worth reminding readers of his stance:

"● The Navigation Acts, blessed by Smith under the assertion that ‘defence, however, is of much more importance than opulence’; (WN464)
● Sterling marks on plate and stamps upon linen and woollen cloth (WN138-9)
● Enforcement of contracts by a system of justice; (WN720)
● Wages to be paid in money, not goods;
● Regulations of paper money in banking; (WN437)
● Obligations to build party wars to prevent the spread of fire; (WN324)
● Premiums and other encouragements to advance the linen and woollen industries’; (TMS185)
● ‘Police’, or preservation of the ‘cleanliness of roads, streets, and to prevent the bad effects of corruption and putrifying substances’;
● ensuring the ‘cheapness or plenty [of provisions]’; (LJ6; 331)
● patrols by town guards, fire fighters and of other hazardous accidents; (LJ331-2)
● Erecting and maintaining certain public works and public institutions intended to facilitate commerce (roads, bridges, canals and harbours); (WN723)
● Coinage and the Mint; (WN478; 1724)
● Post office; (WN724)
● Regulation of institutions, such as company structures (joint stock companies; co-partneries, regulated companies); (WN731-58)
● Temporary monopolies, including copyright, patents, of fixed duration; (WN754)
● Education of youth (‘village schools’, curriculum design); (WN758-89)
● Education of people of all ages (tythes or land tax) (WN788);
● Encouragement of ‘the frequency and gaiety of publick diversions’; (WN796)
● The prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population; (WN787-88)
● Encouragement of martial exercises; (WN786)
● Registration of mortgages for land, houses, and boats over two tons; (WN861, 863)
● Government restrictions on interest for borrowing (usury laws) to overcome investor ‘stupidity’; (WN356-7)
● Laws against banks issuing low-denomination promissory notes; (WN324)
● Natural liberty may be breached if individuals ‘endanger the security of the whole society’; (WN324)
● Limiting ‘free exportation of corn’ only ‘in cases of the most urgent necessity’ (‘dearth’ turning into ‘famine’); (WN539)
● Moderate export taxes on wool exports for government revenue; (WN 879)

Jacob Viner concluded, unsurprisingly, that Adam Smith was not a doctrinaire laissez-faire advocate.

[From Viner, J. 1928. ‘Adam Smith and Laissez-faire’, In ‘Adam Smith, 1776-1928: Lectures to Commemorate the Sesquicentennial of the Publication of Wealth Of Nations, p 53, August M. Kelly, Fairfield, NJ; Lost Legacy provided the references to Wealth Of Nations.]

Much of the confusion and misinformation about Adam Smith comes from attributions to him from people who either, or both, have not read Wealth Of Nations fully and rely only on quotations, or do not understand statements by Adam Smith on Natural Law, are from a theory of jurisprudence (following Grotius, Pufendorf, Carmichael, and Hutcheson), and are not just a theory of how to run a commercial system; Natural Law and Liberty applies to all societies.

Free Capitalism and Free Markets

C. Rick Koerber, of Free Capitalist Blog, discussed on Lost legacy, on Wednesday last (“Origins of the Word 'Capitalism'), has responded with a long commentary HERE:

My criticism of Rick Koerber’s article by focussed on the generality of his statements about the ‘Origins of the Word Capitalism’, which suggested a lack of specific knowledge of its origin and conclusively failed the report its origins, the presumed purpose, at least to this reader, of the article. It also offered a number of misleading origins, including that of Adam Smith’s role.

That some people believed this or that about origins of the word, capitalism, is no defence. The title of the article is specific: ‘Origins of the Word Capitalism’, and I expected a statement of what are verifiable facts of its origin somewhere in the article. But Rick did not state anything factual about the origin at all. Instead, he made misleading generalities about what others may have said, including Karl Marx, for example. This is what drew my attention and on which I commented.

My approach, as always, is educational; I stated the facts about the origins of the word, so that Rick and others could display command of the subject in future. Not knowing with whom I was dealing, but taking his statements at face value, I made no concession for his vague language and his failure to answer his own question.

I think clarity on these points is essential if he wants to promote market solutions to allocation and distribution issues in the 21st century. I added, for information, some facts about Adam Smith because it seemed to me that Rick did not appreciate his role.

Adam Smith did not write about ‘capitalist’ economies; he wrote about ‘commercial societies and markets’ (see his Lectures in Jurisprudence, [1762-63] 1978, and his Inquiry into the Nature and Causes of the Wealth Of Nations, [1776] 1976, Liberty Fund, Indianapolis, Indiana).

He did not even write a textbook on economics, mainly because there was no definitive and widely-agreed body of ideas suitable for a textbook treatment at the time (a discipline requires such a body of agreed material before it writes textbooks for wider study; by the time that body of knwoledge was acquired, the discipline had moved on from Adam Smith, at some cost in understanding).

Smith wrote a critique of the state-managed, mercantile society of mid-18th-century Britain and the consequences of the monopolistic British colonies of North America, with a subsidiary polemic against the activities of the Royal Chartered trading companies, then prevalent, especially the odious East India Company.

It should also be noted that the core ideas of Wealth Of Nations formed parts of his lectures to Moral Philosophy for students (aged 14-17) in his classes at Glasgow University from 1751-64. His main lectures were on ‘ethics’ and these appeared as his Theory of Moral Sentiments (1759), which I think, in its six editions, is a more significant book than Wealth Of Nations (five editions, while he was alive), because Moral Sentiments is about lasting themes for individuals in society, more so than his albeit brilliant polemic against 18th-century State-mercantile policies. But that is a personal opinion.

Because Smith did not mention the word ‘capitalism’, Rick and Seth argue that this, by itself, does not mean that he did not write about what became capitalism, per se. That is, of course, true. However, the fact remains that what he did write about was not the phenomena we now call capitalism.

The differences between his outlook and what happened after the influence of the popularly-called ‘industrial revolution’, was a long process.

It was characterized by an evolution of power-, not hand-, driven machinery. In Smith’s account he was concerned with ‘manufacturing’ in its original meaning, ‘by hand’. He did not foresee the evolution of what became the modern banking system of finance capital, nor an accelerating technological revolution (electricity, chemistry, etc.,) and what became eventually a mass-consumer market, associated with continuous increases in per capita income from sustained general economic growth, which changed many of the fundamentals in Europe and North America to an unrecognizable degree.

The agricultural sub-structure of the economies known to Adam Smith were subjected to major structural changes, from near dominance of society into agriculture becoming a minor segment of ‘GDP’, for example; from mainly local markets (fairs, market days, small shops) to ‘national’ and ‘world’ business–to-business markets, with movements of unimagined large capitals across Europe and the Atlantic, now the Pacific; from local ‘dearth’ of food (even famine) to general food security, but with national ‘depressions’ (‘business cycles’); the beginnings of ‘State macro-management’ of national economies, and to the continuation, but on an ever larger scale, of national capitalist producers with State political objectives, accompanied by substantial lobbying of legislators and people who influence them; extra-state activity of large trade unions, and protest-driven, populist political parties and powerful NGOs; all of which sum to a world vastly different from Smith’s concerns and horizons.

In Smith’s world. Government expenditure was dominated by military procurement; today, though in total much greater, it rarely rises about 7 per cent and mostly is under 3 per cent of GDP.

Indeed, Adam Smith did not predict forward to a possible future; he is characterized by ‘looking backward’ in his outlook; he was not in the prediction business. A rare ‘prediction’ that he made was on the prospects for the former British colonies in North America, while discussing the eventual outcome of a theoretical union between the mother country and its colonies, was that in ‘little more than a century [1880], perhaps, the produce of America might exceed that of British taxation’ (and, interestingly, the seat of the British government ‘would remove itself from’ London to the former British colonies) [ WN IV.vii.c.79: pp 625-26].

In the main, Adam Smith’s perspective was an historical account of how and why society, as it was, had developed in the manner that it did. The shadow of the Fall of Rome, and its affect on Western Europe, from 5th century, the ‘barbarian’ invasion and the destruction of functioning Roman markets, and their slow revival from the 14-15th centuries to the revived commercial societies on the 17th-18th centuries, were Adam Smith’s focus. His books are replete with classical references, both literary and historical.

To which Smith added long chapters on the negative affects of ‘mercantile political economy’, which dominated all European governments, but held back the natural ‘spread of opulence’, especially among the majority families of the labouring poor, matched by the perfidious monopolizing spirit of many ‘merchants and manufacturers’, feeding off the ignorance of the landlord aristocratic order, which dominated the legislature and those who influenced them from among the educated middle order.

People quote Adam Smith (selectively) who clearly have never read Wealth of Nations (otherwise they would know all of the above) and have never read Moral Sentiments (otherwise they would know about how societies are dependent on the quality of justice and the moral behaviour of its participants). Homo economicus, a late 19th century invention, played no part in Smith’s thinking, yet is attributed to him by careless commentators.

Hence, Lost Legacy reacts to expressions of, albeit unintentional, lapses from those who refer to his political economy as if it would be at home with modern State-Capitalist societies. True, the nefarious behaviours of which in kind, in many crucial areas, have hardly changed from the mercantile fallacies of Smith’s time.

If they read Wealth Of Nations at all they would recognize how modern States pursue the same fallacious policies of ‘jealousy of trade’ – hostility to trading partners – and protectionism. Why does Europe, and the even larger US, require tariffs against poorer countries’ exports with a political passion that is as absurd now as it was when Smith wondered why there were hostile tariffs against the import of a few Irish cattle, when even if all of them were sent to Britain it would hardly affect the British meat market? This is why Smith’s general critical approach has resonance today, if quoted carefully.

The quotation from Professor Mark Skousen is interesting in this regard:

“The main character is Adam Smith…[His] captivating philosophy of natural liberty and the invisible hand rapidly became the central character of modern economics as the industrial revolution and political liberty exploded on the scene, and create a new era of wealth and economic growth over the next two centuries."

Adam Smith, like all moral philosophy students of Scottish Universities at the time, was introduced to Natural Law philosophy, as enunciated in a direct line, by 17th century philosophers, Grotius and Pufendorf, and by 18th century, Carmichael, and Hutcheson. Natural Law was and remains a set of ideas of jurisprudence (how civil governments ‘ought’ to be managed).

Natural Law was not a part of ‘laissez-faire’, though it is often confused with it, and, incidentally, Adam Smith never used the words ‘laissez-faire’, though he was familiar with them and what they meant from his contacts with the French Physiocrats (1764-66). He often refers to the natural law theories of natural liberty, which underlay his jurisprudential theory of individual rights. He was not, however, a purist and insisted there were justified exceptions to natural liberty Wealth Of Nations [WN II.ii.94: p 324].

I am not convinced that the origins, content and application of what Professor Skousen calls the “captivating philosophy of natural liberty” is understood by him when he goes on immediately to link it to “the invisible hand” as part of that same ‘captivating philosophy’. It wasn’t and isn’t.

Smith’s singular use of the metaphor of ‘an invisible hand’, mentioned only once in Moral sentiments (TMS IV.10, p 184), and only once in Wealth Of Nations, (WN IV.ii.9: p 456) was not a ‘theory’, captivating or otherwise; it was a literary metaphor that had nothing to do with markets. (See Lost Legacy, passim, for scores of explanations of the alleged role of ‘an invisible that are miscredited to Adam Smith.)

The ‘invisible hand’ was ignored by commentators on his books, including Malthus, Ricardo, Mill, and Marx, and was only joined to economics discourse when leading economists used it to beautify their theories of the triumph of their analysis from the mid-1950s.

Finally, I was not commenting on Rick’s sincerity, nor his enthusiasm for ‘capitalism’, which I may share, though I prefer freer markets to ‘corporate capitalism’, as I prefer Liberty to democracy (many of the world’s ‘democracies’ are alien to Liberty.

Adam Smith on Natural Liberty

Sauvik Chakraverti writes, 19 November, in Antidote, (‘libertarian opinion from Indyeah)’: "Adam Smith... And Marathi Politics’ HERE

“The news that the government of Maharashtra has dictated 80 per cent reservations in jobs for locals must be viewed as an Injustice, given that Justice demands a Rule of Law in which there is neither Preference nor Restraint.

This is preferential treatment for locals – and it brings to mind what Adam Smith wrote on the subject. This quote is from The Wealth of Nations:

“All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”

Comment
Sauvik Chakraverti's quotation is to be found at WN IV.ix.51: pp 687-8. From what is reported to be happening in Maharashtra the quotation appears to be apt, though I do not know enough about the circumstances to comment authoritatively.

However, Sauvik Chakraverti gives me an opportunity to make a comment on Natural Liberty and Adam Smith.

Adam Smith was educated at Glasgow University in the principles of Natural Liberty, a school of thinking notably espoused by the distinguished lineage of Grotius, Pufendorf, Carmichael, and Hutcheson, and it was taught in the Scottish universities in the 18th century.

Many readers of Wealth Of Nations, however, mistakenly confuse the precepts of Natural Liberty – philosophically an element of moral philosophy – with those associated with laissez-faire economics.

Smith was careful to distinguish the jurisprudential roots of Natural Liberty which was applicable in all societies, independently of their subsistence basis of their economies, from the political economy of commercial societies.

Cointrary to myth, he did not advocate laissez-faire economics though he was familiar with the Physiocratic terminology of some of its members (he met and discoursed with them in Paris and elsewhere, and in correspondence and the exchange of manuscripts but he never used the words laissez-faire in anything he wrote).

Tellingly, he made many references to either curbs on the behaviours of ‘merchants and manufacturers’ and to interventions that he considered necessary by governments to curb the freedoms of some of the same people, of whom he was suspicious of their tendency to act against the interests of consumers. There are over 50 instances of him mentioning the less than beneficial actions of sel-interested individuals in Books I, II and III of Wealth Of Nations.

On such set of commercial entrepreneurs that he wrote extensively about were the bankers of Scotland and the rest of the UK at the time. After a long discourse in Book II, chapter 2, on banking operations and some of managers and customers' dangerous failings on occasion, he drew a line between Natural Liberty and total commercial freedom:

“To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.” [WN II.ii.95: p 324]

I think this is clear enough.

It separates ‘freedom’ as a legal concept and as a practical policy by a qualifying restraint where a person’s freedom has deleterious consequences on the public good.

Clearly, not all individual putsuits of self interest necessarily and unintentionally benefit society; hence mythical theories of the invisible hand imposed on Adam Smith by 20th-21st century economists are a manifest violation of Adam Smith’s intellectual integrity and a gross abuse of his legacy. In short, a violation of his Natural Liberty rights.

My thanks to Sauvik Chakraverti for creating this opportunity to comment on this important distinction.