Happy birthday to the Wealth of Nations – and to CEI

Today is the 250^th anniversary of the publication of perhaps the seminal work of economics, Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. The Wealth of Nations, as it is usually abbreviated, is a difficult read for many today, but many of the ideas it contains – from the division of labor to the “invisible hand” – are foundational to free market liberal economics.

Today also marks the publication of my latest CEI paper, Giants of the Free Society, an adaptation of remarks first delivered to the Philadelphia Society and later modified for CEI’s New York City Luncheon Club. In it, I describe how we in the free market movement stand on the shoulders of giants – four in particular: Adam Smith, Ludwig von Mises, F.A. Hayek, and Milton Friedman. For the Luncheon Club I added three more giants of particular relevance to CEI’s work – Frederic Bastiat, Ronald Coase, and Julian Simon.

Here is what I have to say about Smith:

Smith is remembered as an economist, but at heart he was a philosopher. His first great work, The Theory of Moral Sentiments, begins not with money but with sympathy — the natural human impulse to place ourselves in another’s shoes. Sympathy, he argued, forms the basis of judgment. But because our sympathies can mislead us, we appeal to an “impartial spectator,” the man within the breast, to check our selfish impulses with propriety and fairness.

Here lies the moral underpinning of markets. Commerce for Smith was never about unrestrained greed. It was about self-interest operating within a framework of custom, virtue, and trust. The butcher, baker, and brewer serve us, not through altruism, but because serving us serves them too. At the same time, reputation, honesty, and fairness ensure that service is trustworthy.

This moral framework is the soil in which the division of labor, specialization, and exchange grow. It is what makes the invisible hand more than a metaphor. Without trust, commerce collapses into exploitation.

Smith also defined the proper role of government: to preserve peace, enforce justice, and protect against threats domestic and foreign. Government’s job was not to direct trade, manage production, or favor industries. “Little else” is necessary to “carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice,” he said. Those words could serve as the preamble to any modern constitution, and we would be better for it.

The Wealth of Nations was published in 1776, the same year the United States declared independence. George Washington owned copies of Smith’s works. Thomas Jefferson, though impatient with Smith’s prose, recommended them often. The moral and economic case for liberty informed the Founding as surely as John Locke’s political philosophy.

By happy coincidence, today is also CEI’s birthday, and of course our founder Fred Smith shared a surname with the Sage of Kirkcaldy. Fred founded CEI based on the same insights that motivated Adam – that a free society relies not on planning but on the institutions that allow people to cooperate, innovate, and trade to mutual advantage. It was also driven by the recognition that the same arguments against the free society that plagued Smith’s time retain their immediacy today and must be refuted every generation, lest the battle for freedom be lost.

Yet another thing that has proven true of Smith’s arguments – and to an extent of CEI as well – is that they have proven resilient. Despite the machinations of planners, dictators, rent-seekers, monopolists, transnational globalists, and identitarian nationalists, the spread of trade, the growth of prosperity, and the quiet voluntary coordination of billions of economic transactions every day remain the foundation of human welfare and progress.

On this shared birthday of a great book and a feisty and determined institute, it is worth remembering that the case for liberty must be made in every age. Fortunately, we have some very good guides.