On the ‘Invisible’ Adam Smith

This post mainly deals with the common misconception about Adam Smith, whose name is known to all students and professors of Economics; the misconception being the notion that he advocated laissez-faire. Sadly, his works are not as known. (Though the names of his two major works are widely known) So, this post tries to makes visible what is commonly invisible regarding Smith.

In the Indian Schools, textbooks in Economics associate him with the ‘wealth definition’. In Frank ISC Economics, which is authored by D K Sethi and U Andrews, Adam Smith is supposed to have defined Economics as “A science which enquires into the nature and causes of wealth of nations.” Definition is “a concise explanation of the meaning of a word or phrase or symbol”. [Dictionary.com] Adam Smith has never defined Economics is the afore mentioned way. Is it ‘right’ to teach such ideas? Isn’t it against the ethics of academics? A large number of students are programmed in such a way in school, whereby their notion of economics is constituted only by neoclassical economics. Plurality in economics has been totally done away with. Teachers teach what is printed in the textbooks. No questions are asked.

Also, it is not surprising to see classical economists (Smith, Ricardo, Malthus, etc) being seen as ‘classical’ or rather irrelevant, because of either their naive assumptions or their bad theories.

The primary focus of this blog post is to argue that Adam Smith never advocated Laissez-faire. Let me put forth two instances where such a misconception has been put forth.

The following paragraph was published in The Hindu Young World, a widely read Indian Newspaper.

Adam Smith’s fundamental proposition was that a free market is a self-regulating mechanism and tends to produce the most desirable types and quantities of goods.

The second instance is from Economy professor, an online dictionary of economics.

Adam Smith’s fundamental argument was that individuals should be allowed to pursue their own private economic interests as much as possible and so long as they do not violate basic principles of justice.

Smith called this the invisible hand of the market – although everyone is acting in their own self-interest, they are led to achieve the good of all as if by an invisible hand of economic forces. Therefore, outside interference will inevitably lead to disaster. This became known as laissez-faire economic policy.

Instances like these are numerous. One reason could be that, the only paragraph(s) that such people read by Smith is this (are these):

Every individual…generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

-The Wealth of Nations, Book IV Chapter II

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.

-The Wealth of Nations, Book I Chapter II

In fact, there is very little evidence to state that Smith advocated ‘free markets’ through stating the importance of self-interested behaviour. Also, he viewed individuals as a part of the society and not like an individual that is cut off from the society-the Homo economicus. Sen rightly points out that “it is precisely the narrowing of broad Smithian view of human beings, in modern economies, that can be seen as one of the major deficiencies of contemporary economic theory.” [Sen 1987]

To conclude, Adam Smith tried to understand his society and also tried to prescribe ways by which the society could grow-morally and economically through his two masterpieces. In short, he was a great scholar, who ideas are still prevalent; despite what school textbooks and some academicians posit.


Sen, A.K. 1987: Economic Behaviour and Moral Sentiments. On Ethics and Economics. OUP.

Further Reading

Prof. Gavin Kennedy’s Blog-a must read for those who want to ‘know’ Adam Smith.

The Prospects of Homo economicus-a scientific American piece which uses behavioural economics.

Myth and Fact about Homo economicus

7 thoughts on “On the ‘Invisible’ Adam Smith”

  1. Interesting post Alex. I too am guilty of seeing him in that narrow field.

    I can’t claim to know too much about economics being a political scientist with interests in race relations and African politics.

    But I will be reading closer here for more schooling :0)

    Peace to you,

  2. Alex, If the intention was to show that Adam Smith opposed “free-markets” or Laissez-faire, then this post falls short. Surely, you can do better. :)

    Cite for example, where Smith wanted state-intervention. Then you might have a case. The paragraph you cite doesn’t support your hypothesis, rather in my opinion it reinforces the alleged ‘narrow view’ Basically what he’s saying is individuals don’t indeed on serving others, but by acting self-interestedly, they serve other people wants. that’s kind of what free-market-people say.

    Browsing through your blog (I meant to tell you some time back) and seeing your criticisms about I’m surprised you don’t find the Austrian school appealing. Some of your cricisms of the mathematical models (perfect competition, etc.) is similar to Austrian criticisms.


  3. Obviously that comment was drunk in parts,

    I meant to say, “Basically what he’s saying is individuals don’t INTEND on serving others,.. [..]

    ..and seeing your criticisms about NEOCLASSICAL ECONOMICS, I’m surprised[..]


  4. hey alex.. it’s funny, i just happened upon this blogpost of yours shortly after i did a paper on almost exactly the same subject, but from a narrower perspective. Ive written about how the real adam smith has been obscured and has been portrayed as a poster-boy of laissez-faire, while reading of his works prove differently. Its written with a slant to show that Adam smith was not gender-biased also.. if his economic works are read with the theory of moral sentiments..
    maybe i could send u that once its polished a lil bit ? :)

    1. Hello Jolin,

      Happy to hear about the kind of work you are doing. I would definitely like to read it.

      As Paul Streeten, in Thinking about Development said “Adam Smith knew that selfishness has to be embedded in a system of morality and trust in order to work for the common good, just as the Invisible Hand has to be attached to a strong Visible Arm.”

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