The most important classical liberal economic theorist was Adam Smith (17231790), a contemporary of David Hume.
The principle of Smith’s economic theory is that, in a laissez-faire economy (one in which the government remains on the sidelines), each individual, in seeking her or his own gain, is led “by an invisible hand” to promote the common good, though doing so is not her or his intention.
As an exponent of the benefits for everyone of capitalism (a system of private ownership of property and the means of production and distribution) and a free- market economy (in which individuals may pursue their own economic interests without governmental restrictions on their freedom), Smith advocated positions that resemble those of many contemporary American conservatives. His An Inquiry into the Nature and Causes of the Wealth of Nations (1776) has become a classic among American political conservatives.
CLASSICAL LIBERALISM
Power versus liberty. Government versus the individual. At the heart of
classical liberalism, a political philosophy that began to emerge in England,
France and the United States in the late 18th century, is a commitment to
limiting government power so that individuals may pursue their own economic
self-interest freely. Classical liberalism borrowed from the English and
American 18th-century political devotion to individual rights, the rule of law,
separation of powers and checks and balances, while adding a new commitment to
laissez faire economics. Some classical liberals were deeply pessimistic about
the future prospects for society, while for others social progress became an
article of faith; but for both pessimists and optimists alike, any good in society
is jeopardized by excessive government meddling. Like a teacher who trains his
students into helplessness by always providing them with the answers,
paternalist efforts of the government to assist people - that is, going beyond
its traditional role of protecting property and establishing order - ends up
hurting its intended beneficiaries. Early on in England, and later in the
United States, the tenets of classical liberalism were employed to rationalize
as a necessary evil the suffering and misery associated with industrialization.
Smith was so opposed to Hobbes’s and Mandeville’s positions that the
very first sentence of The Theory of Moral
Sentiments begins with their rejection:
However
selfish man may be supposed, there are evidently some principles in his nature,
which interest him in the fortune of others, and render their happiness
necessary to him, though they derive nothing from it except the pleasure of
seeing it. (TMS I.i.1.1)
Adam Smith, an 18th-century Scottish philosopher and economist, is often considered one of the founding figures of modern economics and political philosophy. His ideas laid the groundwork for classical liberalism and free-market capitalism. Some basic features of Adam Smith's political philosophy include:
1. *Laissez-Faire Economics*: Smith advocated for minimal government intervention in the economy. He believed that individuals pursuing their self-interest in a competitive market would lead to overall prosperity and the best allocation of resources.
2. *The Invisible Hand*: Smith famously used the metaphor of the "invisible hand" to describe how individual self-interest in a free market can unintentionally promote the greater good. When individuals seek their own gain, they unintentionally contribute to the well-being of society as a whole.
3. *Division of Labor*: Smith emphasized the importance of the division of labor in increasing productivity. Specialization in tasks, he argued, leads to greater efficiency and economic growth.
4. *Private Property Rights*: He believed that secure property rights were essential for economic development. When individuals have ownership of property, they have the incentive to use it wisely and for the benefit of society.
5. *Limited Government*: Smith's philosophy included the idea that government should have a limited role, primarily focused on providing public goods, enforcing contracts, and maintaining law and order. He believed in the importance of individual liberty.
6. *Wealth of Nations*: Smith's most famous work, "The Wealth of Nations" (1776), laid out these ideas in detail. He discussed the importance of free trade, the role of money and markets, and the benefits of competition.
7. *Meritocracy*: Smith believed in a meritocratic society where individuals succeed based on their abilities and efforts rather than their social status or connections.
8. *Critique of Mercantilism*: Smith criticized the prevailing economic doctrine of mercantilism, which emphasized government control over trade and accumulation of gold and silver. He argued for free trade and the idea that a nation's wealth should be measured by the well-being of its citizens, not the accumulation of precious metals.
These are some of the fundamental features of Adam Smith's political philosophy, which had a profound influence on the development of modern economics and political thought.
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