Was Adam Smith Really an Advocate of Laissez Faire?

If we were to ask a layman today to name some economists, the name Adam Smith would probably be near the top of the answers alongside perhaps Karl Marx. With Adam Smith’s name synonymous with laissez-faire capitalism and Karl Marx being the harsh critic of a capitalistic system of production. With laissez-faire meaning that decisions are left to the individual as opposed to the case of what Ludwig von Mises referred to as “state faire”, in which case decisions are delegated to an omnipotent state. Laissez-faire is also synonymous with the principals of individual liberty, inviolate rights of property, free markets, and minimal government.

But while it’s pretty much not doubted that Marx was a Marxist, whether Adam Smith was an advocate of laissez-faire remains an open question. In this paper I will provide a description of literature regarding this topic and try to answer the question as best I can.

The paper starts with the introduction, where I try to describe the meaning of laissez-faire and where I delve into the thoughts of some famous economic thinkers about Adam Smith’s writings. I continue with Smith’s description of the invisible hand and his advocacy of antiinterventionist position. Further I continue with a critique of his deviations from laissez -faire and in the last section I try to present a recent theory regarding Smith’s strategy, which he used in his writings to influence favorable public opinion as much as humanly possible.

Even after reviewing the literature, it is still hard to definitively state, whether Smith was an advocate of laissez-faire or a moderate interventionist. I argue that, even though there exists a long list of Smith’s deviations from the laissez-faire that his advocacy of free trade and free markets still proved to be very important.

There is also some recent evidence from the paper of Michael J. Clark (2011) that would justify Smith’s deviations from laissez-faire as Smith’s support for the approach of Greek philosopher Solon, who attempted to put forth laws that would be “the best the people could bear”.