Please go read Brad DeLong’s post on taking Adam Smith out of context. Now. All of his points are well taken.
I would only add two things. People who like to take Adam Smith out of context and caricature his thought have not read or thought carefully enough about Smith’s Theory of Moral Sentiments, which is a work of such insight, virtuosity and soul that it will change your view of Smith forever, particularly if you have a cliché opinion of Wealth of Nations. One of the things on which Smith elaborates in TOMS is the extent to which individuals are motivated to seek wealth by vanity, or accumulate wealth through frugalilty. The author of the original post (Professor Herzog) would have been well served not just to read more deeply into WON, but also to integrate it with Smith’s observations from TOMS. In a nutshell, we are all individual, and we are all motivated by a variety of things and conditions. Not all of those motivations are “laudable”. Yet even motivations like vanity do enhance overall well-being and growth, by increasing economic activity. Note how compatible this observation is with one of the cliché WON insights: it is not from the beneficence of the butcher, brewer and baker that we get our meat, beer and bread, but from their self interest. Individual self interest, applied in a context of (formal and informal) market rules and institutions, makes others better off in the process. A better work for elaborating on how vices can produce virtue is Mandeville’s Fable of the Bees, which influenced Smith.
Second, and Brad goes some way toward pointing this out when he talks about Smith’s “system of natural liberty”, one of the most stunning things about Smith’s thought is the spontaneous order, ecological, complex-dynamic-system organic nature of the economic system and how he describes it. Smith is not alone in doing this; other Scottish Enlightenment writers do some of it (particularly Frances Hutcheson). But Smith goes the farthest in analyzing and articulating the economy as a complex dynamic system. That is so modern that it’s still fresh today, and I’m convinced is one of the reasons why we still read Smith.
Although it sounds like some of us (I’m thinking of Professor Herzog here) should go back for a refresher … I’m teaching History of Thought winter quarter, Professor, if you are interested in sitting in! It’s only a 4-hour drive from Ann Arbor …
Small nit pick: Both Brad and Professor Herzog seem to carry this idea of WON as a “Bible” for market fundamentalists. In many cases I think the stereotype is ill-fitting. Take me, for example. I’m sure that if we were to converse, or if either one were to read some of my research or the posts here at KP that they would think me a “market fundamentalist”. I think the rising interest in Hayek over the past two decades, the rise of new institutional economics, and the increasingly interdisciplinary research into complex dynamic systems gives us a theoretical context, a toolkit, and a language for being able to articulate why and how “the market will provide” in a more nuanced and sophisticated way than is reflected in the old “how many economists does it take to screw in a light bulb?” joke. And even the most committed “market fundamentalist” can’t ignore that market processes arise in the context of a rich web of formal and informal rules and institutions that shape those processes and provide important enforcement. So I encourage both of them to reexamine their presumptions about market evangelists.