Economists and the State

Economists and the State

What Went Wrong

Timothy P. Roth

Adam Smith is widely regarded as the ‘founder of modern economics’. The author shows, however, that Smith’s procedurally based, consequence-detached political economy, an approach shared by America’s Founders, finds no expression in the economist’s utilitarian, procedurally-detached theory of the state. This ‘wrong turn’ has meant that, if economists are ill-equipped to address an expanding federal enterprise in which utilitarian considerations trump the Smithian/Madisonian idea that means and ends must be morally and constitutionally constrained, they are also ineffectual bystanders as growing institutional skepticism, demands for ‘social justice’ and metastasizing rights claims threaten our self-governing republic.

Chapter 1: The Smithian inheritance

Timothy P. Roth

Subjects: economics and finance, political economy, public choice theory, politics and public policy, political economy, public choice


1.1 WHAT HAS BEEN LOST It has been suggested that, ‘Despite all the recent scholarship on the impact of Scottish thought on the American founding, curiously little attention has been paid to the influence of Adam Smith’ (Fleischacker 2004a, p. 1). This is curious, because we know that the Founders read both The Wealth of Nations and The Theory of Moral Sentiments,1 and because the Founders’ views on moral and political philosophy and on commerce were influenced by Smith’s work. The influence of, or congruence with, Smith’s view of human nature – developed in its essentials, in The Theory of Moral Sentiments (TMS) – will be discussed in Chapter 2. Of immediate interest is the influence of ideas articulated in The Wealth of Nations (WN). It is perhaps not surprising that WN has been widely characterized as a paean to self-interest. We know, for example, that the ‘invisible hand’ metaphor, invoked only once in WN and once in TMS, suggested that ‘By pursuing his own interest [every individual] frequently promotes that of the society more effectually than when he really intends to promote it’ (Smith [1776] 1976, p. 456), and that The rich … in spite of their natural selfishness and rapacity … are led by an invisible hand to make nearly the same distribution of the necessities of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society. (Smith [1759...

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