Democracy and Exchange

Democracy and Exchange

Schumpeter, Galbraith, T.H. Marshall, Titmuss and Adam Smith

David Reisman

Democracy is the rule of the people. Exchange is supply and demand. Individualism, agreement, tolerance and choice are the underlying values that make possible the productive collaboration of the market and the state. This book assesses the theories of democracy and exchange of five interdisciplinary thinkers who tried to unite political and economic reasoning into a single theory of moderation and pragmatic management.

Chapter 12: Conclusion: Adam Smith on Market and State

David Reisman

Subjects: economics and finance, economic psychology, history of economic thought, institutional economics, social policy and sociology, economics of social policy


Rothbard believed that Smith, at best ‘a plodder in tune with the Zeitgeist’ (Rothbard, 1995: 464), at worst ‘a retrogression and deterioration, rather than an advance’ (ibid.: 417), had shunted the car of gain-seeking activity on to the line that leads to the managed market and not to individual freedom: ‘In Wealth of Nations . . . laissez-faire becomes only a qualified presumption rather than a hard-and-fast rule, and the natural order becomes imperfect’ (ibid.: 465). Adam Smith had written of capital invested in domestic industry that the self-interested atom ‘is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention’ (Smith, 1776: I, 477, emphasis added). Smith had observed of the profit motive and the market outcome that the myopic calculator can also prove the ultimate visionary: ‘By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it’ (ibid.: I, 477–8, emphasis added). Warren Samuels had no doubt as to the conclusions that followed from the ‘in many other cases’, from the ‘frequently’, that seemed to him to convert the libertarian’s principled always into the pragmatist’s contingent we’ll see how we go: ‘Notice the merely tentative properties attributed by Smith to market results . . . There is no presumptive optimality of market solutions’ (Samuels, 1977: 703, 704). Murray Rothbard was not disposed to disagree with this assessment. Adam Smith, he wrote with regret, had ‘introduced numerous waffles and qualifications...

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