Entrepreneurship, knowledge and employment

Adam Smith, Laissez Faire and what Nature Teaches

Andrews David, State University of New York at Oswego

It has long been clear that the Wealth of Nations is not uniformly opposed to government intervention. Smith contrasted certain government policies and what he called “the system of natural liberty,” clearly preferring the latter. But Smith also argued that the liberty of individuals ought to be restrained when it threatens the larger society, citing banking and construction regulations. According to Jacob Viner, Smith was simply inconsistent, believing both of two contradictory things, that natural liberty must be respected and that it must be violated. But Smith does not say that banking and construction regulations are violations of natural liberty. Smith allows that there is a qualified sense in which these restraints “may . . . be considered as in some respect” to be a violation of natural liberty, but this implies that there is another more important sense in which the restraints in question are not violations of natural liberty at all. This essay offers an interpretation of this alternative sense. The question of inconsistency hinges on the meaning of ‘natural liberty’ and especially to the meaning of the word ‘natural.’ The idea of nature is ubiquitous in Smith writings, but it is notoriously difficult. The claim of Alfred and Mary Paley Marshall has been widely accepted that Smith used ‘natural’ to mean ‘spontaneous’ or “normal.” But the Marshalls present no evidence or argument for their interpretation. I suggest that Smith had a rich understanding of nature, as a teacher rather than as a lawgiver. Nature according to this view has purposes and teaches us to pursue those purposes. Nature teaches that it is possible to improve on nature when its purposes can be achieved in a manner that is better, more “civilized,” than the means provided immediately by nature. In that case, the use of collective means that restrict individual liberty for the purpose of furthering the purposes of nature are not violations of natural liberty.


Keywords: Adam Smith, Laissez Faire, nature, system of natural liberty

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