If contemporary economists fielded a football team, it would no doubt be named the Smiths, in honor of the illustrious eighteenth-century Scot who is rightly regarded as the founder of modern economic theory. But the team mascot as presented by those economists would have as much in common with the real Adam Smith the as the Washington Redskins’ mascot has in common with a real Native American. Few thinkers of Smith’s stature have been so routinely misrepresented and misappropriated.
George Stigler, a Nobel laureate economist, wrote that Adam Smith’s great work The Wealth of Nations demonstrated that “the efficiency property of competition” was “the crucial argument for unfettered individual choice in public policy.” Politicians and pundits alike regularly invoke Smith’s name to contrast the efficiency of markets in allocating goods and services with what they see as the damage done by government when it constrains “unfettered individual choice.” And in doing so, they regularly misapply Smith’s most famous metaphor, turning the “invisible hand” into an embodiment of the virtues of an unfettered market.
For example, in his 2012 presidential campaign, Mitt Romney’s stock stump speech included this line: “The invisible hand of the market always moves faster and better than the heavy hand of government.” Former vice-presidential candidate Sarah Palin made the same argument in a 2012 interview with Sean Hannity: “The difference that we’re facing in the two parties, and as we approach a general election, is that clenched fist of Barack Obama’s that is forcing the socialist-type field policies that kill jobs, we’re facing that as opposed to that invisible hand in a free market that Adam Smith and more recently Thomas Sole and others speak of.”
At a slightly higher level of discourse, James Dorn, was a short-form summary of how markets work: “In a market economy, price signals automatically steer society’s scarce resources to the uses people value most, and at minimum cost. This is Adam Smith’s famous Invisible Hand.” Even Pope Francis, in his beautifully argued Evangelii Gaudium, assumed that the invisible hand belonged to the impersonal forces of the marketplace.
But all this is the Adam Smith of legend. The real Adam Smith was a sophisticated thinker about moral virtues as well as efficient markets, not a cartoon spokesperson for laissez-faire economic policy. Smith never intended his metaphor of the invisible hand to become synonymous with an omniscient and efficient Mr. Marketplace. Specialists have known this all along, but the caricature version of Smith continues to distort our policy discourse.
Why should we care that many modern observers so fundamentally caricature the man they see as the mascot of free enterprise? One answer is simply out of respect and admiration for the subtlety of Smith’s thought and its continuing relevance to our own efforts to become responsible members of society. But the more important reason to engage with the real Adam Smith is that doing so reveals how impoverished our public-policy discourse has become. Smith’s famous invisible hand has today become a dead hand, stifling meaningful debate over the roles of government and private markets.