I admit it: I like Adam Smith. His perceptiveness never fails to impress. True, he didn’t foresee the marginal revolution that Carl Menger would launch a century later (with, less significantly in my view, Jevons and Walras), but give the guy a break. The Wealth of Nations is a great piece of work.
One thing I find refreshing in Smith is his wariness of business people. This is something we ought to frequently remind market skeptics. Smith knew the difference between being sympathetic to the competitive economy—which he called the “system of natural liberty”—and being sympathetic to owners of capital (who might well have acquired it by less-than-kosher means, that is, through political privilege). He knew something about business lobbies.
This famous passage from book 1, chapter of Wealth is often quoted by opponents of the free market:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
The quote is used to justify antitrust law and other government intervention. But as has often been pointed out in response, Smith had no such policies in mind. We know this because he immediately follows with:
It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
Government should do nothing to encourage or enable attempts to limit competition. But of course government does that all the time at the behest of business and to the detriment of consumers and workers. Hampering competition raises prices for the former and weakens bargaining power—and therefore lowers wages—for the latter. Those groups would be the prime beneficiaries of freed markets.