Abstract
The ideas of Adam Smith, and their journey and reception in the United States, are the focus of this worthwhile book, Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism, by Glory M. Liu. This is a story not just about the misinterpretation and misrepresentation of Smith’s work, which has been addressed productively elsewhere. This book tackles the way in which “reception” is understood within the political and social milieu of one’s time. The author is a Lecturer in Social Studies at Harvard University, who received her Ph.D. in Political Science at Stanford University. This book is an outgrowth of that dissertation.
In Liu’s work the topic of how Smith’s ideas are received comes alive within the constraints of a changing environment where economists-as-promoters have their own incentives and biases: Reception, influence, translation, and reputation are not passively enjoyed by Smith's writings as they are tossed about by the winds of fortune; rather, these modes of transmission are created by human actors, who themselves are subject to, responding to, and even fashioning the “vicissitudes of opinion at various times and places”.… [I]t is a way of understanding how and why certain people wanted to shape, control, or inherit Smith's legacy as they viewed it (pp. 8-9, emphasis in original).
The spinning of Smith into someone acceptable for a specific time and place begins shortly after his death with Dugald Stewart’s, Account of the Life and Writings of Adam Smith, LL.D. Stewart’s aim, according to the author, is to “neutralize” Smith’s notions and make his radical ideas appear more acceptable to the British ruling class in light of the French Revolution debacle and the push for constitutional reform in Scotland and England (p. xxix). Since then, the journey of Smith’s ideas across the Atlantic has continued the process of re-invention of Smith’s concepts to suit the politics of the times.
The book is arranged chronologically. An Introduction provides a useful overview of the content and thesis of the book. Chapter 1 focuses on the “founding era,” the revolutionary period during Smith’s lifetime. After his death, political economy developed as an academic field in the early- to mid-1800s, and Smith’s place of honor features prominently in Chapter 2. Chapter 3 analyzes Smith subsequent influence on America’s on-going debates about free trade. Chapter 4 argues that a nuanced view of Smith begins to appear by the end of the 19th century. Chapter 5 discusses the eclectic views of Smith at the University of Chicago in the first part of the 20th century, and Chapter 6 shows the subsequent reinvention and repurposing of Smith’s ideas at the University of Chicago to promote a narrow conception of human motivation and the market. Chapter 7 deals with critiques of the “Chicago view,” focusing on the pivotal 1976 bicentenary of The Wealth of Nations, in which scholarship on Smith came of age. The Epilogue is a short chapter that addresses the Smithian renaissance since 1976 and suggests why Smith’s ideas will continue to reverberate in public debate. The book has extensive footnotes, a list of reference materials, an index, and six illustrations.
History of economic thought scholars, as well as general Smith readers, will find much of interest here. The book is carefully researched. Lui makes a compelling case that views about Smith’s ideas have morphed noticeably over time. For instance, the role of political economy in economic science has evolved dramatically. In the early 19th century it was widely accepted in America that a study of political economy was wrapped within a larger view of Smith’s moral philosophy, because understanding “one’s duties and obligations to society” was a prerequisite to action (p. 72).
After the mid-20th century, the “Chicago School,” led by George Stigler and Milton Friedman, adopted and promoted a partial and simplistic notion – that Smith’s central ideas revolved around rational self-interest, limited government, and moral abstention. To these authors, Smith’s works conjured up a view of markets as freedom-enhancing and scientifically objective, while simultaneously minimizing the need for institutions and justice beyond the market. Stigler, in particular, took apparent delight in pigeonholing Smith’s The Wealth of Nations as “a stupendous palace erected upon the granite of self-interest” (p. 229), which sounds like it was channeling the 1937 introduction to The Wealth of Nations by journalist Max Lerner, who baldly (and incorrectly) asserted that Adam Smith “gave a new dignity to greed” (1937, p. ix).
Liu appropriately calls attention to an earlier Chicago School, pre-1946, made up of Frank Knight and Jacob Viner, who in contrast to Stigler and Friedman, presented a nuanced understanding of Smith’s model. Liu cites, for example, Viner’s famous 1927 essay “Adam Smith and Laissez Faire” that demolishes any attempt to place Smith in the laissez-faire camp. An interested reader could also look up The Wealth of Nations passage where Smith identifies Quesnay (the originator of the term “laissez-faire”) as the “speculative physician” who wrongly imagines that health can thrive only within a precise regimen of perfect liberty and perfect justice. Other Chicago School notables also put forth a non-Chicago School view of Smith. Ronald Coase, who arrived at the School of Law there in 1964, accepted complexity as key to Smith’s approach to understanding human nature in an astute 1976 essay for The Wealth of Nations bicentenary, “Adam Smith’s View of Man (Coase 1976).” Deirdre McCloskey, whose time at the University of Chicago from 1968-80 overlapped with Stigler and Friedman, also ushered in a modern view of Smith as a humanist and ethicist. In other words, the Chicago School is not monolithic: “multiple Smiths coexisted” (p. 213).
The final chapter, Chapter 7, provides a fascinating account of how Smith, following his revival in 1976, became a treasured source of wisdom for both the right and left sides of the political spectrum. Central to this restoration is the concept of a moral economy, one in which capitalism thrives—and can only thrive—within the ecosphere of social accountability. It is “bourgeois man, not economic man” who embeds in humans the norms of sociability and community, and constrains self-interest to produce the wide benefits of commerce (p. 280). A virtue ethics approach to life is essential to these approaches. Those on the right (including moderate Democrats) would use this doctrine to espouse reforming the welfare state by promoting self responsibility. On the left one could demonstrate Smith’s concern for worker alienation, the need for education of the masses, and an egalitarian rejection of special interests. After the 2008 Great Recession, attention also turned in earnest toward the need for government re-regulation of financial markets to reduce risk, as Smith proposed in The Wealth of Nations, and a greater emphasis on reducing inequality. Smith noted that development happens when wages rise and profits fall—the former indicating rising productivity and competition in labor markets, the latter indicating competition in output and capital markets.
Smith was not always so lauded. Economic nationalists and populists, like Friedrich List in 1827, and others throughout the ages, have complained that Smith lacked a fundamental understanding of power relationships and “refused to acknowledge the exigencies of national interests” (p. 81). Liu asks a penetrating question: Why do people keep returning to Adam Smith? This is a question that others have sought to answer, myself included. Liu’s answer is that economists over the ages have used Smith to promote their own agendas. A complementary view, which I put forth, is that science does not progress in a linear fashion, but rather recursively. One must go back in time to revisit old insights that have become relevant again in the present time.
Adam Smith’s America is a helpful book that will engage scholars. It develops the premise that the Chicago School distilled Smith's ideas into a “popular and powerful myth: that rational self-interest is the only valid premise for the analysis of human behavior, and that only the invisible hand of the market, not the heavy hand of government, could guarantee personal and political freedom” (p. 2). The book’s key contribution is to address reception history more broadly, where: [R]eception is a process of active creation, invention, and transformation. Taking reception history seriously requires that we try to see different possibilities for a text in different times and places…. [The] successive reconstructions of Smith’s significance and import often tell us less about the content of Smith’s ideas themselves, and more about the grounds on which his interpreters believed his authority rested (pp. 2-3).
The various interpretations of Smith’s moral economy are “ambiguous and slippery” and these qualities are “what enable Smith to be such a useful, ubiquitous, and powerful device for expressing a wide range of hopes and fears about capitalism in the twentieth and twenty-first centuries” (pp. 261-2).
Adam Smith’s America is highly recommended, even if some of the passages are dense. Readers wishing shorter, but more narrowly focused approaches, can read Liu’s companion articles that are the basis for Chapter 3 (2018) and Chapters 5 and 6 (2020).